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SB 165 steals small business tax savings

OSBA Works Against Small Business Tax Increase
By Oregon Small Business Association,

Oregon Small Business Association President T.J. Riley appeared before the Senate Committee on Finance and Revenue  to testify against SB 165. This bill would force small businesses across Oregon to add at least one full-time equivalent employee (FTE) in order to qualify for a tax break originally granted by the Legislature in 2013.

Under current law small businesses can reduce the tax rate applied to part of it’s tax liability. SB 165 would require that a business add an employee and have no reduction in average wages in any year in which it wants to claim the reduced tax rate. As pointed out in the hearing, this is not practical for a variety of reasons and if passed, SB 165 would likely dramatically reduce the number of small businesses that could qualify for the reduced rate.

In addition to this problem, several other concerns were raised during Thursday’s public hearing. In particular, it was noted that SB 165 adds tremendous complexity to an already complex tax break. New calculations on wages and new proofs of employment and wages would be needed, and it would be unlikely the average small business owner would be able to determine on his or her own whether the business qualifies. In fact, testimony showed that only a fraction of small business owners are even aware the current tax rate reduction opportunity exists. The Oregon Society of CPA’s indicated that not even all of it’s members know their clients can benefit. It’s also not likely that retention of a relatively small tax break is much incentive to hire an employee that might cost a small business many times the tax savings the break provides.

In particular, it was noted that, should SB 165 become law, small business would get a “double whammy” during times of economic downturn. Not only would they be struggling with a slowing economy, but any failure to continue to hire new employees would result in a higher tax bill as well!

Committee Chair Mark Hass (D-Beaverton) expressed an interest in ideas that might encourage small business hiring and wage growth. The OSBA would be happy to pass along any ideas you might have that would remove barriers to hiring, or provide incentives for hiring or wage growth.