Oregon tax hike: a boost here?

Clark County business leaders are saying the same thing when it comes to Oregon’s proposed business tax hikes, on the ballot in a Jan. 26 special election: If voters south of the Columbia River pass measures 66 and 67, it’s likely good for business to the north.

“Our ability to attract companies looking to move from the other side of the river increases,” said Bill Connelly, an industrial real estate broker with Eric Fuller & Associates in Vancouver.

Depending on the industry, a tax comparison between the two states often favors Washington because businesses here don’t pay income tax. A yes vote on Oregon’s ballot measures would widen that gap, making the tax difference for businesses and for wealthier individuals more favorable on the Washington side.

As with previous tax hikes in Oregon, Clark County shouldn’t expect a mass exodus of businesses to Washington, said Bart Phillips, president of the Columbia River Economic Development Council in Vancouver. But it becomes a more appealing factor for businesses already considering a move, he said.

“To the extent increases in Oregon are seen as a competitive advantage to Washington, it will certainly be part of any discussion with a company that wants to locate here,” said Brent Grening, executive director of the Port of Ridgefield, which is actively recruiting new commercial and industrial tenants.

A yes on 66 means:

o Oregon income taxes increase for individuals making more than $125,000 per year or families making more than $250,000 per year from 9 percent to 10.8 percent for three tax years.

o The rate for individuals making more than $250,000 per year or families earning more than $500,000 per year would increase from 9 percent to 11 percent.

o Starting in 2012, the tax rate would return to 9.9 percent for both tax classes.

o The ability to deduct federal tax liability from Oregon state income taxes phases out for the upper tier of taxpayers.

o Cuts taxes on unemployment benefits.

A yes on 67 means:

o Corporate minimum tax increases from $10 to a sliding scale starting at a minimum of $150 for companies with less than $500,000 in sales, up to $100,000 for those with $100 million or more in sales.

o The marginal tax rate increases on corporate income over $250,000 from 6.6 percent to 7.9 percent in 2009 to 2011, to 7.6 percent in 2012.

o After Jan. 1, 2013, the income tax rate would return to 6.6 percent for all businesses, except those that make more than $10 million.

Oregon’s proposed small corporate tax increase — amounting to a temporary two-year boost of about 1 percent — isn’t likely to sway too many businesses that weren’t already on the fence, however, says Steve Burdick, director of development for Killian Pacific in Vancouver.

“My gut reaction is it won’t have any effect,” Burdick said.

Oregon budget crisis

The 2009 Oregon Legislature passed two bills to temporarily increase personal and corporate income taxes on the wealthiest taxpayers to help cover a tax shortfall because of the recession. Oregon voters must now decide in a special election whether to reject or keep the bills.

Together, the measures are meant to generate $733 million in revenue for the general fund to avoid deep budget cuts in state services, including education, health care and public safety.

Proponents of the measures say tax increases aren’t always bad for business. State spending reductions reduce economic activity more than a business tax increase, according to a letter from 36 Oregon economists to state legislators in favor of the bills.

But the Oregon business community, which is typically leery of a business tax increase in any climate, has been especially opposed to a tax increase when state unemployment tops 11 percent and companies are struggling.

“It’s already had its impact whether or not it passes, just because the specter of it causes instability,” said Phillips. “It shows the legislature is willing to increase corporate taxes, if not now, than maybe in the future.”

If Ballot Measure 66 passes, Oregon income taxes would increase for individuals making more than $125,000 per year or families making more than $250,000 for three years. The measure would also phase out the ability to deduct federal tax payments from Oregon income taxes for the upper tier of taxpayers.

A yes on Ballot Measure 67 would increase the corporate minimum tax from $10 to a sliding scale starting at a minimum of $150 for companies with under $500,000 in sales up to $100,000 for those with $100 million or more in sales.

The measure also gradually increases the marginal tax rate on corporate income over $250,000 from 6.6 percent to 7.9 percent in 2009 to 2011, to 7.6 percent in 2012. After Jan. 1, 2013, the income tax rate would return to 6.6 percent for all businesses, except those that make more than $10 million.

“I think it’s a great thing for us if they pass it,” said Kris Greene, director of government affairs for the East Vancouver Business Association. “That means corporations in Oregon will have to charge more and it will give us a competitive edge because we don’t have it.”