Oregon passes tax boost on consumers

Elsewhere, the headline from yesterday’s referendum results reads “Oregon passes tax boost on wealthy, corporations.” But there’s no such thing as a tax on corporations, and states that pass taxes on the wealthy soon find themselves with fewer wealthy people.

There’s no such thing as a tax on corporations because the money has to come out of someone’s pocket: from shareholders in the form of lower returns, from employees in the form of lower wages, or from customers in the form of higher prices. Liberals seem to think it’s OK for shareholders to lose money, ignoring the ripple effects on investment, and to fantasize that employees and customers won’t get stuck with the bill, ignoring reality.

The most egregious part of the new law is that Oregon will now tax companies based on their revenues in the state even if they don’t make a profit. The state will tax residents earning $125,000 a year at rates that even tax-happy California reserves for millionaires.

Oregon already was not what you would call a low-tax state. Even before Tuesday’s vote it had the 15th-highest corporate tax rate in the U.S., which is the same thing as the 15th-highest corporate tax rate in the world, as well as one of the highest individual income tax rates.

On the other hand, maybe Oregonians are tired of all those Californians moving northward to escape their own high taxes.

Keep all of this in mind the next time someone suggests that Atlanta should view Portland as some kind of model.

26 comments Add your comment

Robert Beal

January 27th, 2010
4:44 pm

Oregon’s nonpartisan Legislative Revenue Office says that after the passage of the two tax measures:

2/3 of the states have a higher individual tax burden than Oregon

90% of the states have a higher corporate tax burden than Oregon

misplaced

January 27th, 2010
4:48 pm

Are you serious how would one define “wealthy people” Walmart pledged $600,000 dollars for Haiti. The Waltons are worth 81.8 Billion
If they Pledge $6 million everyday for the next two years their worth would drop to $79.8 billion.
The Walton family income is about $1 billion per year and they spent at least $3.2 million lobbying for a lower tax rate, and all they have to do is support a communist regime and exploit child labor laws.

How old are you?

January 27th, 2010
5:12 pm

I am stunned at how naive you really are. Have you been to Portland? I have. I also lived in the infrastructure hell that is Atlanta for 4 years. You need to apply for a job a the WSJ if you want to continue to parrot corporate scare tactics that have been trite since the 80’s. I am from the South and we all know trickle down turns to trickle on pretty fast. Check out how many people in the fortune 500 really made it on their own. Generational wealth is why we left England and here we are again.

professional skeptic

January 27th, 2010
5:23 pm

I’m a corporate tax accountant, and I say there’s no such thing as a political blog.

Just think how much more expensive things would be for corporations if thier state governments hadn’t used tax revenues to provide all of the costly infrastructure that corporations freely enjoy. Roads, airports, police/fire protection, the court system, etc.

It’s a fact that a lot of states are considering a migration to tax on revenues/gross profits, rather than on net income. All that much-used infrastructure ain’t gonna pay for itself.

LA

January 27th, 2010
5:47 pm

“I’m a corporate tax accountant, and I say there’s no such thing as a political blog.”

Then why the hell are you on this blog?

professional skeptic

January 27th, 2010
5:52 pm

*weep* *sniff*

‘Cause… ’cause… corporate tax accountants are people too and we have voices just like everybody else!!!!

That, and I hate tax myths.

Don’t worry your pretty little head, LA. It’s past 5pm and quittin’ time. I’ll blog if I want to.

samuel

January 27th, 2010
5:52 pm

It’s annoying to me when businesspeople, especially multimillionaires or billionaires, complain about their taxes or talk about wanting to keep “my” money. They completely ignore their employees (who pay a higher % of their income in taxes, ask Warren Buffett). As Professional Skeptic noted, there’s an infrastructure network that has to be maintained in order for businesses to thrive. Infrastructure is paid for by taxpayers. Also, it’s false that tax cuts for the wealthy spur job creation. Some wealthy people will take the money they save in taxes to put in investments to make more money for themselves, not to create jobs. An example would be manufacturing companies that closed factories in the U.S. and moved them to Mexico and overseas after Ronald Reagan cut the top tax rate in half (in 1981). While business owners made a killing in the 1980’s, their employees salaries didn’t grow as much as in previous decades. It was the very defintion of “trickle down” economics. It’s been a disaster for most Americans, but many people, including many working-class Southerners, still don’t realize it.

