There was potential good news and bad news this week for some Oregon businesses.
While state legislators in Salem were approving a new business tax to benefit schools, Oregon businesses located near the border of our northern neighbor were given a gift from an unlikely source — the Washington state legislature.
First, the Oregon House voted to institute a half-a-percent tax on some of the state’s largest businesses in order to raise $1 billion per year to fund K-12 school initiatives. There is bipartisan support for helping our ailing public schools with much-needed additional funding. However, there is partisan disagreement over how those funds should be raised. Democrats ignored objections and used their supermajority to push Bill 3427 the “Oregon Student Success Act” through.
It is misleading to say the tax would only impact the “richest” businesses in the state. The tax package calls for a 0.57% tax on gross receipts for businesses with $1 million or more in annual sales. That represents less than 10% of all businesses in Oregon. However, as many business owners know, annual gross sales of $1 million do not necessarily translate into profit. A company with a very narrow expense-to-revenue margin, which includes a lot of agricultural businesses, could find themselves shouldering an increased tax burden whether they are profitable or not. The bill now moves to the Oregon Senate. We will continue to follow this important piece of legislation.
Meanwhile, Washington state lawmakers in Olympia did some Oregon businesses a favor by passing Senate Bill 5997, which would end the practice of retailers there giving Oregonians tax-free purchases just by showing their Oregon ID. If signed into law, it will effectively end the level playing field Washington retail businesses could offer to consumers from Oregon, which has no statewide sales tax.
As this newspaper has reported, many Oregon consumers living close to the border in Hermiston and Milton-Freewater choose to do much of their shopping at big box stores in the Tri-Cities or Walla Walla. If the tax-free advantage is taken away July 1 as planned, this could potentially benefit local businesses in Oregon who could recapture at least part of the retail leakage that is currently heading north.
While Washington lawmakers reasonably expect a revenue boost from the additional taxes raised on out-of-state shoppers, they could easily see that offset with lower sales volumes. A positive outcome would be more Oregon dollars being spent here in Oregon, supporting our local Oregon businesses.
It remains to be seen whether this will spur additional retail development in Umatilla County, but it certainly won’t hurt. Any consumer interested in helping our rural economy should remember that money spent here stays here, and regardless of the tax exemption should weigh that choice carefully.
Now more than ever, Oregon’s lack of a statewide sales tax remains a competitive advantage for its retail business community, especially those near the border, in attracting out-of-state consumers and, hopefully, retaining local shoppers.