This is part three of a four-part series discussing Measure 97 and recent analysis from the Oregon Legislative Revenue Office. Read parts one, two, and four.
In our previous posts, we discussed how the gross receipts tax Measure 97 (M97) would increase resident taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. burdens and consumer prices in Oregon if it is adopted by voters in November. But those aren’t the only economic consequences caused by this large tax increase, as recent data from the Legislative Revenue Office (LRO) show that the new tax would significantly impact job creation.
The LRO estimated how the labor market would be affected by the proposed gross receipts tax, predicting that 38,200 fewer jobs would be created between 2017 and 2022 due to M97.
The job losses would be concentrated in a few industries. LRO states “over half of the reduction in private sector employment growth is expected to occur in three sectors: retail trade, wholesale trade, and health services.” It makes sense that jobs in these industries are the most vulnerable, as they are high volume and low margin, making them subject to higher levels of tax pyramidingTax pyramiding occurs when the same final good or service is taxed multiple times along the production process. This yields vastly different effective tax rates depending on the length of the supply chain and disproportionately harms low-margin firms. Gross receipts taxes are a prime example of tax pyramiding in action. (see part one in our series here). Manufacturing and natural resources, along with other professional services, would also see job losses.
The table below highlights the projected job losses for these five industries and Oregon’s private sector as a whole:
|
Private Sector Employment Changes Due to M97 |
||
|
Employment Sector |
Jobs Lost from 2017-2022 |
Percent Change |
|
Private Sector |
-38,200 |
-1.6% |
|
Individual Sectors |
||
|
Retail Trade |
-13,600 |
-4.9% |
|
Wholesale Trade |
-4,700 |
-4.6% |
|
Health Services |
-3,500 |
-1.5% |
|
Other Services |
-10,600 |
-0.6% |
|
Manufacturing & Natural Resources |
-5,700 |
-1.2% |
Note: Numbers do not add due to rounding
The report does, however, note that not all sectors would lose jobs. Public sector employment would increase by 17,700, for administration of new and expanded government programs funded by the $6 billion in new biennial revenue. The LRO does caution that this number could change. “This estimate assumes the mix of public sector spending does not change. The growth in public sector employment would be influenced by the types of programs policy makers decide to expand with additional revenue.”
While employment will decrease, the LRO predicts that wages would increase in the aggregate. Wages would increase 0.4 percent by 2022, largely due to the mix of jobs lost and created. The LRO posits, “[T]he higher wage projection results partly from a shift from lower paid private sector jobs (particularly retail trade) to higher paying public sector jobs.” Public sector workers in Oregon, and nationally, make more than private sector workers.
In total, the LRO estimates that Oregon would lose 20,400 jobs due to M97, while wages would increase slightly. This should not be construed as a positive development. The net loss of jobs means fewer opportunities for workers, particularly lower-wage and lower-skill workers.
Be sure to read the other three installments in our four-part series on Oregon’s gross receipts taxA gross receipts tax, also known as a turnover tax, is applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding. initiative:
Oregon’s Gross Receipts Tax Proposal Would Increase Consumer Prices
Oregon’s Gross Receipts Tax Proposal Would Be the Largest Tax Increase on Residents in the State’s History
Oregon’s Gross Receipts Tax Would Be Regressive