Relying on a former state economist, the Common Sense Institute says the large corporate Measure 118 won’t deliver promised benefits.

Common Sense Institute, a business-friendly think tank that’s raising its profile in Oregon, today took a close look at Measure 118, the November ballot measure that would impose a 3% gross receipts tax on corporations with Oregon sales of more than $25 million a year.

The report notes that Measure 118 would be a “seismic” change to Oregon’s tax structure. And like the left-leaning think tank Oregon Center for Public Policy, Tax Fairness Oregon and elected officials on both sides of the aisle, all of whom oppose Measure 118, Common Sense raised a series of concerns.

“When fully implemented, it is estimated that this change would result in a six-fold increase in corporate tax payments,” the report says. “Not only would corporate tax liability swell, but the proposal would also change the distribution of tax burdens dramatically. In the current system, the vast majority of tax liability is generated by taxing profits. Under Measure 118, nearly all corporate tax liability would be based on sales.”

That tax burden would hurt low-margin businesses, such as grocery stores.

Proponents of the measure, including chief petitioner Antonio Gisbert, say the tax, which would generate about $7 billion a year, could produce a variety of benefits.

They hope the so-called Oregon Rebate will alleviate poverty and also stimulate economic activity through new spending. That’s because the state would distribute the new tax money to every Oregon resident, in the form of a $1,600 check. Gisbert and his allies say that Oregonians would spend that money, resulting in new revenue for businesses and more jobs.

The Common Sense Institute, which earlier this year hired the state’s former chief economist, Mark McMullen, dug into the data and found suggestions that consumers may not act as proponents expect.

For one thing, McMullen and his colleagues found, people don’t necessarily spend found money, especially those who do not need it.

“Unlike traditional basic income programs, rebates under Measure 118 would be distributed to all Oregonians, regardless of their income level,” Common Sense found. “As a result, a large share of the payments would be saved by households and would not generate additional near-term economic activity. A recent study by the International Monetary Fund (IMF Marginal Propensity to Consume Study) found that 85% of households that received $650 COVID payments in the UK saved the entire payment, while only around 8% spent it all.”

McMullen also drew on the experience of his old employer.

“For a local example,” the report says, “the Oregon Office of Economic Analysis found little evidence this year of additional spending on the part of households despite record ‘kicker’ rebates.”

McMullen’s and his colleagues also found that many of the companies that would pay the tax are likely to pass it on in the form of higher prices.

“Businesses and households would face higher costs for a wide range of necessities, including utilities, fuel, telecommunication services, groceries, healthcare, building materials, and construction services,” the report says.

Proponents of the measure point to a nonpartisan state analysis that found the price increases individuals will face are less than the $1,600 check they would receive, so they would be better off under Measure 118.

The think tank disagrees. “The positive economic impact of rebate payments would be watered down,” Common Sense concluded. “Rebate payments are subject to federal taxes, will create a hole in the state general fund, and will be collected by high-income households that will save much of the windfall rather than injecting it into the economy.”

By: Nigel Jaquiss

View original article: https://www.wweek.com/news/2024/09/16/another-think-tank-pans-the-proposed-oregon-rebate/