Detailed budget breakdown of Measure 66-67

Dan Lucas is a candidate for House District 27 who has authored a detailed budget analysis of Measure 66 and Measure 67. – For those of you who need a good overview of the budget, check out the full report.
See Report here.

Introduction note from Dan Lucas,

One in four working-age Oregonians is either unemployed or underemployed — the HIGHEST RATE in the nation. The last thing Oregonians need right now is new taxes that will cost the state 79,000 jobs. And there’s no need for new taxes. State government has not tightened its belt like the rest of us — these measures increase taxes by $733 million, but $802 million of the current budget is to pay for 1,540 new state jobs, state employee raises, Cadillac health insurance for state workers, and the state-paid employee portion of PERS. Despite talks of “cuts”, the state budget actually WENT UP, not down – from $51 billion to $56 billion. The current budget is 9.3% ($4.8 billion) higher than the previous budget.

Measure 66 is an envy tax on Oregonians who make more than $125,000 a year, and 2/3 of those are actually small businesses. Even before Measure 66, Oregonians who make more than $100,000 a year were just 10% of income taxpayers, but they paid 54% of the income taxes. That’s not FAIR!

Measure 67 isn’t about $10 – it’s about 6 new taxes and fees totaling $262 million. One of these 6 new taxes and fees will cost businesses up to $100,000 a year, even if they don’t make a profit; even if they lose money. The taxes are so big & complex that the Department of Revenue had to add more than 7 new employees just to collect them. Businesses are already paying their fair share & they pay a LOT more taxes & fees than just Oregon income tax — including 50% of Oregon’s property taxes!

See Report here.

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Posted by at 07:19 | Posted in Measure 37 | 27 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Oregonian

    “Even before Measure 66, Oregonians who make more than $100,000 a year were just 10% of income taxpayers, but they paid 54% of the income taxes. That’s not FAIR!”

    What’s not fair is how much our tax structure relies on the personal income tax. Measure 67 helps that. That’s why you see small business owners supporting this while lobbyists and PR guys keep saying “small business is against this! it will kill us all!” It’s a snow job by Nelson & McCormick, Guns For Hire, to try and trick lower and middle-class Oregonians into supporting their Big Business friends.

    Disgusting, and Oregon can do better. I’m so sickened by your deplorable twisting of this issue, Dan.

    • Steve Plunk

      Oregonian,

      Small business does not support this. Don’t bring up the liberal group you did last time, they are not representative of Oregon small business. You are twisting facts and using misdirection.

      This tax is an ‘envy’ tax. Liberals want to take from well off Oregonians as if they have a legitimate claim to their property. There is no moral basis for such a claim.

      This middle class small business owner is voting no.

      • anonymous

        Small business owners are on both sides of this. I’m one who is on the pro 66 and 67 side. Unfortunately the debate has become more about ideology and name calling than about practical issues. And Dan Lucas, by suggesting those in favor do so out of “envy” of higher income earners, simply gets it wrong. Most higher income earners voted for Obama, and most in Oregon will probably vote yes on these measures. Do they “envy” themselves?

        • Rupert in Springfield

          >and most in Oregon will probably vote yes on these measures. Do they “envy” themselves?

          No, but that is somewhat irrelevant as no one would ever make the argument that people were trying to make higher wager earners envious of anyone in order to pass these measures.

          The point is the envy of the poor and middle class is what is being ginned up here.

          Plenty of the rich vote for liberals, any visit to New York City would confirm that. I certainly would never argue that one doesn’t have to be quite wealthy to afford a lot of the liberal philosophy. The fact that you tend to need a lot of money to live in the most liberal areas of the country would tend to confirm that.

          • anonymous

            Maybe the reason it takes more to live in so-called “liberal” parts of the country is because they are more desirable places to live. And maybe that has something to do with liberalism.

          • Rupert in Springfield

            Either way, it’s not the point I was addressing so Im not too concerned with it one waty or the other.

  • Rupert in Springfield

    The key to measure 67 passing is maintaining this lie that simply by incorporating, your taxes go from thousands to $10 annually.

    Basically they have to make people react emotionally and not logically. If people thought about it for any length of time, and believed this $10 line, then it would rapidly occur to them that they would be idiots for not incorporating immediately and simply sending in a ten every year instead of paying the thousands they do now.

    Since virtually all of my friends are screaming liberals its my favorite line with them when the issue comes up. I ask them if they honestly believe I only pay $10 a year? If they do then I ask them why they don’t incorporate. It costs about $1,000 but they would make that back on their first year and never pay taxes again, save the $10. Any employer would love to have you incorporate. It would likely take them off the hook for your SS and Medicare

    No one ever has any good answers for me on that one.

