October 2, 2013
CONTACT: Michael Gay
Senate passes historic tax relief, tax certainty
for small businesses
Salem, OR - For the first time in Oregon history, small businesses will receive significant tax relief and tax certainty. The legislature voted Wednesday to create a new tax bracket specifically for job creators that qualify as small businesses, resulting in a 22% tax cut that will help small businesses to hire new employees and expand their operations.
"This is a groundbreaking policy that I believe will help Oregon small businesses grow and add new jobs, and therefore help working families succeed," said Senator Bruce Starr (R-Hillsboro). "A state with a successful economy has successful small businesses. This legislation recognizes the crucial role small businesses play in the long term welfare of Oregonians, and works to help them prosper."
Currently, small businesses are taxed at a higher rate than so-called "big business." Most small businesses are S-Corps, LLCs, sole proprietorships, and partnerships where the income "passes through" on the owner's personal income taxes, and is taxed at the personal rate. While a C-Corporation faces a top rate of 7.6%, small business income is taxed at the top personal rate of 9.9%. In other words, a small business in Oregon faces a higher marginal tax rate than a Fortune 500 company.
House Bill 3601 will establish a new, separate tax rate for small business income. The new rate starts at 7% on the first $250,000 of income, and adjusts up on a sliding scale to a top rate of 9.9% on anything over $5 million. More than 90,000 Oregonian entrepreneurs will benefit from the new rate.
"This puts small businesses on a level playing field with big corporations, and empowers them to do what they do best: grow and create jobs," said Senator Jackie Winters (R-Salem). "This is one of the most significant actions the legislature has ever taken to help Oregonians find family wage jobs."
"Certainty is invaluable to a business of any size, but especially to small businesses who are trying to plan for the future and grow strategically," said Senate Republican Leader Ted Ferrioli (R-John Day). "This measure gives these small businesses and the employees they represent a sense of security and confidence in their future tax status, confidence that will embolden them to take the risks necessary for growth."
According to the Small Business Administration, small businesses account for 64% of new private-sector jobs. More than 75% of employers in Oregon are small businesses with fewer than 10 employees.
Republicans also pushed for an expansion of the Earned Income Tax credit, providing hard working, low-income Oregonians a little extra breathing room in their budgets. This relief is part of a bi-partisan agreement that will cut run-away PERS costs and make much needed investments in Oregon classrooms and other core priorities.