PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

STATE SPOTLIGHT: 3 States Making Negative Tax Policy Changes for Small Business in 2020

By at 20 December, 2019, 12:35 pm

by Raymond J. Keating-

Three states – Oregon, Hawaii and Connecticut – are scheduled to take some notably negative tax policy steps in 2020. In each case, it’s bad news for entrepreneurs and small businesses.

SBE Council’s “Small Business Policy Index 2019: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth” ranks the 50 states according to 62 different policy measures, including assorted tax, regulatory and government spending measures. State lawmakers in the following states have chosen to impose policies that will reduce their respective state’s competitiveness.

Oregon. The big negative for entrepreneurs and businesses in Oregon will be the imposition in 2020 of a gross receipts tax, known as the Corporate Activity Tax. According to the Tax Foundation, Oregon will rank as only the second state with both a corporate income tax and a gross receipts tax, with the CAT applying “to all business entities that have Oregon income above $1 million, and it will be imposed at a rate of 0.57 percent of Oregon gross receipts above $1 million, plus $250.” A gross receipts tax is a dangerous levy in that it is in fact a consumption-based tax that is hidden from consumers. Adding such a levy on top of Oregon’s already-burdensome income tax system is a recipe for restraining entrepreneurship and business growth in the state.

Hawaii. While assorted states have been expanding exemptions for their estate (or death) taxes, Hawaii has added a new 20 percent death tax rate applying to estate’s exceeding $10 million. Of course, death taxes are applied to total assets, and are levied after individuals pay seemingly countless taxes and fees to government over a lifetime.

Connecticut. The coverage of the state sales tax rate in Connecticut was expanded in 2019. As of January 1, 2020, the tax will be further expanded to cover such services as dry cleaning and laundry services, and motor vehicle parking services. In addition, the state’s 10 percent “temporary” corporate income tax surcharge has been extended.

Draining more resources from the private sector to be handed over to elected officials and their appointees, who will redistribute such dollars according to political incentives, always ranks as a negative for the economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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