    Some stick with the emotional Ayn Randian response “well, business just has to pay more, they just have to”

    Some start to realize they have been lied to and get pretty angry. There kind of is nothing better than that in my book.

    • v person

      You seem to conflate what one pays in business tax with what one pays in personal income tax. If you show no profit for your tiny corporation, you pay the $10 minimum. But if you paid yourself $50K, you will now pay a $150 minimum. That is the story. A tax raise of $140 is not going to put anyone out of business. Something like 2/3 of Oregon corporations pay the minimum because they fold the “profit,” such as it is into the income they pay themselves. If you or others want to avoid a $140 tax raise you can disincorprate and go sole proprietor. Stop whining.

      • Steve Plunk

        Perhaps the whining will stop when pro tax people like yourself admit there are other taxes and fees already being paid. Heh, making a point is now ‘whining’.

        This is not whining, it’s pointing out how Oregon business pays it’s fair share of taxes and how the state of Oregon has been a poor steward of the money already paid. Why should we pay anything to an effectively corrupt state?

        Judging from your example above you are either incredibly naive about business or once again attempting to use misdirection. That $50K is subject to income tax and employment taxes, you failed to mention that. It seems the pro tax side only gives half the story.

        • v person

          Not naive. I pay these taxes myself and have for many years. We small business people also get a lot of write offs that working stiffs don’t get, and we only pay income tax on our net. We get to write off vehicle use and expenses, home office expenses, and can depreciate business equipment that we also make personal use of. Our effective tax rate on income is thus less than what most wage earners pay. And I’m not misdirecting. I’m saying, as plain as I can, that for most small businesses this is a $140 tax increase and nothing more. Complaining about a $140 tax increase, the price of a cheap cell phone, amounts to whining. If one takes more than $125K a year from one’s business, then there is an additional small increase in the income tax, but it does not amount to much unless one makes way over that.

          You say Oregon business pays its fair share. That is in the eye of the beholder Steve. But objectively Oregon ranks near the bottom among all states in how much it taxes business.

      • Rupert in Springfield

        >You seem to conflate what one pays in business tax with what one pays in personal income tax.

        Nope, I just refuse to go along with your scam of trying to confuse people that a Type S corp, which is what most businesses are, is only paying $10 a year in taxes.

        Its just simply a lie, and most people figure it out pretty quick when the understand the absurdity of the suggestion that by incorporating one would get off with paying only ten bucks a year.

        You dont like that, and I can understand it. It is, however, the truth of the matter. Type S corporations always pay taxes on the personal side so of course they would always appear to pay zero business taxes.

        >Our effective tax rate on income is thus less than what most wage earners pay.

        Well, thats a lie. Just considering you pay both sides of SS and Medicare it would be extremely hard to find a business owner who was filing honestly who was paying a lower total rate than the avergae wage earner. That doesnt even start to take into account taxes on inventory, assets and depreciation.

        Other than in college, Ive spent virtually no time other than being self employed. Never once did I pay a lower effective rate than anyone making the same amount who worked for an employer.

        >Something like 2/3 of Oregon corporations pay the minimum because they fold the “profit,” such as it is into the income they pay themselves.

        Wrong. For a type C corporation that would be illegal. Type S corporations do not “fold” anything. They are required by law to carry over all profit onto the personal side. At that point they pay all the taxes anyone else would pay and then some.

        • v person

          What one pays in personal income tax is not a business tax Rupert. Its what one takes from the business as personal income. You are the one who seems perpetually confused on this issue. And any way you cut it the tax increase amounts to $140. BFD.

          “Well, thats a lie. ”

          No, its not a lie. Its a fact. We pay double on SSI and Medicare, but we only pay that on our net. That is after all legal deductions. And we are entitled to a lot of legal deductions that wage earners are not entitled to. If you don’t know about this then you ought to consult a CPA.

          “Other than in college, Ive spent virtually no time other than being self employed.”

          That explains your problem right there. You have no experience paying taxes as a wage earner, so you have no basis for comparison. I’ve done both nearly equally over the past 31 years. When it comes to taxes, I pay more as a wage earner than I do on my business income dollar for dollar.

          “They are required by law to carry over all profit onto the personal side. ”

          Right. After deducting all legal expenses. That is my point. You can write off car use and repairs, home office use, depreciation on home improvements, a portion of your utilities, travel, books, your newspaper subscription, insurance, and a zillion other things. Wage earners can’t legally write this stuff off. You and I can and do.

