This is the last of three columns on Measure 97, which proposes to raise funds for education, health care and senior services by increasing the minimum tax on a corporation’s annual sales of $25 million or more in Oregon. In it I consider whether consumers, not the affected corporations, would foot the bill.
The “No on 97” mailer I received claims the “$6 billion tax on sales [will be] passed on to consumers.” If true, it’s the opponents’ most persuasive argument.
Before I examine it, I’ll agree that taxing a corporation’s sales rather than its profits isn’t the best approach. But as I explained last week, corporations have used their legislative clout to evade Oregon’s taxes on business income. About 70 percent of them, including many of the largest, pay the alternative minimum tax, which is based on their Oregon sales. Only now that their sales tax might not stay laughably low are they arguing that it’s wrong to tax their sales.
We can’t know for sure who’ll pay what. The corporations could to absorb the entire cost or they could pass it all on to consumers. We do know that comparisons of retail prices across the U.S. reveal no correlation between prices and corporate taxes, which vary greatly. If there were, Oregon consumers would pay the lowest prices in the nation, because large corporations here pay the lowest taxes in the nation. Our benefit at the cash register is that we pay no sales tax, not that these corporations give us a break in return for the break we’ve been giving them.
The "no" forces claim that because there are no exemptions for food and other necessities, low-income families will be hurt the most. But it’s unlikely that the cost of necessities will be much affected. A 2016 comparative price study by the Oregon Consumers League concluded that the prices for common staples, such as cereal, diapers, duct tape and Legos, are remarkably consistent across the country. Further, the large retailers it studied — Kroger, Target, Lowe’s, Walmart and Toys “R” Us — have uniform prices nationally. More comprehensively, the study found that the Council for Community and Economic Research’s Cost of Living Index, a tool for comparing the costs of goods and services in the U.S., doesn’t vary in relation to state corporate taxes.
I want to mention car prices, since Lithia Motors is locally headquartered, sells lots of cars in Oregon, and its CEO has issued dire warnings about Measure 97. It’s hard to compare car prices, because dealer competition varies from locale to locale and time to time, and because each buyer negotiates with the dealership. But the Manufacturer’s Suggested Retail Price is a constant. In 2010 Autoblog listed the 10 cities with the largest average discounts from the MSRP. They ranged from Tampa/Orlando (10 percent) down to San Francisco (8.1 percent) across nine states. No Oregon city was listed. By now that list will have changed, but that’s beside my point — car prices also don’t seem to vary with the state taxes corporations pay.
I’ll end with this from Rep. Peter Buckley: “The Tax Foundation (a conservative organization) study shows that overall, consumer prices might increase 0.9 percent over time. Even if that should prove true, the increased benefits of well-funded schools, health/mental health care, senior services, etc. should boost our economy and our quality of life far beyond that.”
— Herb Rothschild's column appears in the Tidings every Saturday.