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The Facts of Oregon’s New Tax

Emotions run high on both sides of the campaign that ended Tuesday with a victory for the supporters of Measure 66 and 67.  Now the buzz is all about really trying to understand the new taxes.  How will the taxes affect you?  Everyone is talking about it, but misinformation seems to be the only common denominator.  Let’s talk about the facts and answer some of the misunderstanding about the new law.

Measure 66 increased the state income tax rate for households who have taxable income over $250,000 or individuals with taxable income over $125,000 from 9% to 10.8% plus a temporary bracket for those earning over $500,000 at 11%.  This tax is retroactive to 2009 so high income tax payers will have a tax bill that they didn’t plan for.

Business in Oregon is affected by Measure 67.  If you have a business entity of any kind except for sole proprietors, you will pay some additional tax.  The Oregon Center for Public Policy has created a flow chart that is the best I’ve found in making the tax implications to business clear.  The flow chart helps to bring clarity to the new taxes and who they will affect.

S Corporations, LLC’s and partnerships will pay $150 to file a tax return rather than $10.  They will continue to pay tax on the net business income on their personal tax returns.  The biggest misrepresentation of the campaign was that corporations only pay $10 in tax.  Of course anyone with common sense knows that this wasn’t true.  Business owners of S Corporations or LLC’s pay plenty of tax in Oregon.  Luckily if you have an S Corporation or an LLC this is the extent of your tax increase (unless your business income puts you in the “high income” category for personal taxes).  However, also tied to this legislation you will now pay $100 to renew your corporate filing each year rather than $50.

C Corporations are the ones who get hurt the most.  Corporations are designated with the IRS as either a “C Corp” or “S Corp.”  The difference is that a C Corporation pays tax as an entity rather than passing its taxable income to its owners.  If you are a C Corporation who has revenue over $500,000, even if you don’t have any profit, you will now pay a minimum tax of $500 and the tax increases as your revenues increase.  This will affect small and large companies in Oregon.