Thank God for Virginia, Delaware, and North Carolina
Kari Chisholm
Like the lobster frog, we've been sitting in the simmering water and haven't noticed that the heat has been rising.
For years, progressive policy wonks in Oregon have been trying to make the case that there's been a massive tax shift from corporations to individuals. For the most part, regular Oregonians (who aren't obsessive BlueOregon readers) haven't noticed - other than to wonder this: How is that my taxes haven't dropped much, and yet our schools and community services seem chronically underfunded?
Well, the answer has finally arrived... A pro-big-business, anti-tax think tank just issued a report acknowledging what we've been saying all along. Oregon's business taxes are almost the lowest in the nation, as a percentage of Gross State Product (like GNP, but for states.) In fact, only Virginia, Delaware, and North Carolina are lower. We're tied with Utah at 3.7% of GSP.
Get the full study here (PDF). Get commentary from the Oregon Center for Public Policy here.
The think tank, the Council on State Taxation (COST, get it?), is affiliated with the Council of State Chambers of Commerce - and represents around 550 multistate corporations.
So, the next time you hear someone complaining about high taxes, give 'em a little truth: For businesses, Oregon is a very low-tax state.
Once you've digested that, ponder this: If we're so low tax, where are all those jobs that low taxes are supposed to create? Maybe they're in high-tax states like Washington and New York (5.7% of GSP).
[Disclaimer: I do website development and net strategy for OCPP.]
 |
More Recent Posts | |
Albert Kaufman |
|
Guest Column |
|
Kari Chisholm |
|
Kari Chisholm |
Final pre-census estimate: Oregon's getting a sixth congressional seat |
Albert Kaufman |
Polluted by Money - How corporate cash corrupted one of the greenest states in America |
Guest Column |
|
Albert Kaufman |
Our Democrat Representatives in Action - What's on your wish list? |
Kari Chisholm |
|
Guest Column |
|
Kari Chisholm |
|
connect with blueoregon
1:54 p.m.
May 10, '05
I bet you opposed the House's capital gains cut, too, didn't you, you commie dog.
2:05 p.m.
May 10, '05
I'm with Jeff, Kari. You're obviously a Fellow Traveller at least.
Just look at the national record. Bush has cut taxes for the very wealthy many times and many ways in the last five years based on assurances that they would invest that money in sweatshops in Vietnam.......Wait, I meant to say provide a roaring stimulus to the US economy.
Anybody that's not a Commie Dupe can see that that's worked out well for all.....and hey, just yesterday in the Oregonian we got the good word that Oregon's economy is staggering forward impressively.
May 10, '05
Um, yeah. Like a lobster not noticing the heat. If we were dropped into a pot of boiling water, the lobster would leap out -- ribbit!
May 10, '05
Interesting statistics. I think even more persuasive than the column about effective tax rate as percentage of GSP, is the one right next to it about business taxes as a percentage of total taxes in the state.
National average is 43%, Oregon's is 33.8% -- only Maryland is (slightly) lower at 33.7% (yet their effective tax rate is 4.4%, certainly higher than Oregon). The only other state lower than 35% is Connecticut.
So clearly we don't obtain as much of our total tax revenue from businesses as most any other state, which supports your basic thesis about the tax burden being more on individuals than on businesses.
Yet, the claim that taxes have shifted from business to individuals might be countered by this little nugget from the same report -- in Oregon from 2000 to 2004, revenues from business taxes rose slightly faster (9.6%) than tax revenues overall (9.2%). Put another way, 35% of state & local tax revenue increases were due to business taxes, while only 33.8% of taxes come from businesses.
Another point to consider -- since you brought up Washington -- look at the composition of taxes. Washington has a sales tax which Oregon does not; Oregon has an income tax which Washington does not.
If you factored out both sales and income taxes for both states, and compared based on what's left over in common, you'd still have 3.4% of GSP for Oregon, but less than 3.1% of GSP for Washington (interestingly, doing the same thing for New York which has both sales and income taxes but derives much more from property tax, yields 3.6% of GSP). This tells me that Oregon is simply not making up with income taxes what we lose by not having a sales tax. And, as businesses go, this is intuitive; virtually all businesses big or small spend money and would thus be subject to a sales tax, while not all businesses are profitable enough to be subject to an income tax.
