Oregon is a stunning state known for its gorgeous coastline and the significant perk of having no sales tax—a policy that’s been in place since a constitutional amendment in 1910.
Over the years, Oregonians have consistently rejected sales tax measures by a substantial margin, with proposals failing ten times by roughly 70 percent.
Historically, Oregon leaned heavily Republican in its voting patterns until 1984, with the exception of Franklin Roosevelt’s four terms during the Great Depression and World War II. However, as the state has shifted towards more liberal policies, this longstanding tax-free tradition is facing a serious challenge.
Introducing Measure 118
Oregon voters are now confronted with Measure 118, an unprecedented sales tax proposal that could lead to double-digit sales taxes due to its structure. The bill is presented as a tax on large corporations, a popular target for liberal and even some conservative voters. However, the reality is far more complex and potentially harmful to consumers.
The Mechanics of Measure 118
Measure 118 proposes a 3 percent tax on the gross revenues of large corporations. At a glance, this seems like a straightforward tax on big businesses. But the implications are far-reaching. Unlike income taxes, which are levied on profits, this gross receipts tax is imposed on total sales, regardless of profitability. This means that businesses will likely pass these costs onto consumers, effectively transforming it into a sales tax.
The Hidden Costs of Measure 118
The gross receipts tax will replace the current minimum tax with a significantly higher burden—potentially up to 600 percent more than the existing tax. This translates to an effective 37 percent corporate income tax rate, which is staggeringly high.
But it doesn’t stop there. The tax is applied at every stage of production and distribution, from manufacturing to retail. This means the same item could be taxed multiple times, a phenomenon known as tax pyramiding. As a result, the final cost to the consumer could be inflated considerably.
The Impact of Tax Pyramiding
Tax pyramiding occurs when multiple layers of tax are added throughout the supply chain, drastically increasing the final price of goods. In Washington state, for example, tax pyramiding has been estimated to create a tax burden 400 percent higher than the statutory rate. If Measure 118 passes in Oregon, consumers could face an effective tax rate of around 12 percent on many products.
Economic Consequences
The implementation of such a tax could drive businesses to relocate their operations outside of Oregon, negatively impacting the state’s economy. For those businesses that remain, the increased costs will likely be transferred to consumers, leading to higher prices across the board.
The Bottom Line
While Measure 118 is marketed as a way to raise funds for taxpayer rebates, promising checks of $1,600 per year, the underlying structure reveals significant drawbacks. The measure is essentially a disguised, highly aggressive sales tax that could burden consumers and hurt the economy. As enticing as the rebate checks might sound, the broader implications of Measure 118 warrant careful consideration.