Equity Alliance Oregon

By John Calhoun

When it comes to their support of the $150 million tax cut proposed by Sen. Larry George, The Oregonian editorial board has one thing right: The idea of protecting small business is rhetorically very powerful. So powerful, in fact, that it gets used to cover up policies that are otherwise politically toxic, like big tax cuts for the already wealthy (“Legislature at a crossroads on small business issues”).

As business owners, we at Equity Alliance Oregon also support the goal of helping small businesses. That’s why we support increased funding for the critical services that help small businesses thrive: education and basic infrastructure. And that’s why we oppose big tax cuts, like this one, that only benefit the wealthy few and require cuts to important services.

Make no mistake, the taxpayers who will primarily benefit from this proposal are individuals in the top 1 percent. The major beneficiaries aren’t the owners of software startups or your local auto body shop; the largest beneficiaries will be people like wealthy lawyers, accountants and doctors. They’ll certainly enjoy getting a few thousand unexpected dollars in new tax breaks, but that money won’t be spent adding jobs or investing in our economy.

We sympathize with the goal of reducing the gap between the tax rates that small businesses pay and the lower rates paid by larger corporations. However, this tax cut is counterproductive for a host of reasons. Aside from the fiscal problems of this proposal, there’s a consideration of fairness here. This bill would mean that wealthy business owners would pay a lower tax rate than their employees. That is fundamentally unfair, and this proposal should be rejected on that basis alone.

But it gets worse. If left unchecked, this proposal could quickly balloon out of control, costing middle-class taxpayers far more than its proponents have advertised. Wealthy individuals would shift income into entities that receive the tax discount, and the hit to state revenue would balloon above the current estimate.

Furthermore, it doesn’t really address helping “small business.” Under this proposal, a “small business” owner with a profit of $250,000 would get a tax cut of around $5,000. That’s not enough to hire even a single employee. Even for an owner earning $1 million per year, the tax cut would be around $25,000. That’s maybe enough to hire a clerk, but that’s about it. This is hardly a job-creating stimulus.

If someone has an income of more than $1 million, or even a quarter of a million dollars, how can we justify giving him or her a tax break that a carpenter, police officer or secretary can’t qualify for?

Finally, it’s important to note that the vast majority of small-business owners do not make anywhere near these income levels. The proponents of this bill appear to be conflating company profits with revenue, and also not acknowledging that most businesses have multiple owners.

When we talk about numbers like $250,000, that’s a single owner’s share of the company’s income after all expenses (labor, rent, supplies, etc.) are paid. At that income level, such a “small-business owner” would be in the wealthiest 1 percent, and is probably running a large, multimillion-dollar business.

If you’ve paid any amount of attention to income distribution trends over the past several years, you’ll know that these lucky few at the top aren’t the ones most in need of help.

If we truly want to create a state where small businesses can thrive, we need to focus on investing in what matters — funding K-12 classrooms, higher education and basic infrastructure — not handing out more tax cuts to the already wealthy.

John Calhoun is a co-founder of Equity Alliance Oregon.

The Equity Alliance of Oregon is a group of business owners and business leaders who believe that Oregon’s ongoing prosperity is tied directly to the strength of the middle class and providing real economic opportunities for all Oregonians. We support House Bill 2456 and strongly urge a Yes vote on this bill.

Most of the members of the Equity Alliance will see our taxes go up as a result of the cap on tax deductions for upper-income taxpayers. Everyone should remember that upper-income taxpayers receive the bulk of the benefit from tax deductions today. HB 2456 will partially reduce that preference.

Most importantly, as business leaders, we know that you can’t remain successful if you’re giving away more money than you spend investing in your future. Nothing is more important to the state’s economic health (and the success of every business and family who lives here) than a quality education system, from pre-K through university.

And yet, right now, the state of Oregon is doing a pretty poor job of fostering that education system. Our K-12 classrooms are unacceptably overcrowded. We have one of the shortest school years. State funding of colleges is dwindling, and tuitions are skyrocketing. On many campuses, it’s a struggle just to keep the lights on, let alone provide a quality education for our next generation of leaders.

Over all, Oregon is expected to give away more than $36 billion in tax breaks over the next two years, much of that going to corporations and wealthy households that don’t need the additional help. By finding ways to slow the growth of these tax expenditures, we can redirect those funds into our shared priorities—like investing in our education system so that Oregon will have the highly educated workforce we need to attract businesses to the state.

By lifting the corporate minimum cap on large corporations, we can generate around $50 million for our schools and priority services.  Not only will that free up needed money, it will also correct a deep flaw in our corporate minimum tax. Right now, the cap on the corporate minimum tax means that the very largest corporations doing business here get a tax break that isn’t available to smaller businesses. It’s specifically designed to benefit the biggest corporations at the expense of small businesses. That’s unfair and needs to be fixed.

