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Rep.
Richardson's March 9, 2007 Update
Hats off to Oregon’s Big Corporations
I have just returned from the House Floor after voting to create Oregon’s new Rainy Day Fund. It has been a strange and wonderful day.After a week of meetings, negotiations and “shuttle diplomacy” between the House Republican and Democrat caucuses, we finally reached a revised agreement acceptable to the majority of Legislators on both side of the aisle. Reaching this agreement was not easy. In last week’s newsletter I described the Legislative Rainy Day Fund—Corporate Kicker Agreement. We had a deal that was attractive to me because (1.) it created a permanent Rainy Day Fund, which could not be reached without an economic recession plus a 3/5 “super-majority” vote of both the Oregon House and Senate; and (2.) it doubled the size of an estate before a family would be subject to the devastation of death taxes. As with any negotiated agreement there were parts I did not like, such as increasing the Corporate Minimum Tax and funding the Rainy Day Fund with Corporate Kicker money, which is nothing more than an over-payment of income taxes. Nevertheless, last week’s Agreement was negotiated in good faith, and the House Republicans and Democrats were determined to honor it. Thankfully, before the Agreement could be implemented, potential negative consequences surfaced in the proposed adjustments to the Corporate Minimum Tax (CMT) portion of the Agreement. The CMT was designed to capture a “minimum” tax from multi-state and multi-national corporations that might generate more than $25 million in Oregon sales, yet pay only $10 in Oregon corporate tax. To do so, the proposed CMT was to calculate the minimum tax based on gross sales of “C” corporations. This “anti-Enron” provision sounded reasonable when it was being negotiated as part of last week’s Agreement, but since then we have learned of potential unintended consequences. For example, a wheat co-op in eastern Oregon sells grain for its members. It passes the sales receipts through to its members after keeping only a small administration fee to pay for its services. With the proposed sliding scale CMT, it would have become liable for a tax that was greater than the association’s entire income. Another example came from a fast growing Internet-based Oregon company. It employs 75 workers, and although its 2006 sales totaled nearly $18 million, almost all of its income was consumed by costs or plowed back into the business itself. Since sales without consideration to profitability was the determining factor in the proposed CMT, this business and many others would have suffered substantial harm from the well-intended reforms to the Corporate Minimum Tax. Therefore, the Corporate Minimum Tax was peeled out of last week’s Rainy Day Fund-Corporate Kicker Agreement. Sadly for Oregon’s small farm and business owners, the increased Inheritance Taxation Exemption provision was also removed. Taxation issues are complex and changes in tax policy inevitably results in financial winners and losers. It became obvious, that complex taxation reform decisions should not be made without public debate and public hearings. Therefore, the taxation provisions of the Agreement needed more thorough consideration before coming to a vote. When substantial provisions of an agreement are changed, it nullifies the agreement. Once the Corporate Minimum Tax and Inheritance Tax Exemption issues were removed from the Agreement, we were back to square one. Both the House Republicans and Democrats had a decision to make. Do we scrub the entire Legislative Rainy Day Fund—Corporate Kicker Agreement, because the two tax provisions were not ready to go forward, or do we continue negotiating? The two remaining issues were (1.) the creation of the Rainy Day Fund, and (2.) the placement of some part of the Corporate Kicker in it as seed money. Creating the Rainy Day Fund was something our Republican caucus had promoted for years. It was easy for me to support the Rainy Day Fund due to the careful “side boards” placed on it during prior negotiations, it could not easily become a legislative slush fund. It also was drafted to receive 1% of the state general fund revenue from the ending balance of each biennial budget. Agreeing to deposit into the Rainy Day Fund a part of this year’s Corporate Kicker required closer consideration. I am a fiscal conservative. One of my duties as a citizens’ representative here in Salem is to ensure our tax dollars are spent efficiently, effectively and economically. To me a fiscal conservative is someone who understands that every dollar spent by government is money extracted from the wallet or bank account of some citizen--private, corporate or otherwise. Taxes are not charitable contributions. I remember once reading a U.S. Supreme Court case which described “taxation” as “compulsory exactations.” Some may pay out of civic duty, but until today, I had never seen a person or organization that paid more than the minimum required. (Nevertheless, as you will see below, miracles happen.) In deciding whether or not to vote for House Bill 2707, we tax conscious fiscal conservatives faced a dilemma. If we withdrew from the negotiations, Oregon would lose its Rainy Day Fund, and, eventually, all Oregon corporations would lose their tax over-payments (“Corporate Kickers”). On the other hand, if we worked out a new agreement, we would be able to protect the Corporate Kickers of more than 10,000 of Oregon’s smaller corporations ($24.8 million), while funding the Rainy Day Fund with the Corporate Kickers of only 1500 of Oregon’s big corporations ($290 million). The problem was, no matter how one might spin it, diverting $290 million from Oregon’s corporations, even if only a one-time Corporate Kicker transfer, still looked like a tax by another name. Fortunately, our dilemma was resolved by large corporations themselves. Attached is a letter of instructions they sent via the Democrat Majority Leader, Dave Hunt. This letter instructed the Legislature to adopt House Bill 2707 and fund the Rainy Day Fund with their Corporate Kickers. It was signed by several of Oregon’s largest and most well-respected business associations:
These organizations represent the vast majority of Corporate Kicker money that would be diverted to the new Rainy Day Fund. Specifically, their letter instructed us fiscal conservatives as follows:
Sincerely,
Representative Brian Boquist (R-Dallas) was born and raised on a dairy farm in Tillamook and has been an Oregonian his entire life. He and his wife, Peggy, now live on a farm in Dallas, Oregon with their six children.At 17 he enlisted in the US Army, and now at 48 is a Reserve Special Forces Lieutenant Colonel. In 2005, Representative Boquist served as the Deputy Commander and Chief of Staff of the Combined Joint Special Operations Task Force in Iraq for seven months. At the close of his tour, Brian Boquist received the Bronze Star Medal and was recommended for immediate promotion to full Colonel by his commanders. After receiving a B.S. in Social Science and Business Administration at Western Oregon State College, he earned an MBA from Oregon State University in Corvallis. With the life experience gained in the military, and the education he received, today Brian Boquist is the Executive Vice president and partner of International Charter Inc. of Oregon, an international aviation and transportation small business located in Salem. Currently he serves on the House Agriculture and Natural Resources Committee and the House Veterans Affairs Committee. |
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