This lack of a sales tax in Oregon is, I suspect, a major reason that the relative overall tax burden falls so lightly on businesses. Establishing a sales tax would hit both individuals and businesses, but it would likely be a greater increase of taxes for businesses than for individuals. Reducing income taxes at the same time would go a long way towards balancing business tax contributions with individual tax contributions.
3:33 p.m.
May 10, '05
BillO - yeah, I got my metaphor screwed up. Fixed now. Thanks!
3:40 p.m.
May 10, '05
David Wright writes
Yet, the claim that taxes have shifted from business to individuals might be countered by this little nugget from the same report -- in Oregon from 2000 to 2004, revenues from business taxes rose slightly faster (9.6%) than tax revenues overall (9.2%). Put another way, 35% of state & local tax revenue increases were due to business taxes, while only 33.8% of taxes come from businesses.
The study neglects to mention that corporate taxes failed to keep up with the rise in corporate profits. Between 2000 and 2004, corporate profits nationally grew 44.5 percent, while state and local business taxes were up just 13.7 percent. Unfortunately, we do not have Oregon corporate profit info.
May 10, '05
Fair point, Chuck -- but it sounds like you're talking about overall business taxes only rising 13.7% while corporate profits grew 44.5%?
Keep in mind, that the vast majority of business taxes are not income taxes (nationally only 7.6% are, and a few states have no business income taxes), and therefore are considered business expenses taken before profits are counted.
So I wouldn't expect a 44.5% increase in corporate profits, taken by itself, to result in anything more than about a 3.4% increase in business taxes overall, nationwide (44.5% increase to the base for the 7.6% in business taxes on corporate profits). Naturally, increases in sales, property, and other taxes would boost the overall business tax collection by something more than that 3.4%. Of course, an awful lot also depends on where those profitable corporations are paying their taxes. Microsoft is pretty darn profitable, based in Washington with no state corporate income tax. Texas is another state with no corporate income tax, lots of profitable companies are based there too.
Anyhow, I don't disagree that businesses get a relatively easy time of it here in Oregon compared to other states. But it does seem like the trend, both nationally and in Oregon, has been to gather more tax from businesses, at a slightly faster rate than from individuals.
May 11, '05
These are all some very fascinating points that I wish I'd understood years ago. I can really see how the current situation prevents voters from accepting tax increases of any kind because they really do perceive their taxes have not changed, and yet the schools seem to be a bottomless pit of need that can never be satisfied.
I'd really like to see all your mathematically gifted minds explain for the math-challeged (or should I say, language-interested and math-bored) like me why it is that we aren't getting more jobs here in Oregon, in light of our relatively light business tax burden. Is it lack of natural resources? Is it an undertrained or poorly educated workforce? Is it something cultural (are Oregonians too laid back and, therefore, less likely to work their tails off)? Or do we not want growth and intentionally stifle it? Why can't we get our economy going? Can we fix that? Can we get high-paying jobs in Oregon without increasing our cost of living?
May 11, '05
That's easy Becky.
Our taxes are too low. We don't have enough government spending. As with every problem in the state. Right? None of our government agencies, municipalities, programs etc have enough money.
Every program that doesn't work it's because of underfunding.
If the stupid voters weren't so greedy we would have more government employees.
10:48 a.m.
May 11, '05
Becky,
Businesses don't suddenly relocate and jobs do not appear over night. For most of the last century Oregon was a resource based economy. Most of the state still is. When those jobs got hit in the 80's the state focused on recruiting high tech plants from California. We were very successful at that and during the 90's we grew faster than most states and became a national center of the semiconductor industry.
Unfortunately that is also a boom-bust economy, just like natural resources, and recently we have been on the bust side. What we haven't done is develop a truly diversified economy and for historical reasons have only one fortune 500 company that is based here (Nike)and Nike is a young company with a limited number of spin-offs.
In addition we lack the infrastructure for the development of new companies that exist in other states. Most of the growth in high tech in the 90's was in branch plants not in headquarter companies. That means we do not have the corporate depth that exists elsewhere. All of this takes time to develop. I will leave it to the business recruiters to describe what the problems are in recruiting new plants today, but until we have more corporate headquarters based in Oregon, we will always be at the mercy of decision makers who live elsewhere.
