The Facts of Oregon’s New Tax
January 31, 2010
Emotions run high on both sides of the campaign that ended Tuesday with a victory for the supporters of Measure 66 and 67. Now the buzz is all about really trying to understand the new taxes. How will the taxes affect you? Everyone is talking about it, but misinformation seems to be the only common denominator. Let’s talk about the facts and answer some of the misunderstanding about the new law.
Measure 66 increased the state income tax rate for households who have taxable income over $250,000 or individuals with taxable income over $125,000 from 9% to 10.8% plus a temporary bracket for those earning over $500,000 at 11%. This tax is retroactive to 2009 so high income tax payers will have a tax bill that they didn’t plan for.
Business in Oregon is affected by Measure 67. If you have a business entity of any kind except for sole proprietors, you will pay some additional tax. The Oregon Center for Public Policy has created a flow chart that is the best I’ve found in making the tax implications to business clear. The flow chart helps to bring clarity to the new taxes and who they will affect.
S Corporations, LLC’s and partnerships will pay $150 to file a tax return rather than $10. They will continue to pay tax on the net business income on their personal tax returns. The biggest misrepresentation of the campaign was that corporations only pay $10 in tax. Of course anyone with common sense knows that this wasn’t true. Business owners of S Corporations or LLC’s pay plenty of tax in Oregon. Luckily if you have an S Corporation or an LLC this is the extent of your tax increase (unless your business income puts you in the “high income” category for personal taxes). However, also tied to this legislation you will now pay $100 to renew your corporate filing each year rather than $50.
C Corporations are the ones who get hurt the most. Corporations are designated with the IRS as either a “C Corp” or “S Corp.” The difference is that a C Corporation pays tax as an entity rather than passing its taxable income to its owners. If you are a C Corporation who has revenue over $500,000, even if you don’t have any profit, you will now pay a minimum tax of $500 and the tax increases as your revenues increase. This will affect small and large companies in Oregon.
February 1, 2010 at 10:58am | Permalink
Ughh… This doesn’t impact my taxes, but it hits some of my clients hard - to the point where they’re holding off on some projects. I don’t understand why a person would support the measure. It’s essentially telling big business to go elsewhere. We’ll see how this hurts the goals the people behind it were trying to achieve.
February 1, 2010 at 1:13pm | Permalink
Thanks, Shauna, that summary makes it all clear. Except the flow chart for the C-Corps made my eyes cross. Sure glad we’re an S-Corp. I wonder if a lot of smaller C-Corporations are looking at converting to S-Corps? The larger C-Corps probably don’t have that option, but it seems like a smaller C-corp would want to take a look it.
The “yes” campaign really burned me up with the misrepresentations as well, especially the whopper about corporations only paying $10 in tax. Another particularly troubling aspect of the legislation in my mind is the taxation of C-corp revenues, even when the company is losing money. Talk about a double whammy, for small companies struggling to survive in this economy. I also think the “no” campaign did a poor job of getting this message across to people. It was a bit disappointing.
How quickly we forget the lessons of Jimmy Carter / Ronald Reagan. If you want less of something, you tax it. If you want more of something, you reduce taxes. If the legislature really wanted to increas revenues in our fair state, they would have given businesses a tax break, spurring growth and allowing more hiring, etc. Wherever it’s been tried, reducing taxes has resulted in an INCREASE of gross revenues into government coffers.
Unfortunately Measures 66 and 67 will only lead to more businesses failing or leaving the state. At best, these punitive tax measures will prolong the recovery and contribute to our state’s high unemployment rate. At worst, it could tailspin us into an early 1980’s type recession. Hope you’ve all been buying canned goods.
Best wishes,
February 2, 2010 at 11:14am | Permalink
Thanks for this info Shauna, I got it from Vaughn Parry of RE/MAX. I liked it so much I quoted / reposted it in my blog, http://aarons-2-cents.blogspot.com/2010/02/measures-66-67-explained-by-cpa.html. Feel free to check it out and if for any reason you don’t like the way you were cited please let me know.
February 3, 2010 at 12:12pm | Permalink
Good summary, Shauna. Thanks very much. Hope we will see better changes in education, health, and any sectors from more taxes we have to pay.
February 3, 2010 at 12:41pm | Permalink
Well written and concise. Thank you. Too bad this information was not presented to the public in a more forceful manner. Another tax that small businesses face, at least in Washington County, is an inventory tax. If you had x amount of dollars of inventory, which included any equipment, office machines, furniture, you paid a % of that amount. I always thought it was funny that people might actually believe that businesses only paid $10.00.
February 3, 2010 at 6:16pm | Permalink
Thank you for all of your comments. What I’ve heard from talking to people about this issue is that the correct information was nearly impossible to find both before the election and after. Understanding the facts helps dispel fear, which helps people to make decisions based in information and not emotion.
It is mind boggling the amount of money spent on both sides of this campaign without an real and accurate information produced from either side. Makes you feel like there is something to hide.
I hope that as informed business people get involved we can all work to balance the government and business.
May 12, 2010 at 7:15am | Permalink
very nice post thanks!! i like the info on it
Wall Quotes &
May 14, 2010 at 7:23pm | Permalink
I don’t understand why a person would support the measure. It’s essentially telling big business to go elsewhere.
May 19, 2010 at 6:10am | Permalink
This new tax is going to drive away any major business, whithout offering a solution for small business entrepreneurs. It looks like many more people will be filing in easy saver complaints if this tax isn’t withdrawn.
May 19, 2010 at 6:11am | Permalink
I support the new tax, I think it’s great that large business will have to pay more than local entrepreneurs. I don’t think so many people will care about easy saver complaints if it isn’t withdrawn.
May 25, 2010 at 5:46am | Permalink
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