As of February 1, the Oregon Legislative Assembly is back in session. Among the most talked about issues for the Legislature to tackle in the coming months will be the 2017-2019 state budget. Some legislators are only looking at the revenue side of the ledger for ways to balance the budget – others are looking at the cost side.
The Legislature’s task will be to judiciously weigh the cost of state expenditures with the ability of taxpayers to meet those needs. When your job is to spend taxpayer money (for the benefit of the state and its people), it’s easy to focus on these needs and to forget about the burden tax increases have on those who are paying them.
Consider the U.S. Small Business Administration’s most recent Oregon Small Business Profile report: The median income for individuals who were self-employed at their own incorporated business was $44,147 in 2015. That same year, the U.S. average was $49,804.
Approximately 75 percent of small businesses structure themselves as “pass-through entities,” i.e., the income they generate from their business passes through the business itself and becomes personal income, so the taxes they pay are calculated based on personal income tax rates and brackets, both at the state and federal level.
Knowing that half of Oregon entrepreneurs are bringing in less than $45,000 per year, and acknowledging that this is well under the national average, Oregon needs to recognize something important: Raising taxes on small businesses might help balance the budget, but taking a larger portion of the earnings of small businesses will not help grow the economy.
Clearly, the cost of government to Oregon taxpayers is increasing at a rate that is out-pacing economic growth. For those who find no fault in this scenario, the answer will always be to raise taxes, to take more from the earnings of taxpayers. This sends a dangerous message to both businesses and individuals – taxpayers must always meet the financial needs of government.
But for those who recognize that the role of government is to serve rather than to be served, that elected officials ought to take action in ways that emphasize the “service” part of “public service,” the answer will always be to contain the cost of government, to live within our means, and to take from others only when good stewardship is assured – and for the benefit of every taxpayer, not just the few.
Remember, good tax policy always starts with small business.
Anthony K. Smith
Oregon State Director