If representatives of Oregon’s Department of Revenue were to offer one piece of advice for taxpayers this year hoping to discover a big refund or simply to get the bad news out of the way, it’s this:
Wait. At least until February.
“We know that there will be a lot of people eager to file, but the tax measures could make a difference on their return and delay receiving their refund,” said Steve Purkeypile, an analyst with the personal tax and compliance division.
The advice is as applicable to businesses as it is individuals, agreed Jeff Henderson, an analyst with the corporate policy and appeals unit.
On Jan. 26, Oregon voters cast their vote on two separate tax
measures (66 and 67) that affect businesses and some individuals. Depending on whom one talks to, the measures will either allow many state services to continue unaffected, kill every job in the state or (if the commercials are to be believed) permit intractable tax clerks to become unexplainably smug.
The measures were approved by the Oregon Legislature during its last session and activists seeking to stop them from becoming law collected enough signatures to put it before the voters.
Purkeypile and Henderson took time out of their schedules to depoliticize the measures and provide some clarity regarding the effects if the measures are approved and what it means for those preparing to file.
Measure 66 increases the tax rate on taxable income more than $250,000 for joint filers.
Currently, joint filers making more than $15,200 per year are taxed at a flat rate of 9 percent. If approved, the measure would create two new tax brackets for 2009-2011. Those making $250,000 to $500,000 would be taxed at a rate of 10.8 percent. Those making more than $500,000 in taxable income would be taxed at a rate of 11 percent.
In 2012, rates for all joint filers making $250,000 or more would fall to 9.9 percent.
“The measure also includes an exemption for unemployment compensation collected in 2009,” Purkeypile said.
The federal government approved a one-time federal exemption, which allows anyone collecting unemployment to receive the first $2,400 tax-free.
“Measure 66 will allow Oregon to match that exemption,” Purkeypile said.
If the measure passes, it is expected to affect about 2.5 percent of Oregon taxpayers – about 38,000 of the more than 1.5 million, according to state Legislative Revenue Office. The change is not expected to increase the personal income tax burden compared to other states.
Measure 67 would change both the tax rates and minimum taxes on corporations headquartered or doing business in Oregon.
C corporations are currently taxed at a rate of 6.6 percent regardless of the income level. Measure 67 would create a sliding scale. Corporations with less than $250,000 in taxable income would continue at the same 6.6 percent rate; the rate for businesses making more than $250,000 would increase to 7.9 percent for 2009-2010 and drop to 7.6 percent for 2011-2012.
Beginning in 2013, the rate for businesses making less than $10 million in taxable income would drop back to the 6.6 percent tax rate and businesses with more than $10 million in taxable income would continue to pay at the 7.6 percent rate.
“The part of the measure that will affect more businesses is the C corporation alternative minimum tax,” Henderson said.
The alternative minimum tax would also become a sliding scale with a minimum payment of $150 per year for businesses with less than $500,000 in Oregon sales.
Business most likely to be caught off guard are those claiming past losses on their current returns.
“In those cases, the alternative minimum tax will still apply to whatever their taxable income was for the year,” he said.
Minimum taxes on S corporations increase for $10 to $150 if the measure passes.
While nearly 80 percent of businesses can expect some change in their tax bills through 2012, the measure is only likely to affect about 160 businesses throughout the state after that date.
Where it all goes
The legislature approved the two tax increases to help close a $4 million budget gap along with budget cuts, federal stimulus money and additional money from the state reserves.
If passed, measures 66 and 67 would comprise about 18 percent of the total money used to fill in the budget hole – $27 million from the personal tax increase and $255 million from the business tax increase.
The potential revenue increases were not earmarked for specific purposes, but instead become part of the state’s general fund/lottery budget, money used to support education, human services and public safety.
If the measure isn’t approved by voters, many government services are bracing for substantial cuts.