For reference, here's the complete text of the petition. (PDF warning) A few thoughts: This is a tax on gross sales, so no amount of fiddling around with showing out of state expenses as relevant...
This is a tax on gross sales, so no amount of fiddling around with showing out of state expenses as relevant to Oregon will decrease a company's tax in this case.
There's two parts of the tax; a 1% tax at any level (laid out in 2.a) and an additional 3% above $25M.
It will distribute that money to any individual who resided in Oregon for more than 200 days of the year, may not be used to determine eligibility for any form of public assistance (so it won't screw over people who might fall into the wage gap,) and can't be taken by garnishment or levy.
It will also reimburse anyone for any loss of benefits offered by the federal government if Oregon can't work out a deal to protect from the wage gap.
All in all, it seems a competently drafted proposal, though I'll definitely be interested in seeing how it works out if it does pass. The layers and layers of effects from the extra money for consumers and extra tax for businesses will certainly cause prices to rise, but how and in what ways for what industries? What will this mean for the actual quality of life? My take is that this is functionally a progressive consumption tax, as the more things a business sells the more tax they pay, and as such, the richest people will end up paying the majority of this tax just because they buy the most things. With an even distribution of money the majority of it will go to people who would spend it to sustain their basic quality of life, meaning rent, groceries, etc.
But that's just a guess. I hope it passes so that we can see the effects.
I actually worry this will end up being regressive compared to other options. In particular, I worry about costs being increased for groceries because the low margins in retail make it difficult...
I actually worry this will end up being regressive compared to other options. In particular, I worry about costs being increased for groceries because the low margins in retail make it difficult to absorb otherwise. If prices go up by more than $750 for low income households, I would consider that regressive compared to something like a progressive (in the sense of increasing brackets) income or capital gains tax that could start well above the low income threshold. But perhaps I misunderstand the application of the tax.
Most states with taxes like this have either very low rates or variable rates by industry because of issues with low margin industries.
I'll be interested to see how it pans out. But unfortunately the lead up to the vote will be very partisan and full of FUD.
To your concern regarding whether prices may go up by more than $750 for low income households I have two points. The money is per person regardless of age, not per household. If you're a family...
To your concern regarding whether prices may go up by more than $750 for low income households I have two points.
The money is per person regardless of age, not per household. If you're a family of 4, you're getting $3k.
The average national grocery spending per year is ~$5.5k. 3% of that is $165. So this would more than cover the change in prices of groceries even if the entire increase was passed through to consumers.
I would actually expect grocery prices to rise further than 3% once people have the money, as there would be higher demand for the same pool of goods until additional supply became available, but nationally grocery plus restaurant sales are 24% (36% if you assume that everything sold at a "general merchandise store" was food related.) As the tax draws from all businesses equally but the money is then spent primarily on the day to day needs that the majority of Oregonians have, I expect that the rising prices of groceries will be more than countered by the degree to which the extra money is directed towards groceries. The numbers will be higher, but the purchasing power of the average Oregonian would also rise with regards to their everyday needs.
Since everyone is getting the money back equally, the more someone spends above the average, the more their purchases are funding everyone else. If someone is buying multiple million-dollar sportscars, that's $30k a pop. And they're still only going to get back $750. Anyone making retail purchases of less than $25k a year (which is the majority of poor Oregonians) will be getting back more than they put in. It's a progressive tax in two ways; both baked into the scaling tax on businesses based on sale volume, and with a flat return from your purchases it explicitly distributes from the rich (or at least profligate) to everyone else.
Those are good points regarding minors and household income. However, I'm not entirely convinced, but I'm also no expert. My general understanding is that because low income households spend more...
Those are good points regarding minors and household income. However, I'm not entirely convinced, but I'm also no expert. My general understanding is that because low income households spend more of their money as a proportion on good and services, that when something is applied as a flat tax it disproportionally effects them, with some unintuitive exceptions.
There's two concerns I have: that low income individuals will go underwater, and that higher income people pay a lower effective rate.
So an individual making $30k/year will spend virtually 100% of that on goods and services (edit: plus housing). If they pay 3% more on $15k that would be $450, which would leave them $300 in the right direction. However, two things: there is usually some pyramiding that occurs, and second, that is an effective 1.5% tax on the individual. As far as pyramiding, I don't buy the 4x that the conservative economists love to parrot, but the break even would be 5% on $15k good and services. Which isn't much breathing room.
