Oregonians, not corporations, will pay IP 28 tax

Published on July 7, 2016 10:35AM

Oregon voters in November must reject Initiative Petition 28, the gross receipts tax measure on the ballot.

The measure — pushed by public employee unions, education and healthcare advocates and other liberal interests — proposes Oregon’s largest tax hike ever. It would impose on “C” corporations an additional 2.5 percent tax on gross sales in Oregon exceeding $25 million.

IP 28 would raise as much as $3 billion a year for the state’s general fund, and is touted as a panacea for unspecified spending priorities in search of a funding stream.

Oregonians are fond of raising taxes that they themselves won’t pay, particularly if in the process they can stick it to big, out-of-state companies that they say aren’t paying their fair share. Supporters of IP 28 fondly point out that 70 percent of the companies that would directly pay the tax are not domiciled in Oregon, and include big retailers, big banks, big oil, big pharm — big, greedy companies carrying away Beaver State boodle to Arkansas, Wall Street and Moline. No downside here.

A compelling argument, if only it were true.

Enter Doug Hoffman, president of farmer-owned Wilco — one of the big Oregon companies that will pay the tax.

Wilco is a cooperative set up to sell merchandise and services at a discount to its 3,000 farmer members. Separately it also operates 12 retail stores in Oregon, mostly in the Willamette Valley, selling all comers a wide variety of products with a decidedly farm and ranch bent.

Without any of the bluster one expects from the robber barons IP 28 means to punish, Hoffman lays out the company’s finances. Under Oregon law, the $100 million in direct sales of products and services to members are exempt. The $100 million in sales at the retail stores are not. A portion of any profit is returned to the members.

In a good year the retail operation has a net profit of as much as $2.5 million. That, coincidently, is the amount Hoffman says Wilco will pay in corporate income taxes if IP 28 passes.

Because IP 28 taxes gross receipts, not net profits, Wilco and other businesses with the requisite sales will pay whether they make money or not. Hoffman says there have been years when sales have been high, but the retail business has run at a loss. In that case, the tax bill will come out of reserves.

Hoffman and others say the biggest myth of this, and every corporate tax increase, is that regular Oregonians won’t pay the tab. They will.

Businesses will increase prices to cover the extra taxes they owe and to pay prices increased by suppliers burdened by their own higher taxes. They’ll cut back on employees to reduce operating expenses. They won’t invest in expansions.

To facilitate its passage, IP 28 supporters have picked a small segment of the business to paint as unsympathetic targets of their tax. But if passed, Oregonians and many of the state’s iconic brands will fall victim.


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