Legislature showed tunnel vision
Two views • House speaker says Legislature had its successes, but business advocate believes tax hikes will hurt
They say that when you focus on one thing for too long, you can develop tunnel vision. Gradually your field of vision narrows and you lose sight of the whole picture. When people develop tunnel vision, they have a tough time seeing anything that is not directly in front of them.
In addition to being an actual medical condition, it is also a habit all too common when people get so set in their ways that they become close-minded. Several legislators and interest groups in Salem have adopted this cylindrical viewpoint in the way they look at Oregon employers.
In response to a staggering $4 billion deficit in the state budget, legislators and several special interest groups have decided that firms providing jobs and selling goods should make up the difference in tax hikes. While private-sector employers are struggling to stay afloat on reduced cash flows, legislators and special interest groups want to keep the government operating at 'current service levels,' without confronting their own need to operate on a smaller budget.
Instead of sticking with our traditional system of taxing based on universal measures like profitability, lawmakers have moved to increase the tax burden by also taxing businesses based on their sales - regardless of profitability. Proponents articulate a simple scenario - instead of a $10 filing fee paid by businesses who don't post profits, business would pay a fee of as much as $100,000 based on their sales.
While proponents like to hold up businesses they have painted as poster children of corporate greed, they fail to note the other several thousand Oregon businesses lingering in peripheral view that would be adversely impacted by their one-size-fits-all legislation.
As president of the Oregon Small Business Coalition, which represents approximately 40,000 Oregon businesses, it is my privilege to visit with business owners all throughout the state. Recently, I visited with a small-business owner in the general contracting industry who averages close to $35 million in annual sales. Due to the nature of his business, he operates on thinner margins than other Oregon employers who might also generate $35 million in annual sales. With the recession, it is possible that his shrinking profit margin could turn into a financial loss.
Why would a company operate like this?
In this case, the owner doesn't want to lose skilled workers. He is doing his best to prevent layoffs and ensure he doesn't lose valuable members of his team. But a huge portion of this company's 'sales' are actually material costs and labor (people) costs associated with various company projects. Other things such as health insurance, permit costs, fuel and vehicle expenses mean that the small business owner could likely close out 2009 showing zero profit.
With the tunnel vision scheme legislators have approved, this small-business owner would have what amounts to a tax on his unprofitability. His new tax burden - even if he doesn't post a penny in profit - could equal $30,000. The company's possible burden is nearly identical to the cost of one month of health insurance for this company's employees.
Where does that money come from for a company that has no profit? Do they cut employees and put them on unemployment? Do they cut health care? Do they close down? The proposed tax liability on small-business owners does nothing to encourage businesses to take care of their employees. Imposing this new tax structure on businesses is inviting a completely new set of problems into the state economy. How will small-business owners cope with this new tax liability? Do we really want to introduce another set of challenges resulting from the cost-cutting measures necessitated by this new tax? I don't think so.
I understand that the state needs to balance its budget. Adopting a tunnel-vision strategy that increases tax liability for small business owners is not going to fix the problem.
It is time for the state to learn how to live within its budget. Please join me in asking the Oregon Legislature to do what thousands of us have been forced to do. Please join me in supporting the tax repeal in January and asking the Oregon Legislature to learn to live within its means.
John Killin is president of the Oregon Small Business Coalition. He lives in Tualatin.