In contrast, someone making $250k/year who is paying 3% more on $125k in goods and services pays $3,750 in higher prices. So all good there. But they are paying the exact same effective tax of 1.5%. And that is worse the less you spend as a proportion of your income.
So I could be swayed I think, but I always worry when effective tax rates hit the rich and poor alike.
Thanks for the reply!
Now, things get more complicated as you account for more scenarios. Usually what I look for are a few assessments made by regional universities econ departments via internally peer reviewed issue papers, and comparing them together. But it will be a while before we have that sort of analysis available and by then the media machines will be going full swing.
Edit: I'm using half of the incomes to apply the 3% increase to because without knowing the full breakdown of expenditures we don't know exactly how much. A small landlord with one rental won't have to increase rates, but a large corporate landlord would have a higher tax burden under the bill. Same for buying from a small farmers market vs a WinCo. So for simplicity sake I went with 3% increase on half of income, but that is highly debatable.
Thanks! I've only skimmed, but it sounds sort of like a sales tax in disguise? One that doesn't show up on receipts, and sets a smaller tax rate for small businesses. Normally a sales tax is...
Thanks!
I've only skimmed, but it sounds sort of like a sales tax in disguise? One that doesn't show up on receipts, and sets a smaller tax rate for small businesses.
Normally a sales tax is regressive, but giving the money back equally fixes that. Also, since Oregon doesn't have a sales tax, a 3% rate isn't that big.
One issue, though, is that if a sales tax includes business-to-business sales, a single product could get an effective rate of 3%, 6.1%, or 9.3% depending on whether it changes hands once, twice, or three times, before it gets to the consumer. That would favor Internet sellers (like Amazon) who ship from outside Oregon and only get charged once. Also, would all-in-one car companies like Tesla only get charged once, and car companies that use dealer networks twice?
If you fix it so that business-to-business sales get rebated, then it ends up being like a VAT tax.
Also, consider that some sales are for services, not just goods. Is this effectively a sales tax on rent? Health care? Child care?
(Although, since it's only charged for corporations, this encourages sellers to not incorporate. So, small landlords would avoid the tax.)
Taxes that are sort of like this from a very high-level point of view have been done before. But, maybe getting the rules right isn't simple. Tax codes are complicated for many reasons, some of them good reasons.
But I don't know how it would really work, so these are really just reasons to ask questions.
I agree that there's questions to be answered regarding the specifics of implementation, but the thing about incorporation isn't one of them. There's a stated minimum tax of $150 on S Corps (sole...
I agree that there's questions to be answered regarding the specifics of implementation, but the thing about incorporation isn't one of them. There's a stated minimum tax of $150 on S Corps (sole individuals doing business) up to $25M, whereupon the 3% tax applies to them as well. But the benefits of incorporation are so overwhelming for the founder that even a 3% gross tax doesn't even begin to dent the reasons to incorporate.
But I agree that the specifics will need to be worked out. The specific wording is "...the total sales of the taxpayer in this state...", but it's possible that the word "sales" has a specifically defined meaning within Oregon state law that does or does not include various things. I'm reasonably confident that they're going to define "sales" as involving a transfer of goods but not services. But I'm not an Oregon resident nor am I familiar with Oregon-specific accounting quirks. We'll really just have to see.
As UBI goes, $750/year is not that much. It's a dry run, enough that just about everyone will find it worthwhile to sign up. Compare with Alaska where it bounces around, but was most recently...
As UBI goes, $750/year is not that much. It's a dry run, enough that just about everyone will find it worthwhile to sign up. Compare with Alaska where it bounces around, but was most recently $1300.
If they need to send more money, though, they'll have all the systems set up and ready to go, so it should go more smoothly than it did during the pandemic.
There will probably be interesting edge cases around who counts as a permanent resident that weren't there for Alaska.
It's laid out in the text. 200 days of residency per year, proven by documents that assert their home address, plus a signed affidavit that confirms their residency for the majority of the year....
