Measure 118 – A Costly Tax for All!

In November, Oregon voters have an opportunity to weigh in on Measure 118 (formerly Initiative Petition 17 or “IP-17” aka “The Oregon Rebate”), an effort that would add a 3% gross receipts tax on businesses with annual Oregon sales of more than $25 million. Measure 118 is simply not what supporters claim it to be and would lead to additional inflation and gravely impact the competitiveness of Oregon businesses.

Gross receipt taxes are some of the poorest forms of tax policy because they tax sales, rather than profits, which makes it difficult for low-margin businesses like grocery stores to remain profitable, inevitably forcing price increases. Other entities that would be impacted by the 3% tax would include power and gas utilities, auto dealers, insurance companies, healthcare providers, and large gas stations.

According to The Tax Foundation’s report, “Proponents of [Measure 118] want to use the revenue from the tax increase to fund an annual rebate check, which they estimate at $750 per person on the assumption that the tax will raise at least $3 billion in additional revenue. That might sound good. But if it raises the cost of goods, drives jobs and economic activity out of state, and puts Oregon-based businesses at a massive disadvantage with their out-of-state competitors, it’s likely to be an awful deal for Oregonians.”

Presently the 2024 Business Tax Climate Index ranks Oregon 28^th for overall taxes. Should Measure 118 get approved by voters, the Tax Foundation expects Oregon to be on their list of the “10 Worst Business Tax Climates”. Additionally, it would make Oregon the only state with two gross receipts taxes (the other being the .57% Corporate Activities Tax).

Also concerning is the fact that this type of taxation compounds as the effective tax rate on products can be much higher than the statutory rate would suggest. Every business within the supply chain of delivering a product to the consumer would be taxed when sales exceed the $25 million mark. This compounding effect means the tax could grow to 3-5 times through a product’s lifecycle as it moves through the supply chain on its way to consumers.

Oregon Business and Industry (OBI), a business advocacy organization, has referred to this petition as “A Blank Check for Salem Politicians” because once approved by voters, the funds can be diverted away by majority vote of the Legislature – from households to other political priorities – as allowed by the Oregon Constitution.

Should the tax be approved by a majority vote EDCO’s work to help businesses “Move, Start and Grow” will have a new headwind, which is why we’ve joined Oregon Business and Industry, the Bend Chamber of Commerce and many, many others in their opposition of Measure 118 and are embarking on an educational campaign to inform stakeholders, partners and members beginning with this newsletter post.

EDCO is an advocate for businesses and will always oppose policies that impede business growth. The EDCO team remains dedicated to keeping stakeholders informed and engaged as complex issues like these arise. We ask that you take some time to learn about the potential effects of Measure 118 and, as always, we are open to discussing this in greater detail as interested. If you would like to join the growing coalition opposing this initiative click here.