Additionally, we’re fully in support of the provision in HB 2456 that’s designed to recoup tax dollars hidden in offshore tax shelters. This is a no-brainer, and anyone who opposes it should frankly be embarrassed.

HB 2456 won’t solve all of our state’s problems, but it will help to provide some of the revenue needed to help us reinvest in these key priorities, and it does that by asking for a little bit of help from those of us at the upper end of the income scale.

The business leaders of the Equity Alliance appreciate the work that many members of the House have done so far to close tax loopholes, and we’d strongly urge you to consider much bigger proposals that will fund our schools and make the tax system more fair for everyone.

Sincerely,

Equity Alliance Oregon
equityallianceoregon.com

Chair Barnhart and members of the committee,

Thank you for allowing me to speak today in support of House Bill 2456. My name is Anna Geller, and I’m the owner of an Oregon based Subchapter S corporation – Geller Silvis & Associates, – and a managing member of several LLCs.

I’m here today on behalf of myself and the Equity Alliance of Oregon, which is a group of business owners and business leaders who believe that Oregon’s ongoing prosperity is tied directly to the strength of its middle class and to providing real economic opportunities for all Oregonians.

We’d like to applaud this committee for beginning the critical work of looking for effective ways to rein in some of the billions of dollars Oregon gives away in tax breaks.. Oregonians expect their legislators to be good stewards of tax dollars, and that should apply just as much to the money we give away through the tax code  as it does to the money we spend on schools and infrastructure.

Over all, Oregon is expected to give away more than $36 billion in tax breaks over the next two years, much of that going to corporations and wealthy households that don’t need the additional help. By finding ways to slow the growth of these tax expenditures, we can redirect those funds into our shared priorities—like investing in our education system so that Oregon will have the highly educated workforce we need to attract businesses to the state.

HB 2456 is a modest step in the right direction. In particular, I’d like to speak in support of the provision that caps personal income tax deductions for wealthy households. For the Equity Alliance, this proposal is a common sense approach to the problem. Most of the members of the Equity Alliance will see our taxes go up as a result of this revenue package. But as business leaders, we know that you can’t remain successful if you’re give away more money than you invest in your future. We believe all businesses will prosper when Oregon has the revenue to invest more in education and can grow a stronger, even more skilled, local workforce.

For Oregon, that means investing in our K-12 schools, so that we no longer have the third largest class sizes in the country. It means investing in higher education, so that a college education is actually attainable for the kids of middle-class families, and so that emerging businesses will see partnership opportunities. And it means investing in the basic infrastructure that businesses need in order to create and distribute their products.

HB 2456 won’t solve all of our state’s problems, but it will help to provide some of the revenue needed to help us reinvest in these key priorities, and it does that by asking for a little bit of help from those of us at the upper end of the income scale. This measure preserves tax deductions for the middle-class families who actually need them. But it caps them for those at the very top, who’ve continued to do well even through the ongoing economic crisis. The Equity Alliance believes this is a fair and modest proposal that will eventually benefit everyone

We understand that some charitable organizations are naturally concerned about whether this cap on deductions for wealthy donors would cause them to reduce their donations.  As individuals who would see our taxes go up as a result of this bill, we’d like to tell you that these concerns are mostly unfounded. The bill is designed to only apply to those at the very top levels of income, and it’s phased in to lessen the impact. For instance, a taxpayer with $750,000 in adjusted gross income—that’s more than 16 times the state’s median household income, by the way—would see her taxes go up by just $2,677. In our view, that is not a sufficient amount of money to cause a dedicated donor to change their support of a valued charity.  For someone with three quarters of a million dollars in annual income this is just not a lot of money.

But here’s the biggest reason why this bill won’t affect charitable giving: To the extent that deduction rates influence philanthropic actions, it’s at the federal level. This measure in no way changes the generous federal deductions that wealthy individuals can take that might influence behavior.

In closing, I and the members of the Equity Alliance believe that legislators can and should do much more to raise revenue to actually fund education. HB 2456 is a fair and modest  start towards that goal, but we must do much, much more to find real dollars to invest in our future.

Chair Barnhart and members of the committee,

My name is John Calhoun. I’m an entrepreneur and investor. I am currently CEO of InsideValuation Partners and I’m also the co-chair of the Equity Alliance of Oregon, which is a group of business owners and business leaders who believe that Oregon’s ongoing prosperity is tied directly to the strength of the middle class and providing real economic opportunities for all Oregonians.

