Oregon lawmakers appear to be just hours away from the end of a remarkable legislative session in large part for the huge sums they approved for affordable housing and shelter, response and reconstruction against forest fires, mental health and addiction treatment and infrastructure projects.
Vulnerable Oregonians and dilapidated public facilities aren’t the only winners in this session, however. Businesses of all sizes and in all industries, regardless of their profitability during the pandemic, are expected to receive new state tax relief that could collectively save them $ 450 million to $ 600 million and reduce corporate revenues. Statement of similar amount, depending on a state estimate.
The tax reduction is available to businesses and the self-employed who have received forgivable loans under the Paycheck Protection Program, a $ 780 billion federal effort to help companies keep their employees on the payroll amid pandemic uncertainty. Not only are payments financed by taxpayers exempt from tax under federal law, but Congress passed a provision in December allowing businesses to deduct their expenses from taxpayer money in taxes they may owe on profits.
US Senator Ron Wyden, D-Oregon, has been pushing for change throughout 2020 in his role as leader of a tax drafting committee, after the IRS and the US Treasury issued guidance that the beneficiaries could not write off the expenditure of public funds as a business. expenses. In a May 2020 press release, Wyden suggested that businesses might not want repayable federal loans if they didn’t have the added benefit of serving as a potential tax deduction. “Our bipartisan bill would correct this mistake and ensure that companies feel confident in using P3 funds to keep their workers employed,” Wyden mentionned of a proposal he brought forward with Republicans and another Democrat.
Oregon relies heavily on tax revenue and generally automatically mirrors federal income tax laws, so soon after the legislative session began in January, Democrats were discussing whether to pursue legislation that would be necessary to prevent the state from copying the federal policies of Wyden and his colleagues. Critics of the double tax breaks on federal aid payments have called them a “double dip” to the paycheck protection program.
“Congress creates these new tax breaks for the rich and the business, and then because Oregon automatically copies the federal tax code, we often copy those same unnecessary tax breaks,” said Representative Khanh Pham, D-Portland, in an interview in March. . âThis is money we need for our schools, to rebuild after the forest fires, to rebuild public health infrastructure. “
House Democrats offers taxing canceled loans as income and Senate Democrats considered reducing the tax exemption so that only the first $ 100,000 of a company’s canceled federal loan would be exempt. After a May 25 public hearing at the Senate Finance and Revenue Committee in which lobbyists from business groups and representatives from chambers of commerce lined up against the plan, Democrats abandoned it.
Scott Bruun, director of tax and fiscal policy at the state’s largest business lobbying group, Oregon Business & Industry, cited the state’s latest windfall revenue forecast that projected an additional $ 1 billion into the budget cycle current and an additional $ 1 billion in 2021-2023.
âPut simply, the state coffers are full, they’re actually inflated,â Bruun said. He cited an Oregon Business & Industry-funded analysis on the cumulative impact of new business taxes coming into effect in the state, including a gross revenue tax to fund schools. He found that when these tax hikes are all in effect, Oregon’s business tax burden could drop from the country’s 40th lowest to 20th.
JL Wilson, a lobbyist for the Oregon State Chambers of Commerce, said everyone he knew received a loan from the Paycheck Protection Program. âI know the huge concern that swept through the small business community when the treasury indicated that it would not allow you to deduct expenses that were paid by P3 loans,â Wilson said. âIt sent shockwaves through our community. “
Bennett Minton, an Oregon Tax Fairness volunteer who advocates for progressive tax policies, has been one of the opponents of the tax break. Minton said in written testimony that although canceled loans are generally treated as income, “as an incentive for recipients to pay employees and other expenses to support the economy, it is rational policy. “.
Minton cited information from legislature economists that 83% of paycheck protection loans in Oregon were as low as $ 100,000, but most of the value of the loans – 74% – came out within 17%. remaining loans. âThe richest companies got the biggest loans and should enjoy huge tax breaks,â Minton wrote. If lawmakers were to “hand out half a billion dollars, (they) would have to do it on the basis of fairness principles, not a special interest provision initiated by lobbyists in Washington,” Minton wrote.
In December, The Oregonian / OregonLive reported that nearly a third of the $ 7 billion that Oregon businesses received through the Paycheck Protection Program at that time went to 1,054 businesses that represent only 1.6% of recipients of state loans. In March, the news agency’s parent company announced it would be looking for money under the program.
In an interview last week, Senator Ginny Burdick, a Democrat from Portland who chairs the Senate Finance and Revenue Committee, said the big May revenue forecast cited by lobbyist Oregon Business & Industry was the hit. fatal to change to reduce tax relief. âThe forecast killed that,â Burdick said. âThis is not a good policy. But it was difficult to justify it (change it).
The actual magnitude of the tax cut could change significantly, as economists worked with incomplete information when they generated the estimate of income losses in May: around 40% of loan recipients did not have still requested cancellation, said economist Kaitlyn Harger.
Not all Oregonians who have received federal pandemic assistance receive state tax relief. After lawmakers on both sides expressed interest in addressing a $ 300 million personal income tax hike primarily to low and moderate income earners linked to their receipt of federal stimulus payments, The Oregonian / OregonLive reported that Democrats abandoned this plan in the past few days. of the session.
–Hillary Borrud; [email protected]; @hborrud
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