Exporting tax benefits.

Byline: The Register-Guard

Oregon's minimum corporate income tax appears likely to remain at $10, the same amount as in 1931.

Support for tax increases of any kind has been weak during this legislative session, and it has grown weaker with a brightening revenue forecast. Yet legislators ought to examine corporate taxes as a matter of fairness - if an increase isn't needed for a particular purpose, proceeds could be used to provide tax relief to deserving Oregonians.

Over the course of recent decades, Oregon's tax burden has shifted markedly from businesses to individuals. Without an increase in the minimum, corporations will pay 4.5 percent of Oregon's income tax in the 2007-09 budget period. In the 1973-75 biennium, their share was 18.5 percent. Businesses' share of local property taxes also has declined, to about 40 percent from its earlier level of 50 percent. Personal income tax payers and homeowners have picked up the burden.

Opponents of taxes on businesses argue that corporations don't really pay any taxes. Taxes are passed on to customers like any other expense, resulting in higher prices for goods and services - the equivalent of an indirect tax increase on individuals.

Even legislators who believe corporations would pass 100 percent of any tax increase to their customers should ask who those customers are. If the corporation paying the tax has customers outside Oregon, part of the state's tax burden would be exported. Instead, the benefits of Oregon's low business taxes are enjoyed by many people and businesses beyond the state's borders.

Other states, meanwhile, are taxing their businesses and exporting the burden to Oregon. According to the business-backed Council on State Taxation, in the 2005 fiscal year business taxes amounted to 3.8 percent of Oregon's gross state product - the total output of goods and services. The percentage was lower in only three states: Delaware, North Carolina and Virginia. Business taxes accounted for 4.3 percent of GSP in Idaho, 4.8 percent in California and 5.8 percent in Washington state.

These figures suggest that when businesses roll taxes into the price of their products, Oregonians pay these pass-through taxes to support public services in other states at relatively high rates. Oregon businesses' out-of-state customers reciprocate at a lower level, and get a price break at Oregonians' expense.

Many of the 23,000 Oregon corporations that paid the $10 minimum income tax last year had little or no profit to tax. Yet a family of four with a poverty-level income of $20,615 last year paid $319 in Oregon personal income taxes. If it's good state policy to have a light to nonexistent tax burden on unprofitable enterprises, the state should also refrain from taxing poverty-level personal incomes. Meanwhile, The Oregonian reported that 26 corporations with profits of $1 million or more paid the $10 minimum tax.

Business lobbyists in Salem say their clients already have done their part by forgoing kicker tax rebates to help fund a budgetary reserve account - although most of the $309 million in refunds would have gone out of state, as occurs with the benefits of low state business taxes. They also argue that the state has sufficient income at current tax rates to fund public services.

Oregon, however, could put proceeds from a higher corporate minimum income tax to good use by strengthening services ranging from higher education to health care. Failing that, the need to bring greater balance and fairness to the state tax system remains.

Individuals are carrying too large a share of the burden of taxation - and too many of those who benefit live far from Oregon.