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Oregon is facing a proposed ballot measure that could drastically impact large businesses in the state. The measure, known as IP-17, aims to introduce a 3 percent corporate minimum tax on Oregon gross sales exceeding $25 million. Advocates for the measure claim that this tax increase is necessary to rectify the disparity in tax payments between large corporations and individual taxpayers.

However, a deeper analysis reveals that the proposed tax measure would result in an all-in tax rate exceeding 56 percent for large businesses in Oregon. Currently, Oregon C corporations face a 7.6 percent corporate income tax and a 0.57 percent gross receipts tax. In addition to these taxes, businesses in the Portland area are subjected to various city, county, and regional taxes, resulting in a combined state-local tax rate of 14.2 percent on corporate net income.

The introduction of a gross receipts-based minimum tax of 3.0 percent under IP-17 would further exacerbate the tax burden on large businesses. This would essentially transform the corporate income tax into a high-rate gross receipts tax, significantly impacting businesses with profits around 7 percent. When factoring in federal income tax and other local business taxes in Portland, the total tax rate on net income for large businesses could reach approximately 77.2 percent.

Unlike traditional corporate income taxes that are levied on profits, gross receipts taxes are assessed on total revenue at each stage of the production process. The proposed tax measure in Oregon disregards profits entirely, imposing a tax on gross income regardless of a company’s profitability. This approach could have detrimental effects on businesses, potentially leading to job losses and economic downturn.

While proponents of IP-17 suggest using the generated revenue to fund an annual rebate check for residents, the negative impacts on businesses and consumers may outweigh any potential benefits. The proposed tax increase may drive up the cost of goods, incentivize businesses to relocate out of state, and disadvantage Oregon-based businesses in a competitive market.

Ultimately, the implementation of IP-17 could have far-reaching consequences for Oregon’s economy and business landscape. It remains to be seen how stakeholders will respond to this contentious tax proposal and its implications for the state’s future prosperity.