SALEM, Ore. -- Anti-tax groups mounted a pre-emptive strike this week on any solution to the state’s $1.6 billion budget shortfall that includes a new gross receipts tax on Oregon businesses.
The group is acting ahead of any such tax proposal that may emerge in coming weeks from a bipartisan work group led by Sen. Mark Hass, D-Beaverton.
The idea of a gross receipt tax has an “ew” factor for former state Rep. John Davis, who is spearheading the anti-tax effort.
“It’s gross because it’s not transparent,” Davis said. “It’s gross because it’s the worst of all the options.”
Gross receipts are the total amount a company receives from all sources during its annual accounting period without subtracting any costs or expenses, according to the IRS. States with a gross receipts tax take a small percentage of the total to pay for government services.
On Tuesday, Davis publicly launched a 501(c)(4) organization called Priority Oregon, which is dedicated to educating voters on the hazards of gross receipts taxes, Davis said. The Tax Payers Association of Oregon and the Oregon Small Business Association are part of the effort.
On Wednesday, the organization is launching a television ad campaign that features a woman pouring water into buckets with the tag line: “Tell your legislator not to soak us with this new tax.”
Davis declined to say how much money Priority Oregon has to spend on the educational campaign.
As an educational nonprofit, the group must abide by IRS rules but, unlike political action committees, it’s not required to disclose where the money comes from and where it goes.
The state faces a massive shortfall not because a stalling economy has depressed income tax revenue. On the contrary, the state economy has seen a rapid uptick and unemployment has fallen to historic lows.
But burgeoning increases in the cost of the Public Employees Retirement System (PERS) and doubts about the federal government’s willingness to maintain support for Medicaid has left the state budget in shambles.
Davis said it’s not his job to offer solutions.
“Our job is not to balance the budget. Our job is not to make proposals,” he said. “We’re here to make sure any gross receipts tax proposal doesn’t get through.”
Hass wasn't immediately available for comment.
Gross receipts taxes are regressive, Davis said. They cost consumers at the lowest end of the economic scale the most. Supporters of the tax agree, but they say they can cushion low income taxpayers with some of the tax proceeds.
Low-margin businesses struggle with gross receipts tax because — unlike with corporate income tax – they must pay even when they don’t make a profit, Davis said.
A gross receipts tax is “a very, very harmful way to bring in money,” he said.
The tax accumulates on the products that pass from business-to-business on the way to the consumer. Milk, for example, would be taxed at the dairy, taxed at the producer, taxed at the wholesale buyer and taxed at the retailer – driving consumer prices higher, Davis said.
Any gross receipts tax proposed by the Legislature would be a retread of last fall’s Measure 97, which lost decisively – 59 percent no to 41 percent yes – on the November ballot, foes say.
Priority Oregon is branding the gross receipts concept as a “hidden sales tax,” which in Oregon, is a likely way to stall its progress. The group’s website is www.itsreallyjustasalestax.com.
Oregon’s sales-tax-adverse electorate has voted no on sales tax proposals nine times in nearly 90 years.
Lawmakers who are considering a gross receipts tax say they are running out of options to mend the major hole in the 2017-2019 budget. The courts have prevented them from making major cost-saving changes to PERS.
Such a tax could be tiny – a fraction of a percent – and broad based, encompassing the businesses that currently use tax credits and other deductions to eliminate their tax obligation to the state, proponents say. Gross receipts taxes are comparatively easy for a state to administer.
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