In which I am compelled to call BS on blatant anti-M66/M67 propaganda
From the "if you say false bullshit enough times maybe people will actually start to believe it" files, comes the latest anti-Measure 66/67 propaganda--from a source I don't normally expect: OPB.
David Nogueras, Oregon Public Broadcasting:
The measures were part of a solution to plug a $4 billion budget gap.
Now 6 months after their enactment, and months after Governor Ted Kulongoski ordered across the board budget cuts, some are questioning whether the measures are helping or hurting Oregon’s economy.
"Some"? The convenient pronoun for reporters everywhere, it seems.
As it turns out, "some" in this case is Tara O'Keefe, who told Nogueras that she'd recently sold her Sisters-based business because Measure 66 was just too big a personal tax burden for her to bear.
Well...actually..what she said was that Measures 66 AND 67 forced her to sell, but Nogueras managed to catch O'Keefe's first prevarication:
The new buyer, the Gorilla Glue Company, moved production to Cincinnati, Ohio. O’Keeffe says she sold the business because of measures 66 and 67, which she says taxed the company’s profits leaving less money for the business to grow.
Tara O’Keeffe: "I do want to see my baby, O’Keeffe’s company global. I’m hoping that this company that now has my fourth child will be able to afford to do that."
Measures 66 and 67 are almost always mentioned in the same breath, but they’re actually quite different.
Measure 66 raised personal income taxes on joint filers earning more than $250,000 a year.
Measure 67 raised the minimum tax on corporations from $10 to $150. It also changed the way some corporations are taxed.
O’Keeffe’s company was not affected under Measure 67. But it was set up as what’s called an S-Corp and the company’s profits were reported each year as personal income for O’Keeffe. (Emphasis Carla)
According to Nogueras' story, O'Keefe can't reveal the worth of the company that she sold because of a confidentiality agreement. But according to this story in the Bend Bulletin(PDF) most of the money goes back into the business.
O'Keefe sold the "I had to sell the company because of Measure 67" story to the Bend Bulletin and the Sisters Nugget, both of which never bothered to fact check the story. Or maybe they didn't have the resources to do the fact-checking, small town papers being what they are in terms of revenue. O'Keefe blatantly lies to the Nugget, which says:
O'Keefe said that Measure 67 impacted her company, requiring assessment of ways to cut costs, which would likely have meant cutting jobs.
Yeah..that $150 she had to pay must have really been a hardship. Poor thing.
At this point, one hopes Nogueras would do the basic math to at least check the veracity of O'Keefe's claims about Measure 66. But it wasn't to be. Nogueras notes in his story that the company sold by O'Keefe is "multi-million dollar", so he knows at least that much, and presumably he did his due diligence by reading the Bend Bulletin piece citing the company's worth.
So let's look at the math: She has $2 million in gross revenues. For argument's sake, let's say that a generous 25% of that is pure profit that she takes home. That's $500,000. Assuming she files jointly, M66 only kicks in on her share of profits above $250,000. For the next two years, she'll be paying $4,500. In two years, that gets cut in half, to $2,250.
So O'Keefe sold a $2 million dollar business over $4500? Not bloody likely. Nogueras goes on to heavily quote a financial manager from Bend named Bill Valentine, who tried to shill similar stories of businesses fleeing Oregon over the tax hikes.
I showed this story (along with the Bulletin and Nugget stories) to Professor Patrick Emerson, Associate Professor of Economics at Oregon State University and proprietor of The Oregon Economics Blog. Professor Emerson noted that that though very high income individuals get taxed more they also enjoy no tax on consumption, low property taxes and they can write off state income taxes on their federal return. Therefore the marginal incidence on the tax is greatly reduced.
In other words, it's just not an untenable situation. Far from it, in fact. Professor Emerson also said that if a businessperson is about to sell their business for a one time multi-million dollar windfall then they may have reason to gripe but few others do.
"I will say that focusing on the one individual business kind of misses the point." he said. "Yes, taxes represent a trade off and there is no free lunch - the point worth discussing is not if we lose a single business but how bad an education system are we willing to accept and how will such disinvestment in education affect our future economic growth? I, for one, am comfortable with the trade off the state made with M66 and 67."