It's laid out in the text. 200 days of residency per year, proven by documents that assert their home address, plus a signed affidavit that confirms their residency for the majority of the year. Fairly low on hard proof, but most of the easy fakes are also fairly easy to catch if an auditor asks for more proof.
Wow that's a pretty clever way to gain bi-partisan support. Even those people who usually vote against their own best interests will have a hard time passing up 750 bucks. Though I do wonder how...
Wow that's a pretty clever way to gain bi-partisan support. Even those people who usually vote against their own best interests will have a hard time passing up 750 bucks. Though I do wonder how certain corporate-backed news stations and politicians will spin this as a bad thing for the everyday people (no doubt something about how taking money from corporations means less jobs and how actually it would be better to allow them to pay even fewer taxes for some reason, source: don't worry about it just trust us).
The proposal, Initiative Petition 17, would establish a 3% tax on corporations’ sales in Oregon above $25 million and distribute that money equally among Oregonians of all ages. As of Friday, its backers had turned in more than 135,000 signatures, which is higher than the 117,173 required to land on the ballot. The validity of those signatures must still be certified by the Secretary of State’s Office.
For reference, here's the complete text of the petition. (PDF warning)
A few thoughts:
All in all, it seems a competently drafted proposal, though I'll definitely be interested in seeing how it works out if it does pass. The layers and layers of effects from the extra money for consumers and extra tax for businesses will certainly cause prices to rise, but how and in what ways for what industries? What will this mean for the actual quality of life? My take is that this is functionally a progressive consumption tax, as the more things a business sells the more tax they pay, and as such, the richest people will end up paying the majority of this tax just because they buy the most things. With an even distribution of money the majority of it will go to people who would spend it to sustain their basic quality of life, meaning rent, groceries, etc.
But that's just a guess. I hope it passes so that we can see the effects.
I actually worry this will end up being regressive compared to other options. In particular, I worry about costs being increased for groceries because the low margins in retail make it difficult to absorb otherwise. If prices go up by more than $750 for low income households, I would consider that regressive compared to something like a progressive (in the sense of increasing brackets) income or capital gains tax that could start well above the low income threshold. But perhaps I misunderstand the application of the tax.
Most states with taxes like this have either very low rates or variable rates by industry because of issues with low margin industries.
I'll be interested to see how it pans out. But unfortunately the lead up to the vote will be very partisan and full of FUD.
To your concern regarding whether prices may go up by more than $750 for low income households I have two points.
I would actually expect grocery prices to rise further than 3% once people have the money, as there would be higher demand for the same pool of goods until additional supply became available, but nationally grocery plus restaurant sales are 24% (36% if you assume that everything sold at a "general merchandise store" was food related.) As the tax draws from all businesses equally but the money is then spent primarily on the day to day needs that the majority of Oregonians have, I expect that the rising prices of groceries will be more than countered by the degree to which the extra money is directed towards groceries. The numbers will be higher, but the purchasing power of the average Oregonian would also rise with regards to their everyday needs.
Since everyone is getting the money back equally, the more someone spends above the average, the more their purchases are funding everyone else. If someone is buying multiple million-dollar sportscars, that's $30k a pop. And they're still only going to get back $750. Anyone making retail purchases of less than $25k a year (which is the majority of poor Oregonians) will be getting back more than they put in. It's a progressive tax in two ways; both baked into the scaling tax on businesses based on sale volume, and with a flat return from your purchases it explicitly distributes from the rich (or at least profligate) to everyone else.
Those are good points regarding minors and household income. However, I'm not entirely convinced, but I'm also no expert. My general understanding is that because low income households spend more of their money as a proportion on good and services, that when something is applied as a flat tax it disproportionally effects them, with some unintuitive exceptions.
There's two concerns I have: that low income individuals will go underwater, and that higher income people pay a lower effective rate.
So an individual making $30k/year will spend virtually 100% of that on goods and services (edit: plus housing). If they pay 3% more on $15k that would be $450, which would leave them $300 in the right direction. However, two things: there is usually some pyramiding that occurs, and second, that is an effective 1.5% tax on the individual. As far as pyramiding, I don't buy the 4x that the conservative economists love to parrot, but the break even would be 5% on $15k good and services. Which isn't much breathing room.
