Proposed by referendum petition to be voted on at the Special Election, January 26, 2010.
Raises $10 corporate minimum tax, business minimum tax, corporate profits tax. Provides funds currently budgeted for education, health care, public safety, other services
Result of "yes" vote
"Yes" vote raises $10 corporate minimum tax, establishes $150 minimum tax for most businesses or minimum tax of approximately 0.1% of total Oregon revenues for some corporations with over $500,000 in Oregon revenues. Raises tax rate some corporations pay on profits by 1.3 percentage points. Increases certain business filing fees. Raises estimated $255 million to provide funds currently budgeted for education, health care, public safety, other services.
Result of "no" vote
"No" vote retains $10 corporate minimum tax, rejects $150 minimum tax, rejects raising corporate profits tax, other changes. Leaves amount currently budgeted for education, health care, public safety, other services underfunded by estimated $255 million.
Under current law, corporations conducting business in Oregon pay $10 minimum tax; tax has not changed since 1931. Some corporations pay a profits tax of 6.6%. All other businesses pay no minimum or profits tax. Beginning in tax year 2009, the Measure increases $10 minimum corporate tax to $150; some corporations with over $500,000 in Oregon revenues will pay minimum tax of approximately 0.1% of Oregon revenues. Limits tax to $150 for S corporations and partnerships. Sole proprietors are not impacted by this measure. Raises tax rate some corporations pay on profits by 1.3 percentage points until 2011; increase then drops to 1 percentage point and as of 2013, applies only to profits over $10 million. Corporations pay minimum tax or profits tax, not both. Increases filing fees by $50 for Oregon businesses, by $225 for out of state businesses. Raises estimated $255 million to provide funds currently budgeted for education, health care, public safety, other services. Because some state money brings in federal matching funds, Oregon will likely receive more federal money if measure passes than if the Measure fails. Other provisions.
Estimate of financial impact
This measure increases revenues for the state budget between $118 million and $138 million per year for fiscal years 2010, 2011, and 2012, primarily for the General Fund. The measure increases revenues by approximately $123 million per year thereafter, depending upon growth in corporate profits and sales.
Revenue from this measure is included in the 2009-11 state budget. Failure of the measure will reduce revenues expected to be available for expenditures in the 2009-11 state budget by $255 million. This could result in reduced state-shared revenues to schools and local governments. Failure of the measure also may result in a reduction of federal funds that are used to pay for some state services.
Failure of the measure may limit the state's ability to borrow money. It also may have a negative impact on the state's credit rating which could increase the cost of future borrowing by the state and local governments.
Explanation of Estimate of Financial Impact
The measure raises revenue by:
- raising the corporate income tax rate;
- establishing a flat $150 minimum tax for S-corporations, limited liability companies and partnerships, and C-corporations with under $500,000 in Oregon sales; and
- adopting a minimum tax of approximately 0.1% of sales for C-corporations with over $500,000 in Oregon sales.
The corporate income tax rate will initially increase from 6.6% to 7.9% for net taxable income exceeding $250,000. Starting in 2013, the rate increase will apply to net taxable income exceeding $10 million, and will drop to 7.6%.
|Type of Businesses Affected:||2009-11 General Fund Revenue Component:|
|Increase in Filing Fees ($20 million raised)||Corporate Income Tax ($108 million raised)||Minimum Tax($127 million raised)|
|Partnerships (and some LLCs)||Affected||Not affected||Total set at $150|
|S-Corporations (and some LLCs)||Affected||Not affected||Total set at $150|
|C-Corporations (and some LLCs)||Affected||5% affected in 2009 0.5% affected in 2013||Based on sales (see measure text)|
The new minimum tax will affect approximately 74% of C-corporations, most S-corporations and businesses filing as partnerships. S-corporations and partnerships will pay the $150 minimum tax.
Beginning in 2013, taxes that come from the new income tax rate will go into the Oregon Rainy Day Fund.
Corporate taxes are about 6% of the state General Fund. In the current two-year state budget (2009-11), this fund is used to pay for:
- Education – including elementary schools, high schools, community colleges, and state universities: $6.8 billion (51%);
- Services for children, the elderly, and the disabled – including medical insurance: $3.5 billion (27%);
- Public Safety – including prisons, courts and local jails: $2.4 billion (18%);
- Other programs – including business regulation, natural resource management and state administration: $0.5 billion (4%).
The current budget anticipates $255 million from this measure. If the measure fails, expected resources will be reduced by this amount – about 2% of General Fund resources. State law requires a balanced budget. Future legislatures may decide how this reduction will affect spending. Options include spending cuts, use of reserves, raising revenue, or any combination.
Many state and local government programs are jointly funded with "matching" money from the federal government. Federal funds will be reduced if state spending for these programs is cut.
The state of Oregon borrows money by issuing bonds. Oregon's credit rating affects the cost of borrowing. A good credit rating lowers borrowing costs. One of the factors that affects Oregon's credit rating is the amount of state revenues available to pay for essential services. If the measure fails, Oregon's credit rating could be adversely affected.
Secretary of State Kate Brown
State Treasurer Ben Westlund
Scott L. Harra, Director, Department of Administrative Services
Elizabeth Harchenko, Director, Department of Revenue
Debra Guzman, Local Government Representative
(The estimate of financial impact and explanation was provided by the above committee pursuant to ORS 250.127.)