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Beware of sales tax lurking in disguise

Oregonians have voted down a sales tax nine times in the past eight decades. People who want to raise more money for government programs understand that voters probably never will support a sales tax — since, after all, those same voters would be the ones who would have to pay it.

So instead of taking a direct route into voters’ wallets, the backers of Initiative Petition 28 in Oregon are looking to impose something akin to a stealth sales tax. Registered voters should be very cautious, as their signatures on this particular initiative petition would promote a 2016 ballot measure that could cost them and the state’s economy more than they expect.

There are two fundamental problems with Initiative Petition 28 — euphemistically labeled “A Better Oregon.” The first is that its public union backers are trying to write tax law through the initiative process. This approach always brings with it a minefield of unintended consequences. Just consider the ongoing disparities that flowed from the property-tax limitation measures of the 1990s.

A second inherent flaw in this initiative is its assumption that the state can tax large corporations without having substantial consequences on everyday citizens. Initiative Petition 28 would increase the annual minimum tax on corporations with yearly sales in Oregon greater than $25 million. For any sales above that amount, corporations would have to pay a 2.5 percent tax on every dollar they collect in Oregon.

This tax would be assessed on gross sales, regardless of whether the company is making a profit. That’s why it resembles a sales tax and will be most burdensome to low-income Oregonians who can least afford to pay. In many cases, corporations will be forced simply to tack the 2.5 percent tax onto existing prices. Everyone will help pay this tax — when buying groceries, medicine, clothes and electricity.

The only popular tax, of course, is one that somebody else pays. The backers of Initiative Petition 28 will frame this as an opportunity to make big business shoulder its fair share. But the largest businesses — those with gross revenues exceeding the $25 million limit — also happen to be places where ordinary people shop each week.

Also included in this group of companies are businesses that supply other businesses. In those cases, the 2.5 percent tax gets applied throughout the supply chain, multiplying the costs that ultimately will be borne by consumers.

High-tech industries also would be hit hard by a gross receipts tax, discouraging one sector of Oregon’s economy that’s doing well. It’s possible some corporations will tighten their belts and absorb a portion of the 2.5 percent tax without passing it along to customers. However, the way most businesses cut costs is by reducing their largest expense — payroll. A potential loss of jobs certainly isn’t helpful to the state’s economy.

The gross receipts tax proposed in Initiative Petition 28 would raise $5 billion every biennium, according to estimates from the Legislative Revenue Office. It is naïve in the extreme to think that money will just appear in the state’s coffers without ramifications throughout the Oregon economy.

If supporters of Initiative Petition 28 gather 88,184 valid signatures, this proposal will appear on the November 2016 ballot. Before signing any petitions, however, registered voters should ask petition gatherers a few pertinent questions, starting with: “How much will this cost me?”