What Oregon needs is fiscal stability not revenue stability. Revenues will never be stable, but our budget can be stabilized through a sensible rainy-day fund. Other states have them and benefit from them why can't we? The answer is that whenever we talk about taxes both those that want taxes higher and those that want them lower start jumping in and saying they will withhold support of a rainy-day fund unless they demands are met. This is stupid and destructive.
But since still we are talking about tax reform, let's at least talk sensibly. I don't know what to make of the tortured logic of the Oregonian editorial board this morning:
But Oregon is much less tax friendly to small business. The gap arises in large part because of the way small businesses are structured and the way Oregon taxes the two most common types of corporate structure.
Traditional corporations pay corporate income or excise taxes. Those rates top out at 7.6 percent. Many small businesses are structured as what the Internal Revenue Service calls S corporations. These businesses do not pay corporate tax, but owners, whether a sole proprietor or shareholders, pay taxes at the personal income tax rate. Owners of sole proprietorships and partnerships also pay at the individual rate. In Oregon that rate tops out at 9.9 percent.
The amount of taxes paid by businesses varies widely, according to circumstances. For example, Oregon's lack of a sales tax improves its score in tax rankings, but sales taxes are a relatively small expense for many businesses.But this is nonsense - if I am a small businessperson, I pay an income tax on the income I earn from my business, just like everyone else, but then I don't have to pay a consumption tax so my overall tax burden is quite modest, just like everyone else. Comparing the individual income tax rates to those of C class corporations makes little sense. Those corporations pay lower taxes, but their employees pay income taxes.
Which is really all to say that don't fall into the trap of thinking of a sales tax as that much different from an income tax, you have to think of these two together when thinking of the overall tax burden on individuals.