Oregon Debating $150M Small-Business Tax Cut

A $150 million tax cut for small business owners may be the key to Oregon’s budget standoff, says the Republican state senator behind the proposed legislation.

As Beaver State politicians debate a tax package potentially worth $1 billion or more in cuts to the Public Employees Retirement System (PERS), State Senator Larry George (R-Sherwood) is pushing a small-business tax cut that he says would give business owners tax certainty.

The bill would create a small-business tax rate of 7% for the first $10 million in revenue for businesses classified as S-Corps. Right now, S-Corps pay taxes at the personal rate, which goes up to 9.9% in Oregon.

Jan Meekcoms, NFIB director in Oregon, says Sherwood’s idea stems from the state’s decision earlier this year to give tax certainty to Nike, one of Oregon’s largest employers.

“If you believe that tax certainty results in business expansion, then let’s do that for all businesses in Oregon,” says Meekcoms. “If tax certainty results in more jobs, that’s what we need.”

Small Business & Entrepreneurship Council Director Ray Keating says the tax cut would be a start for Oregon – but the state is far from ideal for small businesses.

“It’s an improvement from 9.9%, but Oregon has the third-highest personal tax rate in the nation,” says Keating. “If they bring it down, it will still be 12th highest – it’s still a very high rate.”

Keating adds that Oregon ranks 42nd out of the 50 states in the SBEC’s Business Tax Index, due to the high personal income taxes, the capital gains tax and high unemployment taxes.

Meekcoms says the tax cut may mean small business owners would have to choose between taking the 7% tax rate or taking deductions – which is worrisome for small businesses coping with an uncertain economy.

“Let’s say a business elects to take deductions because they’re expanding a lot. If there’s a sudden downturn in the market and business is hurting, a 7% flat rate might be better for them, because they’re not able to invest in their companies as much as they had been doing before,” says Meekcoms.