One would hope that business owners in Oregon would WANT to see an excellent education system in our state. Certainly we would rank much higher for attracting business if our educational system wasn't in such a mess.
In a nutshell, O'Keefe's story is utter bullshit. Sadly, Nogueras didn't dig enough to find this out. The real likely story: She built the company up from the ground, became really successful and then a national company offered her a crap ton of money for it. It's probably what every entrepreneur dreams for.
Except that in selling the business, it looks like she's turning her back on her hometown (Sisters) and the 20 people who worked for her. So instead of saying "yeah, I sold out to get my money and...well, sorry employees...but that's the way it rolls..." she finds an easy villain: M66 and 67. This way, she's not the bad guy motivated by greed over the needs of her community. She's the victim of legislators and muddle-headed voters who really hate business and are just making it impossible to do business in Oregon.
By Carla Axtman
Aug. 04, 2010
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Aug 4, '10
I use the stuff - it's GREAT hand cream - I had heard way back , maybe back into 2008 that O'keeffe was selling to an Ohio company. But the signing on the dotted line may have taken awhile?
Aug 4, '10
Wish I'd read this to be more coherent when I emailed OPB. Carl Axtman, thank you for expressing my frustration so well.
Aug 4, '10
I did e-mail OPB and this is what they wrote back:
Rev. Chuck Currie:
Thank you for taking time to write to me about the story we aired on Measures 66 and 67. Questions about how the new tax measures are affecting businesses in the state are complex, as our story pointed out. But they're serious enough to prompt state economists to look into the matter. Their research could take years. In the meantime, businesses are making decisions that we feel are worthy of exploration.
If you haven’t read the story, I hope you will:
In it you will see that we aired a variety of views, including those of a small business owner who said the measures had not hurt her, along with the views of the business owner discussed by Our Oregon. We stand by the story.
Eve Epstein Managing Editor OPB News
Aug 5, '10
I was so irritated to get this same answer back, I sent one more with one word: Bull.
Aug 5, '10
I wrote OPB and got the same form response. I responded by saying as a life-long Oregonian and supporter of public broadcasting I found her response "unacceptable."
OPB has gone off the rails when they start repeating right wing talking points that are not supported by the facts. They seem to be going the way of NPR and their Fox-lite political reporting. It's time for a subscriber revolt
Aug 4, '10
An April 30 Bend Bulletin story, wrote about O'Keefe speaking of telling her employees about the sale and their loss of jobs: "“They understand why I need to do this at this time, personally, but also for the brand,” said O'Keeffe, who plans to keep working as a pharmacist and giving presentations to young people about owning a business. “It's a little bit like sending your child off to college. You need to take this next step.”"
That's right -- the sale was good for the brand and her personally at that point in time. It had nothing to do with the tax measures (heck, if the tax measures mattered, she would have put it off until the lower "permanent" rate went into effect).
O'Keefee felt and is feeling guilty about 20 good employees losing their job over her decision, so despite that one truthful admission she tries to lay blame on the tax measures. OPB's poor reporting just regurgitated her baseless claims.
She sold to a family-owned Cincinnati business who had every reason to move production to Cincinnati. O'Keefe is feeling guilty about that and trying to lay blame, however baseless, and OPB fell for it hook, line and sinker.
Full disclosure: I have a tube or canister of Working Hands cream in my nightstand, in my desk drawer, and in my car. Great stuff, regardless of where it is made or the shameless lies of its inventor..
Aug 4, '10
Chuck is mostly correct. The sale was in the works well before M66/67 were voted on. However, the Bend Bbulletin article clearly states the Ohio parent company weighed the additional costs due to the measures of keeping the operation in Sisters. Ultimately they decided to move everything back to ohio rather than run a remote operation and pay the extra taxes on said operation.
Aug 5, '10
Actually, it was O'Keefe who said that the Ohio parent company weighed the additional costs. Given her history of prevaricating in this story, it seems a bit foolish to believe her.
The story says that a representative of Gorilla Glue said they moved because "Cincinnati is just where we're based."