In contrast, someone making $250k/year who is paying 3% more on $125k in goods and services pays $3,750 in higher prices. So all good there. But they are paying the exact same effective tax of 1.5%. And that is worse the less you spend as a proportion of your income.
So I could be swayed I think, but I always worry when effective tax rates hit the rich and poor alike.
Thanks for the reply!
Now, things get more complicated as you account for more scenarios. Usually what I look for are a few assessments made by regional universities econ departments via internally peer reviewed issue papers, and comparing them together. But it will be a while before we have that sort of analysis available and by then the media machines will be going full swing.
Edit: I'm using half of the incomes to apply the 3% increase to because without knowing the full breakdown of expenditures we don't know exactly how much. A small landlord with one rental won't have to increase rates, but a large corporate landlord would have a higher tax burden under the bill. Same for buying from a small farmers market vs a WinCo. So for simplicity sake I went with 3% increase on half of income, but that is highly debatable.
Thanks!
I've only skimmed, but it sounds sort of like a sales tax in disguise? One that doesn't show up on receipts, and sets a smaller tax rate for small businesses.
Normally a sales tax is regressive, but giving the money back equally fixes that. Also, since Oregon doesn't have a sales tax, a 3% rate isn't that big.
One issue, though, is that if a sales tax includes business-to-business sales, a single product could get an effective rate of 3%, 6.1%, or 9.3% depending on whether it changes hands once, twice, or three times, before it gets to the consumer. That would favor Internet sellers (like Amazon) who ship from outside Oregon and only get charged once. Also, would all-in-one car companies like Tesla only get charged once, and car companies that use dealer networks twice?
If you fix it so that business-to-business sales get rebated, then it ends up being like a VAT tax.
Also, consider that some sales are for services, not just goods. Is this effectively a sales tax on rent? Health care? Child care?
(Although, since it's only charged for corporations, this encourages sellers to not incorporate. So, small landlords would avoid the tax.)
Taxes that are sort of like this from a very high-level point of view have been done before. But, maybe getting the rules right isn't simple. Tax codes are complicated for many reasons, some of them good reasons.
But I don't know how it would really work, so these are really just reasons to ask questions.
I agree that there's questions to be answered regarding the specifics of implementation, but the thing about incorporation isn't one of them. There's a stated minimum tax of $150 on S Corps (sole individuals doing business) up to $25M, whereupon the 3% tax applies to them as well. But the benefits of incorporation are so overwhelming for the founder that even a 3% gross tax doesn't even begin to dent the reasons to incorporate.
But I agree that the specifics will need to be worked out. The specific wording is "...the total sales of the taxpayer in this state...", but it's possible that the word "sales" has a specifically defined meaning within Oregon state law that does or does not include various things. I'm reasonably confident that they're going to define "sales" as involving a transfer of goods but not services. But I'm not an Oregon resident nor am I familiar with Oregon-specific accounting quirks. We'll really just have to see.
As UBI goes, $750/year is not that much. It's a dry run, enough that just about everyone will find it worthwhile to sign up. Compare with Alaska where it bounces around, but was most recently $1300.
If they need to send more money, though, they'll have all the systems set up and ready to go, so it should go more smoothly than it did during the pandemic.
There will probably be interesting edge cases around who counts as a permanent resident that weren't there for Alaska.
It's laid out in the text. 200 days of residency per year, proven by documents that assert their home address, plus a signed affidavit that confirms their residency for the majority of the year. Fairly low on hard proof, but most of the easy fakes are also fairly easy to catch if an auditor asks for more proof.
Wow that's a pretty clever way to gain bi-partisan support. Even those people who usually vote against their own best interests will have a hard time passing up 750 bucks. Though I do wonder how certain corporate-backed news stations and politicians will spin this as a bad thing for the everyday people (no doubt something about how taking money from corporations means less jobs and how actually it would be better to allow them to pay even fewer taxes for some reason, source: don't worry about it just trust us).
“Hamburgers will become $50 because we are giving free money to drug addicts and immigrants!”
I just audibly sighed at how accurate that sounds :(
Let's see..
Leftists are buying your votes and this will make all the corporations leave.
Technically, promising tax cuts is also "buying your vote". People should vote for who they want in office, regardless of tax cuts or "handouts".
From the article:
It never occurred to me how close Oregonian sounds to Argonian.