          Go find yourself a decent CPA and you will have less to complain about.

          • Steve Plunk

            Having studied accounting in college and passing my CPA exams I can say without a doubt this is misdirection as usual. Deducting things like newspaper subscriptions, portions of utilities, and other incidentals rarely makes up for the cost of paying self employment taxes.

          • v person

            Steve, you can call it misdirection if you want, but I’ve had direct personal experience in business and as a salaried employee, and I have no doubt I pay less taxes per dollar earned within my business than I pay when I am earning a paycheck at similar levels of gross income.

          • v person

            and believe me I know what gross is!

          • retired UO science prof

            What self-employment taxes do you have in mind?

            If you’re talking about the employer contribution to SS/Medicare, you don’t get much sympathy from here. The employer gets to pick up these goodies. Even if the employer is yourself. Factor it into your income. A CPA should be well equipped to do that. I should know, my dad was one, and so is my brother-in-law.

    • Dennis Peron

      The $10 if I am correct is a minimum fee to the state if a corporation does not show a profit for the year. In order to not have a profit you need to spend the money in some form to reduce your tax liability. To incorporate in Oregon does not cost $1,000.00 The cost is different on what type of corporation you are forming and the cost of consulting attorneys to make sure you do things
      correctly.

      Lets drop the personal income and personal property taxes and go with a straight use tax so
      everyone pays. Why leave anyone out, we all use the system.

  • eagle eye

    It always has been here, when it comes from anyone advocating or associated with the provision of public services!

  • Alan Grosso

    It’s all quite simple – stop all the fighting and class envy already. Declare taxation on personal property UNCONSTITUTIONAL (which it actually is). It is legalized theft by the government. We, the people, are the only ones that can change that with a constitutional amendment.

    All taxes on income, personal property (houses, boats, cars), investments are off limits. Move the state to a consumption tax fixed at 5%. EVERYONE pays based on how much they purchase. The wealthy purchase a hell of a lot more so they will pay much higher percentage of the taxes collected but now it is THEIR CHOICE. At the same time the “poor” have to contribute if they are going to live off of the taxpayers. When they buy someting – the 5% is added in just like the rest of us. Do not tax food and medical care for everyone. No other exemptions. Oregon lives within its 5% means or they cannot provide the services so they will finally have to prioritize. The politicians can no longer use the tax code to favor groups or people and if they want an increase to the 5% – the voters have to vote it in. Take away Salem’s power to tax and you have a much healthier economy. END OF STORY

    I will find myself dead before the American people figure this one out. As long as we continue to have half of the population living off of the fruits of someone else’s labor – nothing will ever change

    • Anonymous

      Do you know what a regressive tax is, Alan?

  • mrfearless47

    Measure 66 is an outrage. The ballot description is misleading in that it produces 2 new tax brackets, not one, and also phases out the federal tax deduction on Oregon Income Tax. Analyses by professional tax analysts reveal that in my case our marginal Oregon rate will go from 9% to 12.44% factoring in both the double increase in marginal rates and the phaseout. In addition, there’s the retroactivity and the permanence of these tax increases.

    I am normally in favor of temporary tax increases to help the state through a rough patch, but this is a permanent increase that will simply drive many productive people out of Oregon. The effect of the Legislature’s tinkering is to put Oregon’s tax rate as the highest in the Country.

    As for M 67, I am not as sympathetic although I will vote against it as well. It will hit small businesses harder than big businesses. Since I try, to the extent possible, to trade with small businesses in my neighborhood, I know that this will raise their cost of doing business and increase what I pay them for goods and services. Since I will already be getting slammed at the state tax level, it will drive me to bigger businesses that will not be affected in the same way by the increased tax.

    Explain to me how this won’t reduce jobs, reduce incomes, and make Oregon a more hostile tax climate than it already is.

    A liberal in favor of saying “NO” this time.

    • eagle eye

      All probably true, 47. I would have been much more favorable to a temporary tax increase. I haven’t decided yet on these two measures. Up or down, I don’t believe the outcome will be good.

      • current UO student

        Agreed. If only they had included a clause in M67 that froze the tax on revenue for firms that weren’t turning a profit I would feel much better about it. As for M66 and mrfearless47’s concerns, perhaps I need to go back and re-read the measure, but I was under the impression that the increase only applied to income above and beyond 125k (250k for joint filers)? If that is indeed the case (and I’m sure I’ll be accused of envy or promoting class warfare or something) I have to say I don’t sympathize with his perceived hardship. I would love to have that problem. Maybe that’s because the light at the end of my future income tunnel still seems a long way away.