LA

January 27th, 2010
6:21 pm

“Don’t worry your pretty little head, LA. It’s past 5pm and quittin’ time. I’ll blog if I want to.”

I thought I smelled feces. What’s up skeptic?

LA

January 27th, 2010
6:22 pm

professional sceptic tank, how’s life on Bookman’s pc blog?

professional skeptic

January 27th, 2010
6:56 pm

Don’t know. Haven’t had much of a chance to look today.

If you’d care to debate the merits of Kyle’s topic, I’d be glad to discuss. However, I will not waste further time exchanging the kinds of childish, off-topic barbs that got you banned from Bookman’s blog.

Congratulations, by the way, for voilating Kyle’s blog rule #2 in your 6:22 post. Guess you’re just making the rounds, trying to get banned everywhere. Doesn’t make sense to me, but to each his own.

This concludes my second and final off-topic post.

LA

January 27th, 2010
7:06 pm

“However, I will not waste further time exchanging the kinds of childish, off-topic barbs that got you banned from Bookman’s blog.”

Oh I’m just messing with you.

Michael Hagmeier

January 27th, 2010
8:50 pm

The argument that “there’s no such thing as a tax on corporations” shows a profound ignorance of how economics work, and even an ignorance of basic conservative economic theory.

According to conservative economic theory, the only duty of corporations is to maximize profits for their shareholders. In order to do that, they must be charging the optimal price for their products–if they charge more, the loss in sales will more than offset the gain in profit per unit sold.

Raising taxes doesn’t change that basic equation. Increased taxes on corporations cost shareholders, not consumers.

Hillbilly Deluxe

January 27th, 2010
9:05 pm

Michael Hagmeier

I agree with your basic point but very few stocks pay dividends anymore, so in a lot of cases the shareholders don’t benefit either unless the stock price gets pumped up to where they can sell. The CEO’s and the Board members are the ones that are raking it in. They make things look good in the short term and cash out. There’s not much long term view anymore since Wall Street has basically become a big casino. You’re right in that they already are charging all for their product that the market will bear.

Portland

January 27th, 2010
9:07 pm

The tax on $125,000 is if you are filing individually, otherwise the tax is on $250,000 if you are filing jointly. Just wanted to clear that up.

Michael H. Smith

January 27th, 2010
11:43 pm

Liberals seem to think it’s OK for shareholders to lose money, ignoring the ripple effects on investment, and to fantasize that employees and customers won’t get stuck with the bill, ignoring reality.

Well I declare Kyle, I do believe that statement needs a little something. Give me a minute, I’m thinking….

Oh, here it is…

Liberals, CEO’s and certain members of corporations seem to think it’s OK for shareholders to lose money, ignoring the ripple effects on investment, and to fantasize that employees and customers won’t get stuck with the bill, ignoring reality.

Yeah, were is our fat cat bonus?

JohnD

January 28th, 2010
8:52 am

Hey Robert Beal, nice post. But Kyle isn’t interested in facts. Oregon also doesn’t have sales tax or property taxes on vehicles, but Kyle will never factor that stuff in.

In Kyle’s world, its only corporate profits and shareholders that matter. Kinda of like the Teabaggers, if you don’t have a job with health insurance, you have three options: get a job with health insurance; go into poverty while paying your health care costs; or die.

Life is so simple.

Michael Hagmeier

January 28th, 2010
8:52 am

Liberals, CEO’s and certain members of corporations seem to think it’s OK for shareholders to lose money>/i>

I thought the rationale for profit was that investors are risking their money. Now you’re saying they need to be guaranteed not to lose money? So they aren’t risking anything? Wow!

