Bend Bulletin Editorial Board
March 2, 2019

Gov. Kate Brown wants to give schools an additional $2 billion, but, as things now stand, she and lawmakers must find a new pot of money to fund her dream.

Now an alliance of businesses (Nike, a real estate developer and the Oregon Health Care Association) and public employee unions have joined forces to push for a tax. The one they like best is a gross receipts tax on business. It differs in some respects from the similar proposal in Measure 97, which Oregonians defeated by nearly 20 percentage points in November 2016.

There are still big problems with the idea.

Gross receipts taxes pyramid on top of each other, growing with every new step from raw materials to final sales. That drives up prices, and that, in turn, cuts job growth. From the Legislature’s standpoint, however, only two factors are likely to matter. Gross receipts taxes bring in a boatload of money, and they tend not to fluctuate much with economic ups and downs.

Lawmakers are working to reduce that problem, perhaps through something called “sales minus input,” in which a business can deduct some of its costs before calculating what’s owed.

That presumably would make the tax less onerous for businesses with narrow profit margins, notably grocery stores. Grocery stores could even be exempted from the new tax. But there are plenty of other Oregon businesses that have low profit margins, too.

Finally, there’s this: Without PERS reform, a major chunk of what’s raised by a gross receipts tax will go to keep the retirement fund afloat. To make her $2 billion a real increase, Brown is estimated to need to add in another $3 billion just to keep up with projected PERS increases through 2021.

Where are Brown’s proposals to match increasing taxes with substantial reform to PERS? Oregon businesses shouldn’t be taxed any more without those reforms.