If you’ve ever spent any time in the startup scene in the Silicon Forest, you’ve likely heard that there are two major hurdles for entrepreneurs around here: 1) that the State of Oregon—and sometimes the City of Portland—aren’t terribly friendly to startups and 2) that it’s really difficult to attract capital from investors.
What you may not know is that there are some new taxes on the books that—according to Oregonians Against Job-Killing Taxes—may make those two hurdles even higher.
How so? Well, they’re going to be discussing the impact of those taxes at NedSpace Old Town on Thursday October 22 at 4:30 PM.
Oregon’s 2009 legislature passed two tax increase measures that will have a serious negative impact on startups, both directly and by affecting their sources of capital. One of the measures added a new gross receipts tax on unprofitable corporations (like startups). The other measure raises Oregon’s top personal income tax to 11 percent – the highest in the country – thereby adversely affecting the angel and venture investor community’s ability to fund startups. This serves as a double-whammy to the Oregon entrepreneurial community. What we need is more reasons for companies, entrepreneurs and investors to come and stay here – this is just one more reason they will stay away, or if here now, relocate.
In opposition, the group collected enough signatures to drive the tax increases to the ballot—allowing Oregon voters to decide if the tax increases remain or die.
According to the proponents, the tax hikes are all about jobs. And earning an additional $733 million for the state.
“The opponents have draped themselves in a message about jobs,” said Scott Moore, a spokesman for Defend Oregon in The Portland Business Journal. “But in order to protect the narrow interests that are funding their campaign, they are willfully trying to kill two measures that will help the very people who’ve been hurt most by this recession.”
On which side do you fall? Not sure? You might want to swing by the event to get some more details.
The gathering on October 22 will be hosted by some pro-entrepreneur folks who are in decided opposition to the taxes—Bob Wiggins, Josh Friedman, and Bill Pierznik. Attendees will hear from Bill Kelly of Learning.com, Bob DeKoning, CEO of Routeware and board member of Tech America and OEN, and others on “how these tax measures would particularly harm the startup community and new proactive investments.”
For more information or to RSVP, visit Oregonians Against Job-Killing Taxes. Interested in conversing more directly with the parties involved? Follow @defendoregon and @nojobkillingtax on Twitter.
(Image courtesy blmurch. Used under Creative Commons.)
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some considerations from Michigan’s example –
http://bit.ly/Wmhrr
Oregon, and the city of Portland, has a quality of life that is among the best in the world. You get all that, plus a business tax rate that is in the bottom 25% in the nation. The real issue for business in Oregon is the underfunded higher education system. In Washington and California, the relatively higher powered academic environment feeds the startup community with talent and great ideas.
If Oregon gets a more stable reserve fund, other states may follow our tax structure and look at eliminately their state sales taxes. The sales tax is the most invasive tax with the highest overhead, wasting billions every year across America.
Stop being a baby and pay your taxes.
I have no issues with your proposal, because you’re right, the long-term stability is certainly one of Oregon’s ongoing issues. But, I guess I worded it wrong, in what I really meant was stability of the various areas that will be facing cuts if this measure passes.
Either way you spend the money though, for a short term fix or long-term stability solution, I just don’t think that “these tax measures would particularly harm the startup community and new proactive investments” and don’t like the fear campaign that is being run.
Ryan-
You point would be good if the new taxes actually made Oregon’s tax system more stable. My big beef with the package is that it doesn’t fix Oregon’s #1 problem-stability. Only an insignificant portion of the new tax revenue will go to a reserve fund.
For stability, the permanent portion of all the new taxes should go first to fill a reserve fund. Even better, the legislature should scrap the permanent portion of the income tax hike and instead reform Oregon’s unique-in-the-nation kicker law that sends checks back to taxpayers if the state economist made the wrong guess about projected revenue. That would fill the reserve fund without causing the uproar in the business community about highest-in-the-nation income tax rates.
Shouldn’t taxes be the least of a startup’s worries? Heck, if you’re paying taxes, it probably means you have revenue (and maybe even profit!). Not trying to be flippant about an issue obviously of concern to some in the startup scene, but I don’t see this increase as asking too much as a trade-off to a more stable tax base.
