June 26, 2017
June 26, 2017
House votes to dishonor tax compromise it made as part of ‘Grand Bargain’
Anthony K. Smith, NFIB
The Oregon House of Representatives voted 31-28 today to drastically restrict the number of small businesses eligible for the tax rates it agreed to during the 2013 special session as part of the so-called ‘Grand Bargain’ and which have only been in effect for two years.
“House Bill 2060 is a massive tax increase on Oregon small businesses,” said Anthony Smith, Oregon state director for the National Federation of Independent Business, the state’s and nation’s largest and leading small-business association. “A majority of small businesses paying at a rate of 7 percent today will see their rates increase to 9 percent or 9.9 percent under this bill. This could be up to a 41 percent tax increase for individual taxpayers and is projected to grab another $100 million per year from Oregon small businesses.”
The small business PTE (pass-through entity) tax rates were part of the ‘Grand Bargain’ from the 2013 special session. The package of bills passed during the special session included House Bill 3601, which among other provisions, increased the corporate tax rate from 6.6 percent to 7.6 percent on income between $1 million and $10 million and lowered rates (to between 7.0 percent and 9.9 percent) for taxpayers with business income meeting certain criteria with the policy objective being to provide a more favorable rate structure for business income earned by taxpayers who actively manage their own enterprises.
“The net effect 2013’s HB 3601 was an additional $189 million in revenue for the 2013-2015 biennium,” said Smith. “The tax increases went into effect immediately to balance the budget; however, the tax savings from the PTE tax rates did not take effect until tax year 2015.”
According to Smith, “Now after just two years of the Legislature honoring the compromises achieved in the Grand Bargain, HB 2060 seeks to restrict the future use of the PTE tax rates to businesses with 10 or more full-time employees – in each pay period for the entire year. Furthermore, only businesses in certain industry sectors will be able to keep their lower tax rates. Seventy percent of NFIB members in Oregon have fewer than 10 employees. It’s our members on the chopping block here.”
Under current law, only certain businesses structured as S-corporations or partnerships can use the PTE tax rates. “We should be talking about expanding this tax rate structure to include sole proprietors and all small, family businesses – not further restricting it by industry sector or employee count.”
HB 2060 now moves on to the Oregon Senate for consideration.