By Jay Shenai
Mike Grant doesn’t mince his words when asked about his thoughts on Measure 67.
“Cowardly, deceptive and foolish,” said Grant, owner and founder of The Grant Company, a design-build commercial contractor in Mount Angel.
Months after the special election in January, Measure 67 continues to raise the blood pressure and hostility of some business leaders, even as it raises money to maintain state services during a massive budget shortfall.
Ed McKinney, chief financial officer and founding president of GEM Equipment of Oregon Inc., a C-corporation based in Mount Angel, anticipates an additional tax burden of between $8,000 and $12,000 as a direct result of the passage of Measure 67. Despite the amount, the company itself will not be tremendously affected, he said.
“It’s not enough to be a deal-breaker,” he said. “[But it’s just] another proof to business that Oregon doesn’t have a business-friendly climate,” he said.
A manufacturer of industrial food-processor equipment, GEM Equipment’s business is largely interstate and international. About 90 percent of the company’s business comes from outside Oregon, and more than 50 percent originates outside the United States. As such, his customers are unaffected by the measure, McKinney said. For 2009, GEM Equipment operated at a profit, despite a traditionally volatile sales curve for companies like his with large sporadic jobs.
“We’ve been very, very fortunate,” he said.
However, the measure has added to a cooling effect on his company’s willingness to invest. The company currently has a larger-than-usual amount of cash on hand, said McKinney, and at this time has no plans to risk losing surplus moneys during the downturn, on expenditures like factory upgrades.
Jim Hoke, owner of Mount Angel Sausage Co., also finds his business sitting on cash. An S-corporation, he is not directly affected by C-corporation tax hikes as spelled out in the measure, but nevertheless similarly expresses bitterness over the situation, stating that Measure 67 adds to his uncertainty over the future.
“A lot of us feel violated,” he said.
Hoke said he found the campaign for the measure to be especially divisive, portraying local business owners as wealthy and self-serving.
“Here they are trying to do the right thing, and they’re losing their ass, under the precept that they’re losing money and [won’t have to] pay taxes, hanging on to employees, assets to the company.”
Business is what will drive the country out of recession, said Grant. His company is also an S-corporation, which means that profits are reflected on the owner as personal income, as opposed to shareholders or a corporate board. He is angered over the possibility of businesses paying additional tax on gross income. Grant is also furious over the fact that taxes were retroactive to 2009.
“Last year folks lost money, and now they get the privilege of paying taxes on their losses,” he said.
“It sticks in my craw.”
For Chuck Sheketoff, executive director of the Oregon Center for Public Policy based in Silverton, his anger is also very real, but directed at what he calls the misleading misinformation from the No on 67 campaign.
It’s not fair, he said, that businesses complained about taxes being retroactive. After all, when the taxes were voted in by the state legislature last year, it was business interests who delayed their implementation by referring them to the ballot.
“It’s like complaining the other team is slowing down the game, but you’re the one calling all the timeouts,” he said.
Under the measure, only 30 percent of C-corporations, large, multi-state corporations, he said, will have to pay more in taxes. The rest, down to mom-and-pop stores, either pay the $150 corporate minimum tax or will see no change whatsoever.
Furthermore, only 38,000 households pay more in taxes under Measure 66, the additional tax on individuals who make over $125,000 per year or $250,000 jointly. Of those, 8,000 have business income more than 50 percent of their total income. And few made enough in business profit to trigger the Measure 66 tax, he said.
The measures protect small business, he said. Small business owners are not going to have to pay because they don’t clear the minimum threshold under the measure.
“If they’re complaining about this, they’re dead wrong,” he said, “they’ve been scared.”
“I’m mad that you had this vote, where there was misinformation. And these guys, their lobbyists are misleading them,” Sheketoff added.
Measures 66 and 67 are estimated to generate $727 million – $261 million from 67 itself. The money will go into the state general fund, with 90 percent of it going into education, health and human services and public safety.
The legislature, facing a $4 billion shortfall, conceived the measures only after making roughly $2 billion in cuts to public services and securing roughly $1 billion in federal funds.
Sheketoff said both measures target those most able to pay. He points out most lower and middle-class Oregonians will see cuts, including those on unemployment insurance, who see taxes waived on the first $2,000 of their checks. Larger businesses can pull money from savings, as opposed to curtailing spending, he said.
“Tax those with the most ability to pay,” he said.
But that’s completely missing the point, said Sean VanGordon, vice-chairman of the Lane County Republican Party. Even small businesses not affected directly by the measure are still affected.
“Small businesses do business with big business,” he said. “They either buy supplies to make goods or sell finished products to big businesses.
“When you tax only the big businesses, those costs will get passed on to small business in either higher cost or reduced purchases of small businesses goods.”
Moreover, just because a company is large does not mean it has more ability to pay, he said.
“Regardless of size, very few companies have cash just saved up for a rainy day,” he said.
“Recessions are a time of cost cutting and falling revenue,” he said.
Measure 67 represents an additional, unanticipated burden businesses have to make up, which could result in cutting jobs. It could also mean neighboring states luring Oregon businesses away with tax incentives, he said.
For now, the most tangible impact of Measure 67 is anger, on both sides, and concern for the future.
According to VanGordon and others, the state took an enormous amount of wealth out of the economy to grow the budget at a time the state could least afford it.
For the measure’s proponents, the state budget outlook is still grim. The state Legislature will continue to face severe budget deficits in the future, Sheketoff said.
But even in such bitterness, both sides share some hope for the future.
“Oregon’s still a great place to do business,” Sheketoff said.
“I believe it will turn around,” Grant said. An overabundance of vacant homes slammed his industry especially hard, resulting in large numbers of layoffs.
“When that inventory gets eaten up, we’ll get those guys back to work,” he said.
