The following is the speech I gave on the Floor of the House of Representatives on March 2, 2018 to stand up for small businesses in Oregon.
SB 1528 effectively eliminates the tax benefits from the 2017 Tax Cuts and Jobs Bill passed in Congress. SB takes those dollars intended to boost small business and slurps them up into the State Treasury. As long as liberal Democrats run this state, there will never be enough of your money in their pockets.
Thank you Madam Speaker. To the Bill.
Madam Speaker I have two words to summarize this bill — to describe why I will be a No on SB 1528. Those two words are “Cash Flow”. When it comes to Small Business, Cash Flow is King.
Most small businesses in Oregon are not made of wealthy attorneys or medical professions. Statistics from the Oregon Department of Revenue tell us that these over 300,000 small Oregon businesses — who will be negatively effected by SB 1528 — are made up of just one, or a few, individuals and average a gross income of less than $50,000/year. These are mostly home-based businesses — for example mom’s who sell their crafts on Etsy or EBay to help make ends meet; Uber drivers and freelance writers.
Many of Oregon’s small businesses are entrepreneurs who have walked away from the golden chains of corporate America and are trying something new in order to make a better life for themselves and their families. Let us not forget part of the American dream is to invent something new, or to build something better — in a way never done before — in order to improve lives and build a secure financial future. This ingenuity and work ethic is what has helped make America great.
Now, small businesses are not small when you look at Oregon’s economy. Small businesses account for 1/2 of Oregon’s workforce. Oregon’s small businesses indeed are the engine of our economy — and yet — SB 1528 will take away a tax incentive for this vital part of Oregon’s economy.
The number one reason small businesses fail, is not because they have a poor idea, not because they don’t have the right marketing, not because they lack the right production technique, or they have bad management. The number one reason is Cash Flow. Most small businesses have start up money — from personal savings or a loan — but it takes adequate cash flow to sustain a business from month to month. Without a reserve of capital (something most small businesses lack by definition), one bad month can bring to an end to several years of investment and extremely hard work.
The proponents of SB 1528 have said nothing negative will happen to this class of small businesses — it will be “business as usual” for this important sector of our economy. This is partially true. Overall, with SB 1528 small businesses in Oregon will not pay more this year than last year in taxes. However, let me point out a broader point of view.
Suppose a certain Representative in this chamber wanted to buy concert tickets for that 80’s big-hair band they missed seeing in their teens. This member finds out the 80’s big-hair band is coming to town — say playing at the Ross Ragland Theater in Klamath Falls. So the member goes online to purchase the tickets. While online the member finds out they can get the tickets at a discounted price. I’m ecstatic — er, I mean this member is ecstatic. Now the member has extra cash to purchase valuable memorabilia, perhaps signed concert posters, t-shirts, maybe an 80’s big-hair-band replica wig he could use as his hair grows thinner and thinner each passing day. However, upon arriving at the concert, the member is slapped with unexpected parking fees — separate from the discounted ticket price… The savings realized from the discounted tickets is quickly slurped up by the parking attendant.
Now, Did the member end up paying more than they would have if the tickets had been full price? No. But the opportunity to buy additional gear, which the band wants to help promote their concert and brand, is gone. An opportunity by one entity (the concert promoter to place extra cash in the hands of loyal fans) is taken by another (the parking attendant). In the end the concert goer and concert promoter lose and the parking attendant wins.
Oregon is not the only option for small business
It is important to note — and I can’t emphasize this enough, the Federal Tax Cuts will apply not just to Oregon — but to all 50 states. While we in this Oregon Chamber can hope and pretend small businesses only hear the “business as usual” message, it will become increasingly evident that Oregon’s small business taxing policies do not take advantage of this rich and robust opportunity for S-Corps, LLCs and Sole Proprietorships, as is being done in other states across our great nation.
We have a real opportunity today to give current Oregon small businesses a boost, by allowing them to keep more of what they earn — and the cash flow they desperately need — to save, invest and grow (which will in-turn benefit our State Treasury). We also have an opportunity to signal to future entrepreneurs in other states that Oregon is “small-business-friendly” and that in Oregon they will find the best business environment in which to start and grow their new enterprise.
Now before anyone stands up and says “Government needs cash flow too”, let me remind everyone in this chamber we will soon hear and consider SB 1529 which will bring a one-time cash-influx of roughly $140 million to the State Treasury. I am pretty sure there are no small businesses in Oregon dealing with that kind of “cash flow” problem. When considering both bills together, which we should, in a way we are saying “it is okay to improve the cash flow for State government (SB 1529), but for small business, eh, not so much (SB 1528)”.
Finally, and this a point Senator Boquist raised, is whether this bill is even constitutional. It is a revenue raising bill that did not start in the House, but in the Senate. Look to the reader boards: SB 1528. And for those that say it isn’t a revenue raising bill: WE are considering taking specific action by disconnecting from the Federal Tax code and our specific action raises tax revenue over $1 BILLION in the next five years. If we did nothing and this occurred, you might have an argument, but we are voting on a bill, which the net effect takes over $1 BILLION dollars from small businesses and puts it in the State Treasury. I would argue, if there ever was a revenue raising bill, this is it!
Madam Speaker, do we wish to grow the size and power of government, or to grow the size and power of Oregon’s economy? Because the money will go one place or another. A different way to ask this question is whether we believe in order to secure a brighter Oregon, are these funds (nearly $1 Billion during the next five years) better off in the dubious hands of State Bureaucracies or in the capable hands of Oregon’s Etsy Moms and Entrepreneurs?
For the sake of Oregon's current small businesses — and for future small businesses who could consider Oregon as their new home — I strongly urge a No Vote and let us fully reconnect our pass-through entity tax policy to the Federal Government.