Maybe they're big Reds or Bengals fans (I know...it's a stretch..who would do that???) Or perhaps they've always been in Cincy and it's their home--the schools are good and they don't want to leave. That would certainly make a lot more sense than the "costs" of taxes explanation.
If Gorilla Glue was making their tax bill a major part of the calculus, they should have stayed here: If they're an S-Corp, their taxes would be $150. If they're a C-Corp, their minimum on $2 million is at most $1,000 to $1,500. This is of course a fraction of the cost to move the company to Ohio. It's also likely significantly less than they're paying in Ohio taxes.
Further, Gorilla Glue would only be paying Oregon taxes on sales inside of Oregon, so the C-corp tax burden is highly likely to be much lower than even $1,000, as they're nationwide.
No matter how one dissects this OPB story, it simply doesn't add up.
Aug 6, '10
Gorilla Glue is a family held company, and the family reportedly once (still?) had ownership interest in the Reds. All of their operations are in Cincinnati - glue and tape at their recently acquired large location.
I wrote Gorilla Glue and asked them why they moved Working Hands to Ohio and they wrote back and said "Since our corporate headquarters are in Cincinnati, Ohio, the O’Keeffe’s operation will be based here as well."
Anyone who thinks tax policy -- Oregon's or Ohio's -- was a factor is just plain wrong. There were a host of good business reasons, including the fact that this family-held business has all their operations are based in Cincinnati.
Tara O'Keefe makes things up and OPB just did poor reporting (OPB could have contacted Gorilla just as I did and learned that Tara was not truthful.).
Aug 4, '10
Good story, but I think some credit is due to Our Oregon who may have broken it first, I got their email today.
Aug 5, '10
I've said it before and I'll say it again - when they cry "M 66/67 drove me out", they should be required to PROVE IT by disclosing their tax returns. (The buyer as well as the seller, in this case. Depending on the numbers, we could be just talking the minimum tax...) My concern is these taxes are in statute and not the constitution. By keeping it in the media, some could be setting the stage to try and change them or repeal them at future legislative sessions.
Aug 5, '10
Carla, Could you please explain how higher taxes in any case land in the "plus" column when trying to make business decisions? Your best argument is it's "for the children" and people and businesses move here for the tax law? You throw out there that someone with a $2 million dollar gross business is seeing $500k in profit? Really, you got data? And that everyone should just be happy to pay $4500 more in taxes because, "they can afford it" ? Carla, why don't you send another 10 grand a year to your buddy Ted K, he NEEDS it doesn't he? And for whatever reason, Gorilla Glue did not choose Oregon did they? What you are unwilling to admit is that 66/67 is a dumbass tax policy, penalizes those with high gross, low margin businesses, and is just another indication of the kind of state we are stuck with, one that knows better than we do, especially where our money is concerned. But hey, it's only $150 here, $4500 dollars there, of SOMEONE ELSE'S MONEY Carla, NOT YOURS. Maybe Oregon could just suck ALL the money out of the economy and dole it back out to us, but only to the "correct thinkers" like you.
Aug 5, '10
Sure. Higher taxes generally mean much better public schools, roads and public services. All of those are major factors when businesses decide where to locate, often much bigger factors than a potential tax bill.
Actually, I threw out the $500k as a generous number on O'Keefe's salary. If it's less than that, say under $250k, then Measure 66 doesn't effect her salary and she's lying about that too. I was giving her a little bit of the benefit of the doubt.
Your complaints are typically irresponsible anti-tax rhetoric. There is no free pass--everybody pays: for schools, roads and other services. If that's not "correct thinking" to you, then I guess I fail the Teabagger School of Ideological Rhetoric.
I'm okay with that.
Aug 5, '10
It's not even necessary to go there. By Dave's logic, even one more dollar in taxes could discourage businesses.
Dave, the evidence simply does not support you on that point. I'll leave it to Chuck Shektekoff to cite the studies song and verse, but businesses are not that responsive to marginal tax rates.
In addition, the reason Carla posted the profit plus tax is that their RELATIVE size is important. Yes, someone who brings in $500k in profit CAN afford $4500 a lot more easily than someone who brings in $5000 in profit. Is the marginal value of a dollar that hard for you to comprehend? As your income increase, the marginal utility you gain goes down.
