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A Modest ProposalI have talked to a couple of friends in the last couple of days—smart, generally right-thinking people—who want to and maybe even plan to vote against Oregon's Ballot Measure 67. A major argument I've heard is that raising Oregon's corporate minimum tax from $10 to $150 would have a huge impact on small entrepreneurs, causing some to fail and some to not start… I hadn't realized how important $150 could be to a small business. Thinking about it, I've kind of come to the conclusion that a $10 corporate minimum tax may not be low enough. It is obviously vital to foster small, nearly profitless businesses. True, such businesses admittedly employ no one except their owners, and don't actually pay even them. But a few such businesses take off every year, transforming themselves into marginally profitable businesses that might earn their owner thousands of dollars. Besides, small entrepreneurship is part of the American Way Of Life. As such, it is the responsibility of Oregon government to give it full support, no matter how stupid this becomes. My proposal is to lower the corporate minimum tax to -$150. The State of Oregon would mail you a check for $150 along with your licensing information for a new business, and would send you a check for $150 every year thereafter. I think the benefits in terms of small business formation and perpetuation would be immediate and obvious. Oregon's entrepreneurs would surely be highly encouraged by this new tax structure. I anticipate that the most ambitious of them might start as many as several new businesses per day! This sudden blossoming of small businesses around Oregon would surely create an economic boom. The program would pay for itself, as predatory businesses took the $150 payments from these new entrepreneurs and were taxed at the normal rate by the State. One can imagine that service industries such as drugs, gambling and prostitution would be an especially rich source of new tax revenue—revenue that could be used to pay the taxes resulting from the formation of still more businesses. The end result would be a "virtuous cycle" of small business creation that would make Oregon an economic utopia. Alas, I suspect that the dimwit politicians in Salem will be unable to grasp my grand vision. For now, we will just have to live with the foolish folk wisdom that $10, a number passed down by our elders since 1938, is the perfect minimum tax on Oregon businesses.
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There is Only One Figure Which Matters:
The total amount of tax money which will be removed from circulation in our economy and placed in the hands of the politicians in Salem. We are in a truly dismal economy, leading the nation in unemployment, trailing the nation in educational quality. In short, our state is wreck. We do need to change something!
Naturally, the politicians feel that the problem is too much money *not in their own pockets*. They always do so much better at spreading money around than the private sector, and isn't that the purpose of government? To take from the rich and give to the poor, regardless of merit?
How much money are we talking about, in $140 segments? We are talking about $261 million dollars. That is $261 million dollars taken out of the private sector and given to the government. According to your Modest Proposal, that means we must have 1,864,285 small businesses which have no employees and no profit! That is amazing! That is more than 1 meaningless small business for every 2 Oregonians - babies included!
In real dollars, the government is raising the state budget by 9 percent from the last one. That should infuriate anyone who is living by their own means in this economy. You do not pick the worst recession in 70 years as a time to raise budgets 9 percent and take $261 million out of the economy.
Unless you want a bigger mess than we already have.
In all seriousness, I am more than half-hoping that this measure passes. When Oregon loses half a million emigrating taxpayers and everyone left works for some kind of government, you can all pass your paychecks back and forth to each other and curse those greedy businessmen who wouldn't give you the extra $261 million you requested during an economic catastrophe.
You're misreading Measure 67
The total amount of money raised by Measure 67 is estimated to be $261M in 2009. Most of this would come from the 1.3% tax increase on business profits above $250K. Given that there seem to be about 1.5M jobs in Oregon, it seems unlikely that there are 1.8M businesses. I can't find numbers on Oregon corporations in general, but in 2007 there were 50,000 S corporations filing returns. Currently, about 60% of Oregon businesses pay the $10 minimum. So the additional revenue from the change in minimum tax on S corps in that year might have been around $4.2M. The Secretary of State has estimated that about 5% of Oregon C corporations would be affected by the new minimum tax rate. Oregon currently has the lowest corporate minimum tax rate in the nation, and would be in the bottom five if Measure 67 passes.
I guess if the few businesses affected all want to move to one of the other bottom-five states to get a small break on a $150/year tax, we'll be in an amount of trouble. Hence my Modest Proposal referenced above.
I Don't See How We're Disagreeing
Neither of us seems to disagree that this tax will remove $261 million from the economy. That is really my only point, taken from the headline of my response.
Your Modest Proposal was written in complete sarcasm, as per tradition. My Modest Reply was also written sarcastically - I am well aware that there are not 1.8 million small, meaningless corporations in Oregon.
Your justification is a classic. You say that "most" of the $261 million will be raised by a 1.3% tax on business profits above $250 thousand. Great!
So why are they raising the minimum!? If it's not going to generate much revenue, what is the point of raising it? It's just the heavy hand of Salem trying to pinch every penny possible out of the private sector and put it into the public sector.
Ultimately, this tax increase ("most" of the money) will come out of our pockets, as businesses raise their prices by 1.3% to replace the lost tax money. That means that you and I are really paying the tax.
This is the wrong time for ANY tax increase. This is the wrong time for ANY budget increase. Those points which you did not address will be the reason that this measure goes down in flames.
It Passed!
My best friends parents own a retail company which has 8 full-time employees. With the passage of Measures 66 and 67, they will be paying an extra $50,000 per year in taxes. Sure, they are the nicest people you have ever met. No, they are not "rich" in the sense that most people imagine the term. No, they are hardly a burden on society, employing 8 people at family-wage levels. Yet the voters of Oregon decided that they were "not doing their fair share" and should hand over an extra $50,000 each year.
I do not know their exact salaries, but from what I have gathered from my best friend, this amounts to about 4 months for the two of them. Imagine if the voters of Oregon decided that you needed to pay 1/3 of your yearly salary in additional taxes. That is ADDITIONAL taxes, not total taxes.
They were clear that they would have to drop an employee or raise prices significantly. Perhaps the voters would feel better if they sold their house, which took them 40 years to earn, or simply close their business and lived on social security? If one fired employee is good for Oregon, wouldn't eight be better?
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