An initiative on the November ballot disguises a huge business tax increase as a ‘rebate.’

There are bad ideas and then there are ideas so lousy that even liberal Democrats disown them. Count in the latter category an Oregon ballot measure that would stick companies with the highest corporate tax burden in the country while pitching it to voters as a “rebate.”

Under Ballot Measure 118, Oregon would enact a 3% corporate minimum tax on gross receipts over $25 million, then kick some money back to Oregon taxpayers. In fiscal years 2025 and 2026, according to the Department of Administrative Services, the new tax would bring in $14.7 billion in revenue. While corporate income taxes take a percentage of final profits, gross receipts taxes take their cut from total revenue without considering costs, margins or profits.

Corporations with more than $1 million in income already pay a 7.6% corporate income tax in Oregon as well as a 0.57% gross receipts tax. That’s on top of the 21% federal corporate income tax and Portland’s 6.6% cumulative tax burden on local business. Oregonians think they have no state sales tax, but residents will pay more as businesses pass their tax costs along to consumers in order to survive.

According to the Tax Foundation, if an Oregon company’s profit margin is 7%, the proposed gross receipts tax would be the equivalent of a 42.9% corporate income tax. It’s especially punishing for industries with thin profit margins, such as supermarkets, and would apply to companies that lose money.

The tax is structured as a minimum tax, so corporations would pay the greater of the gross receipts tax or the state’s existing corporate income tax. It also takes a percentage from every business in the production chain. That leaves companies with the choice of shifting production out of Oregon to reduce their points of contact with the tax or vertically integrating to bring as many parts of production as possible in-house to minimize transactions.

Voters wouldn’t know any of this from reading the ballot that comes in the mail. The text of the measure says it’s a Corporate Tax Revenue Rebate for Residents Initiative, and promoters promise voters they’ll get hundreds of dollars in cash in their pocket. The proposed rebate would take the revenue from the gross receipts tax and redistribute it to Oregon residents.

The ballot petition was led by former American Federation of State, County and Municipal Employees (AFSCME) Antonio Gisbert, who is a proponent of a universal basic income. The Yes on 118 website says a yes vote will “get yearly rebates of $1,600 for yourself and every Oregonian, kids included.” Sure, until businesses flee and the tax pool shrinks.

If Oregonians want more money in their pockets, the way to achieve that is by cutting taxes, not raising them. Oregon’s current top income-tax rate of 9.9% kicks in at only $125,000 for individual filers, but Measure 118 doesn’t cut that punishing disincentive to work.

Democratic Gov. Tina Kotek has come out against Measure 118, and the four top Democratic state lawmakers have done the same. Oregon voters, take heed: You don’t want this check in the mail.

By: The Editorial Board

View original article: https://www.wsj.com/opinion/oregons-gross-receipts-tax-ballot-trick-rebate-measure-313582f7