Finally, Carla's claim was not that $4500 was a lot or a little money, but that for the owner to claim that $4500 over two years was the reason she took on the tremendous expense of moving her business is a) unlikely and b) completely contradicted by other evidence about her business decisions.
The story is poppycock. If the anti-tax crowd wants to find a business that really moved out of state as a result of M66/M67 let them do so, but quit promoting mythologies to media dupes.
Aug 5, '10
Well said, Paul.
Aug 5, '10
It's interesting that the comments here focus more on the bogus claims by O'Keefe--a bad actor, but one playing a now-familiar role. What I want to focus on is the journalistic malfeasance.
OPB generally does great reporting. As the Oregonian continues to drop local news, they are my go-to source. But this bears the hallmarks of the worst "objective balance" falacies: telling "both sides" of the story and giving them equal weight even if one is totally bogus. In a desire to be fair, they inadvertantly become partisan propaganda agencies spreading misinformation.
Sometimes reporters make mistakes, but as Chuck Currie notes above, OPB is standing behind this BS. News agencies are only as good as their credibility. It's okay for a reporter to get hoodwinked. It's not okay for OPB to stand behind the story. They should issue a correction, stat.
Aug 5, '10
Speaking of the feces of a male bovine, a couple of points in your post deserve response Carla.
The Bend article does assert, as you say, that Mrs. O'Keefe's S corporation produces $2 million a year in gross revenue. (That seems low to me to be the subject of an acquisition like this, but let's assume it's right). I'll even accept your assumptions about 25% profitability and a joint return, though obviously neither of us knows if those are right.
First, if your facts are right, Mrs. O'Keefe pays Oregon income tax of $50,000 per year, not $4500, on the taxable income of her company. (The $4500 is the annual increase under M 66, but she was already paying a hefty 9% on the entire $500,000 before M 66, so the total is $50,000 per year.) Presumably she is taking a salary out of the business, so she has to pay additional Oregon income tax on that as well.
Second, the Bend article indicates that she reinvested most of the profit in her business. The profit wasn't cash that "she takes home" as you assert. It's money that was reinvested in the business. She never received that cash, but she had to pay income tax on it. You confuse taxable income with cash. She paid $50,000 per year of Oregon income tax on profits that she didn't "take home". She paid additional Oregon income tax on the salary that she did "take home."
Third, your economist missed an important point as well. Oregon income taxes are deductable on a federal income tax return, but are added back in calculation of the Alternative Minimum Tax, which most high-income taxpayers end up being subject to. The federal benefit of state income taxes is an illusion.
Mrs. O'Keefe said Oregon taxes were part of the reason she sold her business. (The article said she also wanted the see the business have a chance to grow bigger, with the greater financial resources of the buyer.) She probably had a lot of reasons to sell. She also said taxes were part of the reason the Ohio buyer didn't want to keep the operation here. They probably had other reasons as well, but it's just silly of you to assert that taxes couldn't have been an important consideration.
If you decide to continue to play "whack-a-mole" with every story that comes out about a business or wealthy individual moving out of the state because of our high income taxes, you're going to be very busy over the months and years ahead.
Aug 5, '10
The only reason Karla has to play "whack a mole" is that the media keeps repeating the unsubstantiated claims of people like Mrs. O'Keefe. No one has yet shared numbers that back up the claims. She specifically said it was M67, which it couldn't be and M66 didn't account for her tax pain since she was apparently negotiating this deal before M66.
Besides, Karla used an overly generous assumption of a 25% pre-tax margin, which as you know, is highly unlikely. By re-investing the bulk of the after-tax profit in the business which would mean several $100k per year she should have had much more than $2 million in revenue. My guess is that she earned considerably less, which makes the tax equation even less significant.
As for the tax issues for the acquirer, the Tax Foundation that you thought showed Oregon slipping so badly all the way down to 14th place on best state tax climate, shows Ohio at 47th place, one of the highest tax states in the country and their individual tax rate is the 46th worst in the country.