The real point of all of this is that tax rates are much overrated as the determining factor in where businesses are based and how economies grow.
May 11, '05
Good questions, Becky. Heck, if I had the answers, I'd run for Governor and fix the problem! ;-)
First off, it looks to me like we are creating jobs, but job creation isn't keeping up with population growth, and the jobs that are being created aren't necessarily the high wage jobs that we'd like.
It seems to me that the "undertrained/poorly educated" workforce shouldn't be an issue, we've still got plenty of people left over from the tech bubble that are underemployed. Of course, the demand for those sorts of people is generally still weak, though substantially better than it was a couple of years ago. And having our education system woes ridiculed nationwide doesn't exactly help our image as a good place to raise a family.
I don't think it's a cultural attitude about not working hard. There are plenty of hard-working folks all around the state.
The not wanting growth thing -- seems to be a Portland issue and not a general Oregon issue, and in Portland it's not so much about not wanting growth per se, as trying to manage growth to fit some ideal, encouraging some kinds of growth while discouraging others. That may be a contributing factor.
Lack of natural resources? We're loaded with 'em. But we aren't allowed to use some of 'em, so that could also be a contributing factor (though honestly I don't imagine that opening forests to unrestricted logging, for example, would do much to help our economic problems overall even though in local small towns it would doubtless be of enormous benefit).
I think the economic issues probably break down into a Portland vs. Oregon thing in large part. High tech, high wage jobs require both a technical infrastructure (for the hardware) and a "social infrastructure" (for the employees) which at this point is limited to the Portland area (and to a lesser extent, the rest of the Willamette Valley).
High wage manufacturing jobs could theoretically be set up where land is cheap but transportation infrastructure is still sufficient; that would mean primarily the I-5 and I-84 corridors outside of the Portland metro area. However, then you run into issues of having a sufficient population base from which to draw qualified workers. Hermiston, for example, would seem to be in a decent spot for manufacturing -- but they just had a potato processing plant close last year as I recall. I don't remember the exact reasons cited, but I think it had to do with reduced demand for the product rather than anything specific to Oregon's business climate.
Lots of words here for no real answers, I know. ;-) It's just a tough nut to crack, the first step in finding a solution is defining the problem, and we have a hard time doing even that.
11:33 a.m.
May 11, '05
Interestingly, as I pointed out in a previous discussion over taxes (http://www.blueoregon.com/2005/05/yahoo_another_1.html), corporate taxes as a proportion of total taxes in North Carolina exceeds Oregon's by 3%, even though the effective corporate tax rate is lower.
So while this report does indicate that Oregon's reputation as a high tax state for corporations and businesses may be misplaced, it also points to part of our problem: we don't have enough industries, businesses, and corporations in the state to generate large tax revenues.
I am puzzled and interested just like Becky. The contrast to North Carolina, where I lived for the past decade, and where attracting business is a very high priority for the state and most local governments, is stark. Sometimes I wonder whether Oregon has had it too good -- without a large impoverished sector of the population like NC, Oregon could afford to look askance at industries like poultry and pork production.
I understand that our transportation infrastructure has been lagging (I recall reading a story about the Port stating that we have too few rail links), which may hurt our ability to attract heavy industries like auto manufacturing. Unfortunately, we are a heavily unionized state, which also scares away some heavy industries.
And I echo some of David's comments. I got an earful from a business relocation specialist on a run recently, who said that Metro and Portland try to channel growth into areas where businesses do not want to locate. So while we identify Damascus as our next area for growth, this person claimed that most businesses that he deals with want to locate in Hillsboro, near Intel and Nike, but Metro refuses to allow add industrial land.
The consequence for him? Most of his work now involves moving businesses to Vancouver. None are interested in Damascus.
May 11, '05
People like to compare?
http://ftp2.census.gov/govs/school/03f33pub.pdf Oregon/Washington comparison. WA spends $359 less per student. They have more revenue per student but spend less? They also are spending 6 times the amount on land, existing structures and educational equipment at the same time they spend less, while having less than twice the students? Every graph I looked at shows Washington to be run more efficiently.
Oregon spends $262/student more on salaries and benefits $137/student more on education salaries and benefits $319/student more on support services Page 23 in the report is one of the more interesting.
May 11, '05