Oregon corporate tax hike still alive
By JULIA SILVERMAN - Associated Press
Tuesday, May 29, 2007 1:04 PM PDT
SALEM — Quietly, in the nooks and crannies of the state Capitol in Salem, plans to raise the $10 minimum tax charged to corporations are still percolating.
The air seemed to have rushed out of such efforts when state economists released estimates showing that an unforeseen $152 million would be available for spending in the 2007-2009 biennium, enough to plug holes in the community college and higher education budgets without new taxes.
Immediately after the forecast was released, Rep. Vicki Berger, the Salem Republican seen as among the most moderate in her caucus, told reporters that as far as she was concerned, the extra money meant a definitive end to any further discussions over tax increases of any stripe.
But House Democrats apparently aren’t ready to give up, with an eye toward finding a lasting source of money to elevate the state’s universities and community colleges.
Late this past week, they reconvened a select group of business lobbyists to gauge interest in moving ahead with a reform of the corporate minimum — this session.
The corporate minimum was set at $25 in 1929 and lowered to $10 in 1931, where it has remained.
The tax is paid by businesses that haven’t made any taxable profit in the previous year — essentially, it’s the price companies must pay for doing business in the state.
About 23,000 Oregon corporations paid the $10 minimum last year, according to the nonpartisan Legislative Revenue Office.
There’s no consensus among business groups over what to do, but if they don’t act, they may forfeit the chance to shape a compromise. Education activists and others are likely to send the issue to an upcoming ballot if the Legislature doesn’t act.
Several in the business community have said they’d be amenable to a one-size-fits-all rise in the corporate minimum, pegged to inflation. That $25 paid by businesses in 1929, for example, is the same as $302 in today’s dollars.
Charging that $302 flat rate to all forms of corporations, including professional partnership groups, could bring in about $60 million a year, according to Paul Warner, who heads the Legislative Revenue Office. But Lynn Lundquist, who heads the influential Oregon Business Association, said it’s unfair to expect a mom-and-pop business to pay the same flat rate as a large corporation.
‘‘A 3,000 percent increase on small business, and PGE pays the same?’’ Lundquist asked. ‘‘That’s a difficult sales job inside the building. I think there’s a hybrid, a smaller flat rate across the board, then a graduated rate to treat larger business interests different than the mom and pops.’’
House Majority Leader Dave Hunt — who put the chance that a corporate minimum tax increase will pass this session at 25 percent — said several other models are under consideration, including:
— Basing the rate on in-state sales.
— A charge on pre-taxable wages, interests and dividends.
— A tax based on net profits.
The wild card, Hunt said, is whether House Republicans will go along with any such plan, since any revenue-raising proposal needs 36 votes in the House, and the Democrats hold only a bare, 31-29 majority.
But a bipartisan working group is considering the issue, said Rebekah Orr, a spokeswoman for the House Democrats, and House Republicans have sent signals that they might be willing to make a deal, if it’s laced with incentives like tax credits for small businesses, and cuts in the capital gains and estate tax rates.
Meanwhile, Senate Democrats have been notably more lukewarm about the corporate minimum, preferring instead to focus on the fate of a proposed cigarette tax to fund an expansion of children’s health insurance programs.
‘‘I don’t think much about the corporate minimum,’’ said Senate President Peter Courtney, a Salem Democrat. ‘‘The business community is very divided. And the magnitude of these proposals can take days or weeks.’’
That skepticism is echoed by a number of those from the business community, who point out that they already ‘‘gave at the office’’ this session, by agreeing to suspend their corporate tax kicker and send the more than $300 million to a rainy day fund savings account. They’re pushing instead for more time and more study in the interim.
‘‘This all needs to be part of a broader discussion on a tax overhaul,’’ said Genoa Ingram, who lobbies for the state’s chambers of commerce.
And the clock is ticking toward an expected June 29 adjournment.
‘‘I just don’t think you can accomplish one piece of the whole equation in five weeks,’’ said Jessica Adamson, who represents the Associated General Contractors.
