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Our Opinion: Measure 97 has too many big holes

It’s understandable that many Oregonians are frustrated by perennial state budget problems and want to support what is being sold as a painless solution. But Measure 97 — a proposed corporate sales tax — is fundamentally flawed.

If approved, this initiative, which is backed primarily by public employee unions, would have vastly different effects than what its proponents have advertised.

And voters don’t have to look very hard to see the gaping holes in the storyline.

Most glaringly, supporters have said that just under 1,000 corporations affected by the 2.5-percent gross receipts tax will shell out $6 billion in additional taxes each biennium without harming either Oregon’s economy or its consumers. Common sense would lead anyone to conclude that isn’t going to happen. Companies based outside of Oregon are not simply going to write checks to this state for hundreds of millions of dollars without recouping the money through higher prices or reduced work force.

Consider the case of three grocery chains that would be affected by the 2.5-percent tax on sales for certain corporations: Safeway, Fred Meyer and Costco, whose profit margins in recent years have ranged from 0.68 percent to 2.07 percent. Anyone who argues that these stores will not either raise prices or cut employment to cover the new tax is asking you to believe that they will operate at a loss for the privilege of doing business in Oregon.

That defies all logic, which is why the nonpartisan Legislative Revenue Office estimates families — not corporations — would bear the burden for two-thirds of the proposed tax. Measure 97 isn’t a tax on big business. It’s a tax on people that will be collected by large businesses.

But that’s not the only reason Measure 97 is deceptive.

As reported by Pamplin Media Group in today’s issue of The Review, the measure that’s on the ballot may bear little resemblance to what ultimately would be adopted by the Legislature if voters approve Measure 97. That’s because the measure is so poorly conceived and carries so many unintended consequences that it cannot be implemented in its current form.

As a result, Gov. Kate Brown and the Legislature already are talking, publicly and privately, about a major overhaul. They want to change how software companies would be taxed, because Measure 97’s tax on sales — not profits — would debilitate a growing industry that is providing thousands of good jobs in the Portland area. They want to alter Measure 97’s exemption for so-called “benefit corporations,” because they don’t want companies to change their status to avoid the new tax.

The governor and legislators also want to fix the “Powell’s Books problem,” because they have realized belatedly that Measure 97 would hammer many iconic homegrown businesses, such as Powell’s, Tillamook Creamery and Umpqua Dairy (just to name a few).

Although Measure 97’s revenues are supposed to go toward education, health care and senior services, the governor already has proposed to use the money in other ways. She wants to allocate some of the proceeds to expand the earned income tax credit for low-income families. That’s because a gross receipts tax, by definition, is the most regressive form of taxation — a “sales tax on steroids,” as one economist put it.

Plus, everyone recognizes that a sizable chunk of the money from Measure 97 will be gobbled up by the $22 billion unfunded liability for the state Public Employees Retirement System. Again, it’s just common sense to acknowledge that fact.

Other potential solutions exist for PERS, including a bonding proposal being floated by the PERS governing board. Likewise, the Legislature has numerous alternatives for raising money and reducing expenses to close a $1.4 billion budget gap for the coming biennium.

Yet, no one has been able to give an adequate explanation for why the state should raise taxes on its citizens by $6 billion per biennium — as proposed by Measure 97 — when the actual need is less than 25 percent of that.

The governor and legislators know that Measure 97 is terrible tax policy, but too many of them have resorted to the completely unfounded excuse that “there is no other option.” This type of deliberate deception is not the way Oregon should make its most important public decisions.

There is a reason virtually every newspaper editorial board in Oregon has opposed Measure 97. (Check out the arguments from Eugene, Salem, Corvallis, Bend, Pendleton, Medford and points in between.) It’s because editorial writers have traditionally stood for good government and honest discussion.

Measure 97 doesn’t pass either test. Voters should reject it and demand that their leaders come up with a balanced, well-designed solution to the very real budget problems that Oregon faces.

— Pamplin Media Group