by Chris Broderick
June 29th 2016
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A proposed gross receipts tax for Oregon on the November ballot would significantly increase state tax revenues and increase public sector employment while having a general negative impact on private sector employment, a new study by Portland State University’s Northwest Economic Research Center suggests.
“This should not be a surprise given the amount of taxes collected and the expanded budget of state government, along with the additional governing spending of these additional taxes,” the study concludes. “It is beyond this study to make any claims that this outcome is either bad or good for Oregon –- that expanded government services are either more or less valuable than privately provided goods and services.”
The 41-page report looks in depth at the potential economic impact of IP 28, the ballot measure that would replace Oregon’s minimum corporate tax with a 2.5 percent gross receipts tax for C-corporations with more than $25 million in annual Oregon sales. If approved by voters, the tax would impact 997 businesses and raise an estimated $3.38 billion for the state in the 2017 fiscal year.
Among the report’s conclusions:
- Under IP 28, industries that are the most sensitive to variables in the cost of doing business and to supply-chain effects on their products would experience the largest negative employment and profit impact.
- Those effects would include “tax pyramiding” for the businesses affected as part of their supply-chain operations, meaning that intermediate products along the chain potentially would add the tax at each stage of production.
- The tax impact may shift to other businesses, consumers and other parties that are not directly assessed with the corporate tax.
- Increasing Oregon’s state revenue by more than $6 billion per biennium -- an increase of more than 30 percent from the current biennium -- would also significantly increase the state’s bonding capacity for capital projects.
- Over time, businesses may change their organizational structure from C-corporations to avoid paying the tax.
The study was commissioned by Our Oregon, a non-profit group including organized labor that has proposed IP 28. The study focused on economics and did not examine potential long-term effects of increased state revenue and spending on infrastructure, education or other public services.
The Northwest Economic Research Center (NERC) is based at PSU’s College of Urban and Public Affairs and focuses on economic research that supports public policy decision-making and private sector analysis in the Pacific Northwest and metro Portland. NERC provides unbiased and independent economic analysis for the public, private and non-profit sectors. Dr. Tom Potiowsky directs the NERC and chairs PSU’s Department of Economics. Dr. Jenny H. Liu is assistant Director and assistant professor in the Toulan School of Urban Studies and Planning. The report was researched and written by Michael Paruszkewicz, NERC senior economist, and Potiowsky; research support was by Eric Hoffman and Emma Willingham of NERC.
For more information: Contact Chris Broderick in University Communications at 503-725-3773