The national news is depressing, with one party—and its Supreme Court majority—determined to prevent voters it doesn’t like (and doesn’t want) from participating in democracy. So I bang my head against the wall (on Zoom) in Salem, my state capital, on details: pleading with legislators to stop doing stupid things to the tax code. I suppose it’s penance for that part of my career I spent advocating the movement of a comma from here to there on behalf of the rich and well born.
This week, in the Senate’s housing committee, members and witnesses were enthusiastic about a tax credit for landlords who are getting stiffed by unemployed tenants. In December the legislature created a grant program for those same landlords; a state agency is about to start taking applications. Instead of working to perfect the acknowledged flaws in the program’s design, senators seem bent on adding the tax credit, though they have no idea how much it will cost. I was the only witness to object, telling senators that the tax credit was of dubious value to landlords, would take more time and oversight for a second agency to administer it, and would turn the tax code—the purpose of which is to raise money—into Swiss cheese. But the fix is in. Senators will issue press releases—and then they’ll wonder why their constituents are frustrated with government’s inability to provide actual help.
Meanwhile, Congress extends tax breaks to the favored few, engineered when Mitch McConnell was majority leader. Since last spring, I’ve been in the chorus arguing that three provisions in the CARES Act Congress passed nearly a year ago will go to millionaires. The solution, at least for Oregon’s fiscal prudence, is to disconnect the state tax code from the three provisions, as several other states have done. In Salem, I face off (virtually) against propagandists from the business lobby, folks who either know they are lying or are accustomed to part-time legislators who have little imagination in the face of sound bites.
In testimony last week, I challenged the business lobby to produce a single witness to explain how the CARES Act provisions would help him or her. Instead, the lobbyists recruited a gym franchisee to submit an op-ed to The Oregonian repeating their talking points. Sick of the slick, I fired off a counterpoint to the newspaper.
All I can do is scream, politely, in Zoom and in print. Text of the op-ed follows.
A recent guest column in The Oregonian defended three tax breaks Congress included in the CARES Act as help for businesses that have suffered losses in the COVID contraction (“Don’t cut CARES Act lifeline to businesses,” Feb. 24). The column, by a Lake Oswego gym owner, was prompted by coverage of bills in the Legislature—and Gov. Kate Brown’s proposal—to sever Oregon’s automatic connection to these tax breaks.
I am sympathetic to small businesses and everyone else whose livelihoods have been hammered in the past year. But proponents of these provisions—which applied to tax years 2018, 2019 and 2020—have presented no evidence that anyone so hammered will appreciably benefit from them. The Joint Committee on Taxation, the nonpartisan economists who evaluate tax legislation for Congress, found that the benefits overwhelmingly go to millionaires.
As a former tax policy analyst in D.C., I have been waiting six months for the business lobby to present a single witness who can illustrate how these breaks will benefit small businesses like gyms, restaurants, dry cleaners or retailers. (The gym owner admits in his op-ed he doesn’t know whether he could benefit). I’m still waiting.
Tax policy is terribly complicated and not generally intuitive. But it has one simple aspect: tax cuts apply only to those who owe taxes. If a small business lost money in the COVID crunch, it won’t owe any tax. And it’s unlikely to benefit from these tax breaks.
Why did Congress include these particular tax breaks in the CARES Act? Because lobbyists have been trying to undo these modest limits that were imposed on the huge tax cuts they won in 2017. What businesses employ them? Those that pay lots of tax. They also pay front groups to tell tales.
The CARES Act beneficiaries are large businesses that were profitable three or five or seven years ago and can get refunds because they had no tax liability in 2020. The act also allows them to use long-ago profits to offset losses in 2018 or 2019—which had nothing to do with COVID. The most expensive of the three provisions being scrutinized by Oregon only benefits business owners who make at least a half-million dollars. It allows them to use business losses to offset income from wages or the stock market and potentially end up with no tax liability.
About 20 states are similarly tied to federal tax law the way Oregon is. Six—Colorado, Georgia, Hawaii, New York, North Carolina and Virginia—have disconnected because they understand that these provisions drain their revenue when the states face massive needs prompted by COVID. And because they recognize that these tax breaks don’t help anyone who needs it.
Oregon should become the seventh.