        • current UO student

          And I should add that I’m not looking forward to another tuition increase. My loan debt is already becoming less than comfortable.

        • mrfearless47

          As a retired University prof (PSU) I sympathize with your plight and the UO’s quest to raise tuition. Bear in mind that tuition would rise no matter what happens with M66 and M67. The UO wants to become a private institution and be able to charge whatever the market will bear. Both the former President and the current President of UO have made that tops on their agendas for the near future.

          As for my “plight” on M66, you correctly note that these are marginal rates, not total rates. I made no attempt to disguise this fact (that’s why I used marginal rate in my post). What you fail to understand, however, is that in retirement I employ several people in my consulting business. When my tax rates go from 9% to 12.5% on the income in excess of $250,000 and I lose my federal tax deduction altogether (which come off the top of my tax bill), one of the part-time students I employ will lose his job. I cannot afford to pay Oregon an additional significant amount of money without cutting expenses somewhere else. Despite what you think, it takes money to make that kind of money.

          So, don’t feel sorry for me; feel sorry for the student employee I have. He will be paying my additional income tax if M66 passes. Moreover, when I lose him, I will lose some of my ability to take on consulting jobs that I currently take. This costs me money and it costs Oregon money. Explain to me how the world if M66 and M67 passes will be a better place than if they don’t pass. If you expect tuition to go down if M66 and M67 pass, you are extremely naive. If you expect that UO will hold the line on tuition if M66 and M67 pass, you are equally naive. College tuition bears little relationship to the state economy. It goes up in good times and it goes up in bad times. It, and medical care, are both more or less immune and unaffected by the state of the economy.

          Vote however you want for M66 and M67, but if you are expecting something miraculous or even minorly helpful if they pass, think again. It won’t happen.

          • current UO student

            First things first, prof. I just want to say that I appreciate your comments for both their tone and content. Further, the intention of my reply is not to be oppositional, combative, or hostile in any way. Having said that, I hope you receive the rest of what I have to say with that in mind.

            With regard to your first point: I am familiar with Dave Frohnmayer’s desire to privatize Oregon’s university system (I was not aware the new guy shared his point of view). Frankly, I don’t see that happening in the near future, but if it did I can tell you that I would withdraw immediately. And that is a different conversation entirely – though one I am perfectly willing to have.

            Tuition: Yes, tuition will increase regardless of the fate of M66/67, but it is a question of degree. A 3-4% increase versus a 9-12% increase (wild guess)? Nevertheless, I can tell you with honesty that my own finances are not my primary motivation for supporting these measures.

            M66: I did not mean to imply that you were obfuscating in any way. I’m guessing your consulting business is organized as an S-corp? Hence profits from your business are taxed as personal income? I’m still trying to figure these things out, please be patient with me :) Or, by all means, educate me if I’m misinformed. If that is in fact the case and your gross income is, say, $350k (I am obviously not familiar with your actual numbers, and even more obviously they are none of my business), then your new tax liability under M66 will be 1.8% * $100k + $5k (due to the erasure of the federal tax deduction) = $6,800 more than it would have been otherwise, correct? As an S-corp, M67 would not affect you other than the $140 fee increase, bringing the total to $6,940 in new taxes.

            I understand that it takes money to make money (there’s no need to condescend) and that something that comes from nothing is more often than not less than worthwhile; that said, I do have to ask whether or not your student employee is at all vital to the operation of your business? Or is he essentially a charity case? Far be it from me to tell you how to run your business (sincerely), but might there be other ways to make up the lost income? A business that generates that kind of revenue must be able to nudge its pricing strategy an itty bitty bit? You did say “when I lose him, I will lose some of my ability to take on consulting jobs that I currently take”; maybe I am naive, but wouldn’t you lose more revenue by laying him off than you would lose income as a result of paying the new taxes? Seems kind of like one of those incur the sunk costs as long as revenue exceeds variable cost types of strategic decisions. Moreover, and at the risk of getting into a Galbraith vs Hayek type of debate, do you not feel it a worthwhile contribution (as a self-professed liberal) to help ensure a healthy middle-class in these difficult economic times. I mean, with all due respect, you seem to be doing quite well (and I’ll be careful here and make it known that I do not feel that that obligates you to anything).

            And lastly, I’d like to re-iterate that the one thing that gives me the greatest pause of everything on this ballot is the failure of the writers of the legislation to respect struggling businesses (i.e. not freezing the .01% tax on revenue for unprofitable ventures).

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