League of Women Voters omitted facts on taxes.

Byline: GUEST VIEWPOINT By Don Richey For The Register-Guard

A big headline in the May 22 Register-Guard stated `Know the facts before talking taxes," and below it was a guest viewpoint that purportedly aimed to dispel some myths regarding revenues and spending by the state of Oregon. As a former tax accountant the headline garnered my interest, because there seems to be a great deal of ignorance regarding corporate income taxes, particularly among so-called `progressives.'

Imagine my chagrin when I discovered that the authors had only perpetuated that ignorance by suspiciously omitting relevant factual information. Rather than dispelling myths, the single purpose of the authors was to advocate for higher taxes in Oregon. My limited understanding is that the League of Women Voters' mission is to inform voters, but I had no idea the group did it in such an unbalanced manner.

In their piece, Janet Calvert and Kappy Eaton remarked, `Two-thirds of Oregon corporations pay the minimum income tax of $10 annually.' Reading that, many folks would believe that most corporations don't pay state income taxes. The fact is, all taxable corporate profits are taxed. Is anyone so gullible as to think that the government would allow otherwise? Of course, if there is no profit, there is no tax - and why should there be?

Allow me to shed some light on this subject.

There are numerous forms of corporations. Two are the basic `for profit' type that are subject to taxation - the `S corporation' and the `C corporation." These names relate to the section of Internal Revenue Code that pertains to them.

Now, there are two reasons why a corporation would pay only the $10 minimum Oregon income tax. Either it is an S corporation (small, and usually family owned), or it is a C corporation (the bigger boys) that did not make a taxable profit.

In the case of an S corporation, all profits (or losses) are `passed through' to the shareholders via a K-1 form (similar to the W-2 form used for wage and salary income). Shareholders then report that income and pay the federal and state income taxes on their individual tax returns. For this reason, S corporations pay only a $10 `excise' tax when filing their Oregon corporate income tax return. The bulk of that `two-thirds' figure mentioned by Calvert and Eaton as paying the minimum corporate tax are S corporations.

C corporations, on the other hand, pay through the nose. The federal tax rate begins at 15 percent on the first $50,000 of profit and escalates to 39 percent. Oregon assesses a flat tax of 6.6 percent on all taxable profit of C corporations.

There are other types of corporations, but I won't add to the confusion - other than to say that nonprofit corporations such as the League of Women Voters don't even pay $10 per year to the state coffers.

Aside from all that, corporations contribute much more to a healthy state economy than a relatively small amount of income taxes, mostly in the form of jobs. We would do well to remember that.

Calvert and Eaton stated that taxation in Oregon allegedly ranks 46th in the nation, making Oregon a low-tax state with correspondingly low revenues. Spending tells a whole different story, and Oregon spends money like a drunken sailor.

Between 1992 and 2000, Oregon spending grew by almost 70 percent. Oregon now ranks sixth in the nation in per-capita spending, which means that only five other states spend more than we do.

That money doesn't come from the tooth fairy. It comes from myriad large and small taxes, user fees, the lottery and federal tax revenues, which is all simply progressive lingo for hidden taxes.

Next time you hear anyone from the League of Women Voters talking taxes, you had better check the facts and keep one hand on your wallet.

Don Richey of Eugene is a corporate controller and a former IRS agent.