As business leaders, we know that nothing is more important to the state’s economic health (and the success of every business and family who lives here) than a quality education system, from pre-K through university. And yet, right now, the state of Oregon is doing a pretty poor job of fostering that education system. Our K-12 classrooms are unacceptably overcrowded. We have one of the shortest school years. State funding of colleges is dwindling, and tuitions are skyrocketing. On many campuses, it’s a struggle just to keep the lights on, let alone provide a quality education for our next generation of leaders.

Oregon needs to do much, much more to invest in our schools. In particular, we believe that Oregon could do much more to make sure that the largest corporations are contributing to our state’s priorities. HB 2456 is a good step in the right direction.

Right now, Oregon is tied for the lowest state and local business tax burden in the entire country. We’ve spent many years in the bottom five of this list, and now we’re at the very bottom. This is from a report by the Council on State Taxation, conducted by Ernst & Young.

I want to give you some perspective about just how low corporate taxes are in Oregon. To just get to the national average business tax burden, we’d need to raise state and local business taxes by $2.5 billion. That would be a 43% increase. If we wanted to match Washington’s business tax burden so that we’re even with our closest economic neighbors, we’d need to raise state and local business taxes by $3.4 billion—a 57% increase.

HB 2456 offers a far more modest proposal. By lifting the corporate minimum cap on corporations with more than $100 million in gross revenue, we can generate around $50 million for our schools and priority services.

Not only will that free up needed money, it will also correct a deep flaw in our corporate minimum tax. Right now, the cap on the corporate minimum tax means that the very largest corporations doing business here get a tax break that isn’t available to smaller businesses. It’s specifically designed to benefit the biggest corporations at the expense of small businesses. That’s unfair and needs to be fixed.

We believe that legislators can and should go much farther with regard to corporate taxes, specifically on C-corps. Here are a couple of ideas:

Increase the minimum tax on C-corp sales from 0.1% to 0.4% which is closer to Washington’s Business & Occupation tax rate. This would generate hundreds of millions of dollars—if not more—for our schools and infrastructure, and no one could claim that we’re worse than Washington.

Another idea is to restructure our C-corp tax rates to mirror personal income tax rates. There’s no reason why C-corps should have a dramatically lower tax rate (6.6%) than individuals or most small businesses. The way our tax system is currently designed, the largest corporations enjoy a lower tax rate, and small businesses have to shoulder more of the burden. Adjusting the C-corp rate to mirror the personal income tax rates would be fairer and it would raise approximately $365 million.

Additionally, I’d also like to add that we’re fully in support of the provision in HB 2456 that’s designed to recoup tax dollars hidden in offshore tax shelters. Oregon should play no part in abetting deadbeats who are trying to avoid payment of legitimate taxes.

In closing, I’d to reiterate that the business leaders of the Equity Alliance appreciate the work you’ve done so far to close tax loopholes, and we’d strongly urge you to consider much bigger proposals that will fund our schools and make the tax system more fair for everyone.

Chair Barnhart and Members of the Committee,

My name is John Calhoun and I am a resident of Portland.  I am here representing the Equity Alliance of Oregon. Equity Alliance Oregon is a group of business owners and business leaders who believe that Oregon’s ongoing prosperity is tied directly to the strength of the middle class and providing real economic opportunities for all Oregonians.

I am here in support of House Blll 3433 because the law deferring capital gains taxes on property is not only a tax deferral, but in many cases a tax loophole for the wealthy.  There is a saying in public finance that a tax deferred is a tax avoided. That is certainly the case for like-kind exchanges.  Not only can the taxes be deferred indefinitely by continuing investment in property, but by exchanging the property for property in states like Washington that do not have capital gains and income taxes, the tax can be avoided.  Just as important this is a benefit limited to wealthy property owners and a special class of investors.

I assume that all of you on this panel believe that the state should encourage businesses and individuals to invest in businesses that grow jobs.  Yet I as an angel investor and entrepreneur making the classic job creating investments do not get the same tax deferral on my investments when I sell them and invest in a new business as those who own raw land and trade it for other property even if it didn’t create a single job in the process. Why should this state tax one investor’s capital gains, but not another’s? The only justifiable policy reason I can think of is to encourage investments in risky enterprises that are likely to provide wider social benefit primarily in job creation. That is not the typical case here.

It is hard to believe that the current tax benefit for property owners would be created if you were starting a tax system from scratch. If you would not design it in, why not design it out.

Tax breaks like like-kind exchanges have gotten into the law to benefit a small class of wealthy individuals and businesses at the expense of the broader population, even the broader business community. As many of you know tax expenditures like this have grown much faster than our revenue and as a result we keep cutting our education resources and investments in other basic infrastructure.  It is time to start taking back some of these tax benefits and using them to either provide broader tax relief for all tax payers or investing the revenue in the infrastructure that we need to operate a modern economy.  As a businessman I know that a well-educated workforce, good transportation and communication systems, and a functioning legal system are necessary to have businesses flourish. Unless we start limiting these special interest tax expenditures we will continue to damage our ability to compete in the global economy.

