LEGISLATIVE REVENUE PACKAGE ‘FLASH CARD’ FACTS Corporate / individual income tax ballot measures ELECTION DATE: january 26, 2010 GREET AUDIENCE/INTRODUCE SELF SCRIPT: I’m here today to share some basic information about the Legislative Revenue Package.

What is the revenue package? #1 What is the revenue package? Along with reducing the state budget, the 2009 Oregon Legislature passed two bills that would increase some corporate and personal income taxes. SCRIPT: What is the legislative revenue package? Included in the 2009-11 biennial budget, the 2009 Oregon Legislature made reductions to many state services, including schools, and passed two bills that would increase some corporate and personal income taxes. The two bills are House Bill 2649 and House Bill 3405, and they make up the revenue package.

What is the revenue package? #2 What is the revenue package? These bills are expected to raise $733 million in revenue, which is included in the 2009-11 state budget to prevent further cuts to schools, healthcare and public safety. SCRIPT: These bills – House Bills 2649 and 3405 – are expected to raise $733 million in revenue. That revenue is included in the 2009-11 state budget to prevent further cuts to schools, healthcare, public safety and other state services.

What is the revenue package? #3 What is the revenue package? Legislative actions taken to fill the projected 2009-11 state budget gap of $4.028 billion were: Budget Cuts $1,994 million Federal Stimulus $978 million Additional State Revenue $801 million State Reserves $255 million SCRIPT: Legislative actions taken to fill the projected 2009-11 state budget gap of $4.028 billion were: 1) making state budget reductions of $1.994 billion, 2) using $978 million in American Reinvestment and Recovery Act (ARRA, also known as “federal stimulus”) funding, 3) approving measures that would raise $801 million in new State General Fund revenue, including the $733 million from the revenue package bills, and 4) tapping $255 million in state reserves. 1 1Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 5, September 2009 Source: Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 5, September 2009

#4 When is the vote? The legislature has set a January 26, 2010 election date. A yes vote will confirm the legislature’s passage of the bills. A no vote will prevent the bills from becoming law. SCRIPT: The legislature has set a January 26, 2010 election date. The election will be held if the Secretary of State finds that enough valid signatures have been collected to place the measures on the ballot. A yes vote will confirm the legislature’s passage of the bills. A no vote will overturn the legislature’s vote and prevent the bills from becoming law.

How would personal income taxes be affected? #5 How would personal income taxes be affected? For 97.5% of Oregonians – single people making less than $125,000, or couples making less than $250,000 – personal income taxes would not change. SCRIPT: How would personal income taxes be affected? For about 97.5%2 of Oregonians – single people making less than $125,000, or couples making less than $250,000 – they would not be affected. According to the Legislative Revenue Office, an estimated 37,795 of 1,541,576 Oregon personal income tax filers (2.5%) would be affected. 2Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009 Source: Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009

How would personal income taxes be affected? #6 How would personal income taxes be affected? For individuals with annual incomes above $125,000 or couples with annual incomes above $250,000, it raises the state income tax rate by 1.8%-2.0% – but only on income above those amounts. SCRIPT: House Bill 2649 contains three policies. The first would provide a 2009 exclusion from state income taxes of up to $2,400 of unemployment compensation, which aligns with a recent federal change.3 The second would phase out the deduction of federal income taxes on Oregon income tax returns for single filers with an Adjusted Gross Income of at least $125,000 and for joint filers with an Adjusted Gross Income of $250,000. 3 The third policy in HB 2649 would increase top marginal tax rates for some Oregonians. For individuals with annual incomes above $125,000 or couples with annual incomes above $250,000, HB 2649 would raise the state income tax rate by 1.8%-2.0% on income above those amounts.3 For example, a couple making $260,000 per year would pay no additional tax on the first $250,000 of their income, and 1.8% (or $180) on the $10,000 of income above $250,000. The increase would be reduced to .9 % (or $90), in 2012.3 3HB2649 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 7, September 2009 Source: Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 7, September 2009

How would corporate income taxes be affected? #7 How would corporate income taxes be affected? Corporate Income Tax: Corporations would pay an additional 1.3% on profits over $250,000 in 2009 and 2010. That would be reduced to 1.0% in 2011 and 2012. Starting in 2013, the additional tax will be reduced to 1.0% on profits over $10,000,000. SCRIPT: How will corporate income taxes be affected? In two main ways. First, with the corporate income tax, which will require corporations to pay an additional 1.3% on profits over $250,000 the next two years. That would be reduced to an additional 1.0% in 2011 and 2012. Starting in 2013, the additional tax rate would drop to 1.0% on profits over $10,000,000.4 The first $250,000 in taxable income is exempted from the corporate income tax until 2012. Thereafter, the first $10 million in taxable income is exempted. These exemptions were added to help minimize the impact of the revenue package on small businesses.4 According to the Oregon Department of Revenue, 75 percent of the corporate income tax would be paid by corporations headquartered out of state.5 4HB 3405 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 10, September 2009 5”Characteristics of Corporate Taxpayers,” 2008 edition, Oregon Department of Revenue, pages 3-8 Sources: HB 3405 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009

