Gross Receipts Tax Moving through House – HB 2830
Another Gross Receipts Tax, son of Measure 97 moving through the State House
House Bill 2830 is yet another version of Measure 97. It implements a gross receipts tax of 0.48% on all businesses (not just C corps) with over $3 million in sales. This is a “commercial activities tax” (CAT) Even more, it eliminates Oregon’s “small business tax cut” that lowered tax rates by 20% for small, pass-through businesses.
The Tigard Chamber is taking a OPPOSE position on this bill due to its negative impact to business and our local economy.
Here are the challenges to business with this bill
It creates a new set of winners and losers in Oregon’s tax system. The winners will include large and highly profitable businesses. The losers will be small businesses and those with profit margins under 5%.
HB 2830 transfers the tax burden from large, profitable businesses onto the backs of small business and industries with low profit margins.
The fundamental failing of HB 2830 is that it unfairly taxes businesses with low profit margins or no profit at all. High profit businesses will see big tax cuts under HB 2830, but low margin businesses – generally those businesses with 5% profit margins or less – will have effective tax rates substantially higher than current law.
A CAT proposal is not connected to a taxpayer’s ability to pay the tax, and it will unduly harm low-margin sectors and start-ups.
HB 2830 is a tax increase on small businesses. Most small businesses with less than $3 million in Oregon sales are pass-through businesses. Their taxes will increase with the elimination of the small business tax cut in HB 2830.
HB 2830 will further impact small businesses. Whereas Measure 97 taxed companies with Oregon sales of $25 million or more, HB 2830 taxes small businesses down to $3 million in sales. Taxing small business – particularly those that are low margin or unprofitable – is a bad policy choice.
A major flaw of HB 2830 is that the pass through credit is only for companies with more than $3 million in sales. The credit will not impact companies with under $3 million in sales who will see their tax rates INCREASE by over 20% due to HB 2830’s elimination of the small business tax cut.
Another major flaw of HB 2830 is that the $3 million exemption for small businesses can be lowered or even eliminated with a simple majority vote of the legislature.
Small businesses are already contributing to fixing their share of the state budget deficit by shouldering the $145 million health insurance premium tax on their commercial health insurance policies (HB 2391).