COMMENTARY | Their real goal may be to stop us from making them pay their fair share
Two business associations have filed a legal challenge to Metro’s proposed May 2020 ballot measure to prevent and reduce homelessness. The grocers and manufacturers groups hope to influence the description of the proposal that people will see in the Voters Pamphlet and elsewhere. Their challenge may signal that they will bankroll a campaign against the desperately needed measure, since it contains a business profits tax as well as an income tax on high earners.
However, the facts don’t support the statements of the presidents of the Northwest Grocery Association and the Oregon Manufacturers and Commerce, both of which represent areas much larger than the Portland metro area. Their real goal may be to stop us from setting an example that partially relies on Big Business paying its fair share to provide critical services.
Aren’t state and local taxes on businesses in Oregon among the very lowest in the country? Why are these groups complaining?
Yes! Year after year, the pro-business Anderson Economic Group ranks Oregon as one of the two or three states where the combined state and local taxes paid by businesses are the lowest in the nation. Yet the president of the Northwest Grocery Association was quoted in the Willamette Week and The Oregonian, griping about “the cumulative impact of the exponentially growing number of state and local taxes that are borne by everyday Oregonians and business owners.”
EDITORIAL: To fight homelessness, Metro asks the wealthy to pay their fair share
But recently passed state taxes largely let corporations off the hook, don’t they?
Yes! Economists measure the “incidence” of taxes, which means who actually pays them, as compared to who appears to pay them. While it may appear that businesses will pay recently passed taxes, the evidence shows that they will be passed on to consumers and workers.
For instance, the 2019 Oregon payroll tax to provide paid family leave for most workers will be collected from businesses, and formally be paid 60% by employees and 40% by employers. However economists recognize that employers reduce compensation if they have to pay a payroll tax, so that payroll taxes are largely paid by employees, regardless of the official split.
The Student Success Act, passed in 2019 to better fund our schools, relies on what’s called a gross receipts tax, calculated as a percentage of businesses’ total sales. Oregon’s new gross receipts tax will be easy to pass on to customers. Like Washington’s longstanding gross receipts tax, it applies a low tax rate to most businesses. Since most businesses have to pay it, most will roll it into the prices they charge, as their competitors will also. A low, widely applied gross receipts tax acts like a sales tax, which is why the Oregon Business Association favored it over the years.
Aren’t the business taxes proposed for homeless services concentrated on big businesses?
Yes! The new business tax proposed by Metro will only apply to corporations with annual sales of $5 million or more. Small businesses will not pay this tax. Also, the proposed homeless services funding mechanism is a profits tax, so many, very successful, businesses will be able to avoid paying it due to tax deductions. Obtaining tax deductions motivates lobbying groups like the grocers’ to endlessly fuss about a non-existent “exponentially growing number of state and local taxes.”
Hmmm, and Big Business got a huge federal tax cut in 2017, didn’t it?
Yes! The big Trump tax cut that has dramatically increased the deficit and created a phony argument for cutting food stamps particularly benefited Big Business and the wealthy. Rather than put their tax windfall into increased capacity and higher wages, as promised, corporations have used most of the money to buy their own stock. That’s pushed up stock prices, and executive pay tied to stock prices, but hasn’t done anything for the economy. Wages, unemployment and child poverty rates are much better measures of economic health than high stock prices, and the small, recent progress we’ve made on wages is in large part due to states like Oregon raising the minimum wage.
Didn’t I read that the grocers and manufacturers are also talking about a lawsuit, based on the idea that local gross receipts taxes were preempted by the Legislature as part of the Student Success Act?
Yes! And the possibility of a legal challenge based on that preemption makes no sense. The business tax proposed for homeless services is a profits tax, not a gross receipts tax; only the threshold for which companies pay it will be set by gross revenues.
Didn’t the right-wing Portland Business Alliance and the more liberal Business for a Better Portland groups work with the Here Together coalition to craft the measure?
Yes! Both of these local business associations evidently recognize that our economy and community will function much better if people get the support they need to stay housed. The Here Together measure advocates proven strategies, including case management, mental health care, addiction and recovery treatment, employment services and rent assistance.
Street Smart Economics is a periodic series written for Street Roots by professors emeriti in economics. Mary C. King is a professor emerita of economics, Portland State University.
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