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Last week Governor Kate Brown pulled a PR stunt by asking for
a special legislative session. The Governor’s press release expressed her
desire to clean-up Oregon’s adaptation of a pass-through law by including only
the smallest of Oregon’s small businesses.
The Governor’s statement is cleverly worded to make it
sound like she will be stepping up to rescue small businesses, and sole
proprietorships. Her claim is that a simple fix would give these businesses
access to the same tax breaks afforded larger businesses.
The Governor said, “We have an obvious inequity in Oregon’s tax system that is
prejudiced against thousands of small Oregon businesses, and a simple change
can fix it. I’m simply not willing to let these main street businesses —
entrepreneurs, mom and pops, and start-ups — go through another tax year with
unfair tax treatment as compared to their larger competitors."
Doesn’t this message sound grand, generous and legitimate?
The Governor can
apparently conquer inequity, solve the Democrat Majority’s long-standing
prejudice for extracting taxes from hard-working Oregonians and provide well-deserved tax relief.
Hoooooray!
The governor’s statement continues by bragging this will
help, “an estimated 9,000 sole proprietorships [who] could qualify and use this
new opportunity to reinvest more of their profits into their businesses and
employees.”
Only 9,000? Who are we kidding?
Recall, Oregon’s tax gulag recently imprisoned 192,000 of
Oregon’s small businesses (mom and pop operations, sole-proprietorships, and
“Schedule-C” filers) through Senate Bill 1528.
“Schedule-C” filers represent self-employed owners of
small businesses who utilize the Form 1040 (Schedule C). This is the form used
by businesses to complete income tax information for the federal government.
More importantly, this form is also known as “Profit or
Loss from Business” and it documents exactly what the State of Oregon is
interested in – your profits. Oregon is rapacious when it comes to scraping the
last morsels off the plates of their small-business inmates.
The Oregon Department of Revenue estimated that SB 1528 would deny 192,000
“Schedule-C” filers their eligible for a 20% reduction on their Oregon
income taxes. Although these businesses would qualify under federal
tax-law they become trapped in an environment where it would be legal, except
it’s not. This is exactly what SB 1528 from the 2018 legislative session was
designed to do. It was engineered to disconnect Oregon’s tax code from Trump’s recent
federal tax relief efforts.
With an effective state tax rate of 7.7%, these
hardworking Oregonians already pay a higher tax rate than large Oregon
C-corporations. In my view, SB 1528 represents the Democrat Majority’s official
assault against small business owners and operators.
Here is another item that you may not realize: all revenue
bills are constitutionally obligated to originate in Oregon’s House of
Representatives. House bills are numbered with an HB prefix while Senate bills
carry the SB prefix. Obviously, SB 1528, is a bill for generating tax revenue
which started, unconstitutionally, in the Senate.
Additionally, raising revenue or increasing taxes requires
a two-thirds majority to pass. SB 1528 passed by a simple majority without a
single Republican vote.
The increased taxes on these 192,000 small businesses will
be nearly 40 percent of the estimated $258 million in increased tax revenue pinched
during the 2018 session. That means nearly $103 million will not be available
for those local and family owned businesses to reinvest in their enterprises.
That will be money that is no longer available for employees, benefits, or
business expansion. For the young family running a small, sole-proprietorship,
it could mean bread, milk and cheese which can no longer be afforded.
It seems that the language about solving the state’s tax-inequities
quickly evaporates like green-house-gas emissions right into the night sky when we
realize that this is $103 million which will no longer be spent in our local
communities but funneled into Salem's grimy machinery.
Meanwhile, large multinational corporations will be
allowed to hustle the system with special tax credits. Oregon’s inequitable
tax-program allows its highest income earners to buy tax credits to offset
their tax liability. This means that wealthy Oregonians will enjoy these tax
savings at the expense of the small business owner who can’t afford to purchase
these credits, let alone a box of Mac ’n’ Cheese for the kids.
In the typical fashion of the classic redistributionist,
this scheme transfers general fund dollars to Oregon’s top 1% income earners
while stealing federally allowed tax deductions from mom and pop
businesses.
High-income investors have the financial resources and the
means to lobby for these quirky tax rules. They can arrange to successfully
game the tax system by using their Democrat allies who support complex
giveaways hidden beneath layers of statist bureaucracy.
Gov.
Brown could have exercised her leadership skills with a veto of SB 1528, but
instead, she signed it into law. Typically, Oregon would copy federal tax
breaks for businesses into state law. However, this year’s federal tax breaks
have Trump’s signature all over them. In response, Gov. Brown reminded us once
again why capitalist prosperity in America is so dangerously imperiled as she
built her own version of a wall preventing Oregonians from accessing legitimate
tax benefits.
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This brings me to a question. Why all of the press notices
and expense by Gov. Brown for this special legislative session?
Why? Because the Governor is on the ballot this November.
The Governor’s claim that there is an “obvious inequity in Oregon’s tax system
that is prejudiced against thousands of small Oregon businesses” will sell. It’s
true. There is great inequity.
However, setting a mere 9,000 filers free does not make up
for marshalling the other 183,000 tax-payers into Oregon’s scheme for preventing
access to the Trumpian tax-breaks.
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What gets missed is that the Democrat majority used
unconstitutional and illegal means to create the initial problem and the
Governor signed this into law. Despite claims about protecting small business,
Gov. Brown and Oregon’s Democrat majority are masking their true objectives
behind generous words.
They have accomplished their goal of raising an additional
$1.3 billion in unneeded tax revenue over the next 6 years off the weakened souls of small businesses,
local mom and pop shops and “Schedule-C” filers trapped within the state’s labor-camp
boundaries.
The sad truth is, Oregon’s fiendishly unfriendly business
environment will eventually push Oregonians to cut the wire, jump the fence and escape to more business-friendly states.
Remember, if we don't stand for rural Oregon values and common-sense – No one will!
 Dennis Linthicum
Oregon State Senate 28
Capitol Phone: 503-986-1728
Capitol Address: 900 Court St. NE, S-305, Salem, Oregon 97301
Email: sen.DennisLinthicum@oregonlegislature.gov
Website: http://www.oregonlegislature.gov/linthicum
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