Thank you for your time.

Chair Barnhart and Members of the Committee,

Thank you for allowing us to testify today. Equity Alliance Oregon is a group of business owners and business leaders who believe that Oregon’s ongoing prosperity is tied directly to the strength of the middle class and providing real economic opportunities for all Oregonians.

We’re here to support House Bill 3433, which closes the loophole that allows like-kind exchanges of property to happen tax-free. In particular, we believe that this loophole should be closed for transactions where one of the parties exists out of state, since the value of that transaction will likely never be taxed in Oregon.

This loophole represents a potentially huge tax break for owners of large properties, and it doesn’t make sense to protect it while we’re still cutting school days and threatening cuts to senior services.

Closing this loophole is a step in the right direction toward making sure that the tax code isn’t skewed to disproportionately benefit big corporations and the wealthy few.

As business leaders, we believe that tax breaks for wealthy corporations and individuals diminish needed tax revenue and are not effective in strengthening the economy.

A recent report by the Congressional Research Service showed that tax cuts don’t do much for job creation—certainly not on a macro level. But what tax cuts do is widen the gap between the very wealthy and the middle-class, and damage the economy.

For businesses to thrive, we need strong schools and well-funded infrastructure, not tax breaks and gimmicks.

The Equity Alliance Oregon applauds this committee for continuing to find ways to get rid of tax breaks that don’t work or only benefit the wealthy few, and for finding ways to fund what matters.

Thank you again for allowing us to testify in support of this important bill.

There are two parts to this measure, and they would both harm the schools and services Oregon businesses depend on.

We oppose the elimination of Oregon’s estate tax, because it would force hundreds of millions in cuts every two years to schools and basic infrastructure, while providing a tax benefit for only a small handful of wealthy households.

In addition, we’re even more concerned about a stealth clause in Measure 84 that will create a giant new loophole that would allow the richest households to avoid paying any capital gains taxes.

The chief sponsors have said explicitly that their intent is to eliminate these capital gains taxes.

By banning taxes on “intra-family property transfers,” this new scheme would allow wealthy individuals to sell assets to a family member, and the family member could turn around and sell it to a third party for the same price—and they’d never pay a dime in taxes on this big capital gain.

Capital gains taxes bring in around $800 million every two years to pay for schools, health care, and public safety. Most of those funds could be jeopardized by Measure 84. That’s the equivalent of losing nearly 4,800 teachers.

Businesses depend on educated students and a strong middle class, but we’re damaging those things by our lack of investment in schools, courts, and infrastructure. We need to invest, not give away a loophole that allows the richest 2 percent to avoid paying capital gains taxes.

Please join us in Voting NO on Measure 84.

Equity Alliance Oregon

John A. Calhoun, Entrepreneur

Roger Johnson, Investment Advisor

Brendan Barnicle, Investor

Robert Stoll, Lawyer

Richard B. Solomon, CPA

Jim McDermott, Attorney/Business Litigation

Anna Geller, Real Estate & Community Development

The Corporate Kicker is random, arbitrary, and unfair.

The kicker is entirely unpredictable, which means the Corporate Kicker has never factored into any business’s investment decisions. In fact, investors are more likely to avoid Oregon because of the revenue instability caused by the kicker, which damages K-12 schools.

Because 80% of the kicker funds go to big corporations headquartered outside of Oregon, this policy penalizes smaller Oregon-based businesses, who receive little if any benefit from the kicker when it is triggered. Oregon-based businesses are actually hurt by the instability in school funding caused by the kicker.

According to a recent study by Ernst and Young for the Council On State Taxation [http://www.cost.org/], Oregon already has the lowest business taxes in the U.S. Businesses depend on educated students and a strong middle class, but we’re damaging those things by our lack of investment in schools, courts, and infrastructure. We need to invest, not cut business taxes further.

As business leaders, we know that Oregon needs to reinvest in education in order to help businesses thrive. That’s why we’re backing a Yes vote on Measure 85, the Corporate Kicker for K-12 initiative. It’s the right thing to do for our schools and for our economy, and it’s the best way to start the conversation about our future.

Please join us in Voting Yes on Measure 85.

 Equity Alliance of Oregon

 John A. Calhoun, Entrepreneur

Roger Johnson, Investment Advisor

Brendan Barnicle, Investor

Robert Stoll, Lawyer

Richard B. Solomon, CPA

Jim McDermott, Attorney/Business Litigation

Anna Geller, Real Estate & Community Development