Oregon Initiative Petition 28: The Threat to Oregon’s Tax Climate

Initiative Petition 28 (IP28) would establish a new gross receipts tax on Oregon corporations. The new tax would charge firms 2.5 percent for all sales in excess of $25 million. If passed, the tax would raise an estimated $5 billion per biennium, a 440 percent increase in Oregon corporate income tax collections. Gross receipts taxes result in tax pyramiding, the process of taxes stacking on top of other taxes as goods are refined in the structure of production. Oregon would join just five other states in assessing a state-wide gross receipts tax, and Oregon’s version would be the most burdensome. It would be the highest rate in the country, save for the tax on radioactive waste in Washington, and the tax would not include provisions to limit its distortionary effects like in other states. The gross receipts tax proposed in IP28 is in addition to the corporate income tax, not a replacement. Oregon would fall from the 11th best to the 17th best ranking in the State Business Tax Climate Index, but its corporate tax structure would fall to 50th. Oregon’s corporate tax climate would be the worst in the nation.

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