How would corporate income taxes be affected? #8 How would corporate income taxes be affected? Corporate Minimum Tax: Two-thirds of corporations doing business in Oregon now pay an annual minimum tax of $10. This bill would raise the corporate minimum tax to $150 for corporations with revenues of less than $500,000. Those with revenues of more than $500,000 would pay about one one-thousandth of their Oregon revenues in taxes. SCRIPT: The second way corporate incomes would be affected is with the corporate minimum tax. Two-thirds of corporations doing business in Oregon now pay an annual corporate minimum tax of $10.6 The corporate minimum tax hasn’t been raised since 1931.7 This bill would raise the corporate minimum tax to $150 for corporations with revenues of less than $500,000. Corporations that have revenues of more than $500,000 would pay about one one-thousandth of their Oregon revenues in corporate minimum taxes.8 What’s would be the affect on small businesses? Most – those with annual revenues of less than $500,000 – would experience a corporate minimum tax increase from $10 to $150. Those that have more than $500,000 in annual revenues would instead pay based on their revenue. For example, a corporation with annual revenues of $1 million would pay about $1,000 in corporate minimum taxes.8 6”Oregon Corporate Excise and Income Tax”, 2008 Edition, Oregon Department of Revenue, pages 3-14 7”2009 Oregon Public Finance Basic Facts,” Legislative Revenue Office, page C-13 8HB 3405 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 9, September 2009 Sources: Oregon Corporate Excise and Income Tax”, 2008 Edition, Oregon Department of Revenue, pages 3-14 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 12, September 2009

How do Oregon’s bsuiness taxes compare? #9 How do Oregon’s bsuiness taxes compare? Oregon’s business taxes are currently at $3.7% of gross state product, which ranks 3rd lowest among the 50 states. If the revenue package would be affirmed by voters, Oregon’s corporate taxes would go up to 3.9% of gross state product, which would rank as 5th lowest. SCRIPT: How do Oregon’s corporate tax rates compare? Oregon’s corporate taxes are currently at $3.7% of gross state product, which is third lowest among the 50 states, according to the Council on State Taxation and the Legislative Revenue Office.8 If the revenue package is affirmed by voters, Oregon’s corporate taxes would increase to 3.9% of gross state product.8 8”Total State and Local Business Taxes,” Council on State Taxation, Ernst & Young, 2009 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 18, September 2009 Sources: ”Total State and Local Business Taxes,” Council on State Taxation, Ernst & Young, 2009 and Legislative Revenue Office Research Report #6-09, “Referendum 301 & 302 Revenue Measures,” Page 18, September 2009

How do Oregon’s corporate taxes compare? #10 How do Oregon’s corporate taxes compare? By comparison, Washington’s corporate taxes are at 5.5% of gross state product, California and Nevada at 4.6%, and Idaho at 4.7%. SCRIPT: By comparison, Washington’s corporate taxes are at 5.5% of gross state product, California and Nevada at 4.6%, and Idaho at 4.7%.8 8”Total State and Local Business Taxes,” Council on State Taxation, Ernst & Young, 2009 Source: ” Total State and Local Business Taxes,” Council on State Taxation, Ernst & Young, 2009

What would this mean for Oregon’s schools? #11 What would this mean for Oregon’s schools? Of the $733 million raised by the revenue package, about 40% – some $285 million – would be targeted for schools. This amount would be included in the $6.0 billion allocated to schools for 2009-11. SCRIPT: What would all this mean for schools? Of the $733 million raised by the revenue package, about 40% – an estimated $285 million – would be targeted for schools.10 This amount would be included in the $6.0 billion allocated to schools for 2009-11. If the revenue package is not approved, alternative funding would be addressed in the February 2010 legislative special session. Schools and the rest of state government would experience mid-biennium reductions. For Oregon’s schools, this would likely mean some combination of teacher and staff layoffs, shortened school years, higher class sizes and other reductions. 10” 2009-10 Distribution of Formula Revenue to Districts,” Oregon Department of Education Source: ” 2009-10 Distribution of Formula Revenue to Districts,” Oregon Department of Education

What would this mean for local schools? #12 What would this mean for local schools? [Your information here] SCRIPT: What would this mean for local schools? [YOUR INFORMATION HERE]

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