As Jared Walczak of the Tax Foundation puts it,” it’s no secret that the Portland, Oregon area has high taxes. The citizens keep voting for them.” https://taxfoundation.org/research/all/state/portland-taxes/

“Unfortunately, this tax isn’t just imposed at the retail level. It’s also imposed on the same product at the wholesale level, and at each stage of the manufacturing process. The tax is embedded at every level of production.” This pyramiding could have an impact of up to 12% annually in taxation for the companies affected. Courtesy of Tax Foundation. (Oregon Measure 118 is an aggressive Sales Tax – and worse.) Since this is a gross income tax, much like the Oregon corporate activity tax it automatically increases the cost of doing business in Oregon.

It stands to reason that the companies taxed at the highest levels have a few options. 1) increase the pricing of the products they are selling / manufacturing and pass the cost along to the consumer. 2) Move to another state to manufacture or distribute in Oregon, like Washington state for example. 3) absorb the tax increases. If I were the owner of the companies taxed, I would choose option 2.

As a principal in one of those companies I would probably choose to move to Washington, where there is no income tax. They do have a 6.5% state sales tax, and the averaged state and local sales tax rate is 9.38 %plus they have a Business and Occupation tax of .471% of gross receipts.

As you can see by looking at the chart above its significantly less expensive to operate a business in Washington State. (There are other taxes though like capital gains taxes that will increase some operating expenses.) Unfortunately, that would not work for the retail companies like Fred Meyer or Home Depot or manufacturing companies like Intel and Nike who have invested billions in buildings, staff and infrastructure.

Flight to Vancouver, Washington

Multnomah County is already one of the highest taxed areas in Oregon. This potential statewide new tax becomes a huge disincentive for companies to stay here. Oregon would become a backwater state, as more companies pick up states and move out. We are already seeing the effects of the newest taxes in Multnomah County as businesses and individuals flee the taxes by moving to Vancouver, Washington. Vancouver was the fastest growing city in the Pacific NW from 2017 to 2022 with a combined growth rate of 10.4%.

Vancouver, WA population between 2000 and 2023

Outmigration

OregonLive in a March 27,203 article mentioned that “The numbers show that Oregon lost residents across nearly all age groups in 2022 but saw an increase in net out-migration among children and adults between the ages of 35 and 55.” 

https://www.oregonlive.com/business/2023/09/more-left-oregon-than-arrived-last-year-

census-bureau-says-reversing-decades-of-growth.html

There are many reasons for this outmigration, change in family status, job rotation, increased taxes, political frustration and others, but Oregon has typically been a growth state, and that seems to be changing. To keep Oregon growing, and keep businesses interested in staying, taxes need to be equal to or lower than those in competing states.

Given that there have been kicker tax refunds for the last six years it seems we are taxing Oregonians at a high enough tax level already. “State Economist Mark McMullen told lawmakers that could mean Oregon will send $582 million back to taxpayers in 2026, in what would be the state’s sixth consecutive kicker refund. The unique law refunds income tax payments that come in at least 2% higher than what lawmakers budgeted for. “

https://www.opb.org/article/2024/05/29/potential-kicker-tax-refund-oregon-2026/

Maybe a no vote for Measure 118 is in order.

Clifford A. Hockley, CPM, CCIM, MBA

Cliff is a Certified Property Manager® (CPM) and a Certified Commercial Investment Member (CCIM). Cliff joined Bluestone and Hockley Real Estate Services 1986 and successfully merged that company with Criteria Properties in 2021.

He has extensive experience representing property owners in the sale and purchase of warehouse, office, and retail properties, as well as mobile home parks and residential properties. Cliff’s clients include financial institutions, government agencies, private investors and nonprofit organizations. He is a Senior Advisor for SVN | Bluestone.

Cliff holds an MBA from Willamette University and a BS in Political Science from Claremont McKenna College. He is a frequent contributor to industry newsletters and served as adjunct professor at Portland State University, where he taught real estate-related topics. Cliff is the author of two books, 21 Fables and Successful Real Estate Investing; Invest Wisely Avoid Costly Mistakes and Make Money, books that helps investors navigate the rough shoals of real estate ownership. He is the managing member of a real estate consulting practice, Cliff Hockley Consulting, LLC., designed to help investors and commercial brokerage owners successfully navigate their businesses.  He can be reached at 503-267-1909, Cliffhockley@gmail.com or Cliff.Hockley@SVN.com.