If your a registered voter in Oregon, you should have received your Voter’s Pamphlet for the special election we’re having in a few weeks on a pair of tax measures submitted by the state legislature. If passed, these measures will add to the General Fund, which in turn pays for education, health care, public safety, and other state provided services.
Measure 66: Tax increase on households earning over $125,000 (single filers) or $250,000 (joint filers)
Basically, this measure creates extra tax brackets for earners over $125,000 and raises taxes for those people. The tax rate is higher for the first 3 years, and then lowers a bit in 2012.
My View: While this tax affects a few S-Corporations (businesses whose profits pass directly to the owner), most affected by this tax are wealthy individuals, who can afford to give back to the community that helped make them wealthy.
Measure 67: Increase business minimum tax and profits tax, and expand list of businesses required to pay. Increases filing fees.
Currently, some businesses pay a profits tax of 6.6%, but if that is below $10, they pay $10. This measure increases the profits tax to 7.9% for income over $250,000 (which changes in 2013) and changes the minimum tax to a bracketed sliding value based on revenue, from $150 (revenue under $500,000) to $100,000 (revenue over $100,000,000). Generally speaking, it’s about 0.1%. In addition, partnerships, S-Corps, and LLCs will be required to pay the minimum tax.
My View: I’ve emphasized a few words above, profits and revenue. Profit is income minus business expenses (including paying employees) where as revenue is just income. The new minimum tax is based on what a business takes in regardless of what they pay out in expenses. For example, if a business does $2 MILLION in sales and has $2 MILLION in overhead (employees, rent, merchandise, etc.), it has profits of $0. They would have to pay $1500, which is the minimum tax based on revenue. To meet this they will have to either reduce spending, either by cutting benefits, wages/salaries, or workers, or increase prices.
On a different note, while the amount in comparison seems trivial, that can add up over a business’s supply chain. An example is a grocery store who buys bread from a bakery who buys flour from a mill who buys wheat from a farmer who buys fertilizer and seed, etc. This “sales tax” will either increase the cost to consumer or encourage conglomerations, cutting out the smaller businesses.
In the end this is a sales tax and a sales tax is the “third leg” of taxation that Oregon has fought against for many years, but desperately needs. Personally, I don’t like the price changing at the register, so this type of sales tax, where the tax will be built in to the price the consumer pays, is one that I can get behind.
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