The Economic Effects of M97

May 23, 2016

Oregon’s Legislative Revenue Office (LRO) released its much-anticipated report today on Measure 97 (M97). If adopted in November, M97 would raise the state’s minimum tax on large corporations to 2.5 percent of all Oregon-based sales in excess of $25 million.

More analysis from us will come, but a quick note that LRO’s analysis illustrates just how large the tax increase would be. LRO revised upwards its initial estimate of the revenue produced, from $5 billion to $6 billion per biennium. All told, this is a 25 percent increase in state tax revenue. The report also evaluates how Oregonians would be affected. Individuals would face higher tax burdens, higher costs, and lower after-tax income.

State and local per capita taxes would increase by $600. In other terms, an individual’s state-local tax burden would increase from 10.1 percent of personal income to 11.6 percent of personal income. This would rank Oregon 9th in the nation. LRO found that the higher tax burden would be regressive too. After-tax household income would fall for all household groups, but the largest effect would be for households with less than $48,000 in income. Those households would see personal income fall by 0.9%. The table below shows the projected effects for each household group:

After-Tax Household Income

Income Group

Change from Baseline

Percent Change from Baseline

Less than $21,000

-$372

-0.90%

$21,000 to $34,000

-$500

-0.90%

$34,000 to $48,000

-$563

-0.90%

$48,000 to $68,000

-$613

-0.80%

$68,000 to $103,000

-$751

-0.80%

$103,000 to $137,000

-$868

-0.70%

$137,000 to $206,000

-$1,063

-0.60%

Greater than $206,000

-$1,282

-0.40%

Consumers would bear much of the cost of the tax increase. LRO estimated that prices would increase by 1 percent, due to the tax pyramiding effects of a gross receipts tax.

In addition to higher prices and higher tax burdens, individuals would have fewer job opportunities. LRO predicts that 38,400 private sector jobs will be lost due to M97. Retail trade and wholesale trade would be the most affected. These two industries would lose 4.9 and 4.6 percent of their workforce respectively. Health services, manufacturing, and natural resources would also be particularly hard-hit. There would be more public sector jobs due to the tremendous amount of new revenue for the state, but on net, the state would lose 20,400 jobs, or 0.75 percent of all jobs.

Much of the debate in Oregon has focused on the hypothetical effects of M97. With this new LRO report, detailed effects are becoming clearer.

For more information on M97, click here.

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