Let’s focus on growing the number and quality of startups (as will as improving the education system to help with that), not trying to save a couple hundred bucks. Let’s not be “Penny-wise, pound-foolish.”
Just like Washington, we’re missing one of the typcial tax revenue sources so when you start using phrases like highest in the… you’re usually not comparing apples to apples.
There is no perfect tax system
There are several respected studies that show that the per capita state taxes in Oregon are less than in a majority of other states. In particular, the US Census Bureau ranks Oregon at 40th in per capita state taxes (for 2004),
http://www.census.gov/govs/statetax/04staxrank.html
CNN ranked Oregon per capita taxes as 36th in the nation,
http://money.cnn.com/pf/features/lists/taxesbystate2005/index.html
And in 2008, Oregon ranked 26th in per capita taxes paid to the state per the Tax Foundation.
http://www.taxfoundation.org/taxdata/show/476.html
I doubt that the increase in taxes on top earners and an increase in the minimum corporate tax from $10 to $150 will seriously change those figures.
This technology professional much prefers paying higher personal income taxes over having sales taxes. Sales taxes penalize the poor for being poor by requiring that a higher percentage of their total income goes to the state. If technology entrepreneurs choose to start their businesses elsewhere, I would say they’re both lacking compassionate for those of lesser means, and uneducated in the facts of Oregon taxes.
Relevant urls:
http://www.stopjobkillingtaxes.com/faq/
and
http://defendoregon.org/thefacts.html
These seem to cover the details. And neither of the tax experts that Stop Job Killing Taxes cites actually have their reports available. The whole “don’t raise taxes on the rich people — they won’t invest” is factually and provably wrong. For the last 8 years every rich american has enjoyed the lowest tax rates in the history of the country. And what happened? They got richer, and the median wage and employment count flatlined. Any argument saying that the rich need to keep their money in order to invest is bankrupt. It didn’t happen.
I would be very curious what the argument is for this harming startups. Even if you have $5 Million in sales, your tax is only $2000. If you have less than $500,000 in sales, it’s $150. That is hardly a big barrier. Sure it’s greater than what it was, but if we’re faced with choices between being good for investors and business (let’s say, like California – not exactly a bastion of smart tax policy these days) or paying for schools, police, and health plans, then it needs a hard look. If the argument really just boils down to “rich need money to invest” then that’s pretty self serving.
The funny thing is that both of the FAQ pages seem to agree on one point – that the “gross sales” portion of the increase probably only amounts to about 3% of the total proposed increase. And the argument against the bills seems to be that that 3% plus the personal income tax increase is where all the damage will be done. And if that 3% is such a small amount, the unstated truth would seem to be that it’s the personal income tax that is so objectionable on Stop Job Killing Taxes’ explanation. Conversely if the lost jobs come from higher taxes on profitable companies, then these two arguments (Startup Damage vs. Corporate Taxation) don’t exactly align.
“It’s unfair to tax businesses up to $100,000 even if they don’t make a profit.” (Note, only a 100M Revenue business falls into this category).
&
“A. Those Oregonians who would pay higher personal income taxes make up just 2.27% of all Oregon taxpayers. In 2007, that group paid 32.4%[1] of all the state personal income taxes collected. That seems like they are paying their fair share already. Under the legislature’s plan, fewer than 12,500 Oregon taxpayers out of more than 1.8 million would be asked to increase the taxes they pay by more than $236 million a year. That doesn’t sound fair to me.”
Progressive taxes are fair-er. That’s the entire point. The thing this quote sounds the most like to me is George Bush and his permanent tax cuts based on fairness. Fairness doesn’t come from treating everyone equally when their impact is disproportionate. The number missing from the above statements is what percent $236M is of their total take home. Because without that statistic, the entire argument is hyperbole.
If someone has actual links to the reports Stop Job Killing Taxes cites/reports, that would be nice. And if someone can explain how $150 a year, to $2000 a year in gross sales taxes on 5M revenue and lower businesses account for so much job carnage, that would also be helpful. I won’t easily accept any notion that those job losses will manifest from lost income to the richest Oregonians.
Are we ready for a sales tax yet?