The assumption behind Measure 97 is that every corporation is profitable and that the profits that these corporations are generating are excessive. If that assumption is true, then Measure 97 makes a lot of sense.
The problem is that it’s not true.
Did you know that the average corporation only makes 3 percent to 8 percent net profit? Oregon’s Measure 97 will tax these corporations 2.5 percent of their gross sales above $25 million (the tax is not on their profits). In other words, if a corporation makes a 4 percent net profit on sales above $25 million, they will have to pay out more than 50 percent of their actual profit.
In simpler terms, if a corporation generates $25 million in sales above the threshold and only makes a 3 percent net profit ($750,000), they will have to pay $625,000 in taxes. If they only make 2 percent net profit ($500,000), they will have to give all of their profits, and then some, to the Oregon Department of Revenue.
So why should you care? If you have any kind of retirement account, that money is most likely being invested in large corporations. Their profit or loss is your profit or loss.
Eventually these corporations will be forced to substantially raise their prices, which will result in higher costs to you. The estimates are currently $600 or more per Oregon household.
If every business were successful and profitable, then we absolutely should raise corporate taxes. The problem is that they’re not.
Did you know that only half of all new businesses will still be around in five years and that after 10 years, only 30 percent will be left? Maybe you will recognize some of these large companies that recently have gone bankrupt? Delta Airlines, Sports Authority, Circuit City, Linens & Things, Radio Shack, Borders Books, Blockbuster, Brookstone, and Sbarro Restaurant, just to name a few.
Measure 97 will likely increase the number of bankruptcies since it is a tax on sales and not on actual profits. Remember that bankruptcy destroys the lives of the people who work for that company.
As the corporate tax rates increase in Oregon, more businesses will move out of Oregon and some will even move out of the United States, causing increased unemployment.
Unemployment is the greatest drain on our society and public resources, while keeping people employed is the best way to fund our schools and other vital government services.
The proponents of Oregon’s Measure 97 make a great emotional appeal, but unfortunately it’s a very poor intellectual argument.
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