Taxpayer Association of Oregon Tax LAert
By Jim Welsh
The justification for any of the tax increases heard this week is that the wealthy can afford it. The last time I heard, many employees and small business owners receiving that kind of income were also losing their investments in the markets, along with everyone else, and a tax increase on top of the losses will only create a tendency to hoard, any and all income, which in turn creates a longer and deeper recession with no one wanting to spend or invest in any market.
Tax Increase on Personal Income
The House Revenue Committee heard HB 2078 and HB 2651 both bills increase personal income tax rate on taxpayers with taxable income above certain level. HB 2651 increases the personal income tax on income at $125,000 and above and HB 2078 increases it at $150,000 and above.
New Alternative Minimum Tax Proposed
The Revenue Committee also heard HB 2649 which establishes a 7.5 percent Oregon alternative minimum tax for taxpayers with federal adjusted gross income exceeding $125,000, filing individually, or $25,000 filing jointly.
Limits Business Energy Tax Credit in Oregon
The House Revenue Committee held another hearing on HB 2472 which establishes calendar year limit on total cost of facilities for which State Department of Energy may issue preliminary certificates for business energy tax credit. Applies to applications for preliminary certification received on or after January 1, 2010. No surprise here, as there will be limits if not an all out elimination of numerous tax credits, before the Legislature goes home sometime in June.
Proposed Increase to Corporate Minimum Tax in Oregon
The House Revenue Committee heard for the first time HB 2119 and HB 2070 which both increase the corporate minimum tax that applies to C corporations. HB 2119 transfers net revenues from corporate minimum tax to Oregon Rainy Day Fund with a sliding scale tax table for a corporation doing business in Oregon with $50,000 or less income paying a minimum tax of $100 to a corporation with sales over $1 Million paying a minimum tax of $5000. HB 2070 will impose each tax year a tax at the rate of 0.2 percent of the enterprise value tax base, after allocation or apportionment, of every C corporation with business activity in this state. If the gross receipts of a taxpayer do not exceed $100,000 for the tax year, the taxpayer shall be exempt from the tax levied and imposed. These are big proposals and considerations for businesses in Oregon, or businesses doing business in Oregon, and with the avalanche of negative feedback expected it will be interesting to see what the Revenue Committee will do.
Reduction of Allowable Deductions on Oregon Taxable Income
The House Revenue Committee held a hearing on HB 2077 which reduces the maximum amount of federal income tax liability that may be subtracted from federal taxable income for purpose of determining Oregon taxable income. HB 2077 reduces the maximum from $5500 to $3000 on federal taxable income and for husband and wife filing separately from $2750 to $1500.
No Retroactive Interpretation by Department of Revenue (Good Bill)
The Senate Finance and Revenue Committee held a hearing on SB 498 which prohibits Department of Revenue from applying or interpreting any law retroactively unless expressly provided by statute, if retroactive application would impose additional liability, interest or penalties on taxpayer. The bill also allows the department to apply law retroactively to achieve result favorable to taxpayer. This bill is sponsored by eight different business associations and interests. This is a good bill and we hope it gains support!
Increased Tobacco Tax
The House Health Care Committee held a second hearing on HB 2122 which will increase the tax on all tobacco products in Oregon. Not to consider that Oregonians have twice rejected a cigarette tax at the ballot box, and that there is a very near point of diminishing returns with those who decide they don’t want to afford the expense and those who find other places to buy the products. We all know that tobacco tax revenue is declining due to fewer people smoking and fewer people being able to afford to smoke. Using tobacco tax revenue to help fund any program doesn’t make go financial sense and when the revenue decreases over time the revenue stream will have to be replaced with another revenue stream. Over-taxing tobacco is fiscally irresponsible and certainly no way to, wholly or partially, fund any program.