On Monday night, House Bill 3427 passed along party lines in the Oregon Senate on an 18-11 vote. Known as the Student Success Act, it’s the largest K-12 funding package in the state’s history.
While business owners agree that the public education system is in dire need of investment, there are concerns that this new tax will have a negative effect on the economy and could hurt consumers.
“This is a pass-through bill,” said Travis Snyder, CEO of Precision Electric. “Business owners are going to be forced to pass this on to the customers, the cost of goods will go up. There is no way around it.”
Snyder isn’t alone in those thoughts. As one of the thousands of businesses expected to be affected by this new bill, Snyder and others are concerned about the financial implications and whether this was the right path to go down.
“I think time and time again history has proven to us throwing money at a problem doesn’t fix the problem,” he said.
While the bill is expected to bring in over one billion dollars each year through a tax on a company’s sales, it’s that exact tax on sales that many are worried about.
“Regardless whether you made one dollar, lost money, made some money, you’re getting taxed on gross sales,” said Matt Burkholder, CEO of Mercedes-Benz of Medford. “There’s no consideration for how much money the business actually makes.”
According to the non-partisan Legislative Revenue Office, the new tax will affect less than 10 percent of Oregon’s 460,000 businesses. Businesses like grocery, fuel and some healthcare and insurance companies will be exempt.
But others will have to face the .57 percent tax on sales over one million dollars.
“If you’re a business losing money and a tax is put on you, your demise is going to come quicker than it would have,” said Alan DeBoer, co-owner of Southern Oregon Subaru.
The former state senator is well aware of the potential risk. He says several of his businesses, all together, could pay upwards of half a million dollars in taxes. He says other car dealerships, especially in smaller towns like Grants Pass and Coos Bay, could face even more trouble.
“To lose those dealerships in a small town is just horrible for the community and not to count the thirty jobs they provide,” he said.
Still, each business owner acknowledged the public education system needs serious investment. They just worry about its effect on the economy.
The governor is expected to sign the bill in the coming days. Businesses will then start paying the tax next year.