Kyle Wingfield

January 28th, 2010
9:54 am

Robert Beal: Those stats don’t match up with what I’ve seen from more independent sources. The overall tax burden is lessened somewhat by Oregon’s property taxes and lack of a state sales tax. But you have to consider what a tax gives you an incentive to do — or not do.

professional skeptic: No one said anything about eliminating taxes. But corporate taxes are a poor mechanism because they hide the cost from the person who actually bears it — as demonstrated by all the bloggers on here who apparently think the taxes their employers pay have nothing to do with their wages, or the prices they pay at the store. In a market with no price elasticity, OK. But how many markets are like that? (Although I can see how you, as a corporate tax accountant, would be averse to getting rid of corporate taxes.)

Michael Hagmeier: See above re: your first comment. Regarding your second, this is probably one of the 5 most ridiculous things ever said on my blog. Saying corporate taxes shouldn’t rise is miles away from saying investors should “be guaranteed not to lose money.” There’s plenty of risk out there without government adding artificial regulatory risk.

professional skeptic

January 28th, 2010
12:23 pm

Nice dig Kyle. To be quite honest, I became a tax accountant because I saw my parents with liberal arts degrees get laid off in the ’90s. I was interested in a career with a predictable measure of job security. If corporate taxes ever go away, I’ll switch my focus to combat corporate/government financial fraud, which I consider to be another constant along with death and taxes.

From my perspective, state tax is just another expense to be managed, like utilities expense or wages. In fact, you might as well pen an article on those darn electric bills that corporations have to pay, and by golly, if corporations didn’t have to pay to keep those dadgum lights on, just think about how much less they could charge their customers, or how much more their employees could get paid, or much more their shareholders would pocket.

But taking electricity out of the picture would quickly lead to a situation in which nobody — not the customers, not the employees, not the sharedholders — would get anything at all. I argue that the same would be true if corporations suddenly lost all access to taxpayer-funded public services and infrastructure.

Ok, fine… if we remove corporations’ share of the tax burden and stick the whole bill to the middle class, then American consumers would have less disposable income available for the products and services the corporations sell. Alternatively, if we eliminate corporate taxes and make up the difference via borrowing without ever intending to pay it back, China will eventually come take us over.

Me? I’d rather see us “pay as we go” and stay a free country.

Good discussion… but now I’ve used half my lunch our, so I’ve got to run…

md

January 28th, 2010
3:51 pm

It has always and will always be very easy to vote for others to loose money, that is the new American way.

You have it and I want it, so I give uncle sugar permission to go get it.

No wonder we now live in a get rich quick litigious society.

Michael Hagmeier

January 28th, 2010
8:45 pm

Hmm, I’ll try this again.

Kyle, my comment was directed toward Michael H. Smith’s ridiculous statement attacking liberals for thinking “it’s OK for shareholders to lose money.” Perhaps you should direct your snide comments for those on your side who are actually making ridiculous statements.

Michael Hagmeier

January 29th, 2010
12:01 am

Perhaps this time I’ll actually be able to post my comment.

Kyle, perhaps you needed to read my comment a little more closely–I was commenting on Michael H. Smith’s comment where he clearly implies that shareholders should be guaranteed not to lose money. If you’d have read my comment closely, you would have noticed that I actually quoted the words that had that implication.

Kyle Wingfield

January 29th, 2010
11:35 am

My mistake about the quote, Michael Hagmeier.

But I still don’t see where anyone besides you said or implied that investors should be guaranteed not to lose money. I was talking about taxes, and I read Michael H. Smith’s comment to be talking about executive pay/bonuses. What am I missing?

Michael Hagmeier

January 29th, 2010
8:04 pm

“Liberals, CEO’s and certain members of corporations seem to think it’s OK for shareholders to lose money”

Yes, of course it’s OK for shareholders to lose money–that’s why it’s called risk.

The implication in Michael H. Smith’s comment is that’s it’s not “OK” for investors to lose money. That is, they should be guaranteed not to lose money.

Chandler

January 29th, 2010
9:57 pm

Yes, Oregon may have the highest income tax in the US, but Oregon also has NO sales tax, unlike 43 other states. The state general fund depends on the income tax for more than 70% of it’s revenue.

Michael Hagmeier

January 30th, 2010
11:11 am

We also raised the corporate minimum tax from $10 to a whopping $150. That’s not going to be putting companies out of business.