The Truth About Oregon Corporate Taxes
As the Legislature explores ways to balance the 2017-19 budget, members of the A Better Oregon coalition and other advocacy groups have revived a false claim from the Measure 97 campaign: Oregon has the lowest corporate taxes in the nation, they say. The advocacy groups, who want to balance the budget through tax increases, base their claim on a 2016 study by the Anderson Economic Group (AEG) ranking state business taxes. But their selective use of facts misrepresents the study and the reality of Oregon’s tax structure.
This article clarifies what that study measures and concludes and presents a more complete picture of Oregon’s corporate tax environment:
What Does the Study Measure?
The AEG study does not just examine corporations, but all types of businesses including sole proprietorships, partnerships, and limited liability companies. The vast majority of businesses examined in the study are not corporations at all. They are unincorporated small businesses.
Where Do Oregon Corporate Taxes Really Rank?
The study ranks states based on 11 types of taxes that businesses pay at the state and local level. Corporate income taxes are one of those taxes. On that measure, Oregon ranks 19 in the nation. Of the 11 taxes measured, Oregon ranks low on only one: general sales taxes.
Do Sales Taxes Make That Big a Difference?
All but five states have a general sales tax, and general sales taxes account for 20% of the total taxes measured in the study. Therefore, Oregon's lack of a general sales tax significantly lowers Oregon's aggregate ranking in the study.
Where Can I Learn More About the Study?
You can find the full report on the AEG website by clicking here.
What Do Other Studies Show?
How Oregon compares with other states depends on how or what you measure. No two studies are exactly alike, because there are many ways to measure taxes and fees. A study by Ernst & Young, which like AEG includes sales taxes, also ranks Oregon with the lowest business taxes. However, the same study says Oregon would rank higher than 20 other states if sales taxes were excluded. The Tax Foundation ranks Oregon as number 10 for best business tax climate, considering five types of taxes – one of which is sales taxes. In terms of individual taxes, Oregon has above average unemployment compensation taxes and license fees. Also, some businesses may pay fees that are not included in studies. And local taxes, which are part of the calculations in most studies, vary across the state.