Corporate profits

Corporate profits soar, filling Oregon’s tax coffers

Oregon’s corporate tax payments jumped an astonishing 46% last year, topping $1 billion for the first time, as businesses large and small reaped huge profits following the pandemic.

Oregon collected nearly $1.4 billion in corporate excise taxes, a tax on business income, in 2021. It’s the highest tally on record and another indicator that many companies emerged from the COVID-19 recession in much better shape than they were. in it.

State economists released tax figures earlier this month, painting a rosy revenue picture for the state. While Oregon keeps individual business tax data confidential, state economist Mark McMullen said industries that performed particularly well included warehouse and distribution, automakers and technology makers.

“It’s really in line with what you would expect if you were thinking about industries that have seen an increase in demand,” McMullen said.

Retail stores, hotels that cater to business travelers and aircraft manufacturers are among those faring poorly, he said.

Oregon’s corporate taxes have historically been among the lowest in the United States, according to the Tax Foundation, a national organization that advocates for lower taxes. But Oregon has moved toward the middle of the pack in recent years, according to the Tax Foundation’s calculation, due to a new corporate activity tax for schools and changes to insurance taxes. -State unemployment.

None of these recent changes are included in the corporate excise tax totals and therefore did not contribute to the large increase in excise tax revenue last year. The figures quoted here are for the 2021 calendar, rather than the state’s fiscal year, which ends each June.

Oregon’s corporate excise tax is only a small portion of what the state collects for its general fund. Personal income tax provided nearly nine times the revenue in the last fiscal year and is also rising sharply, fueling record state revenues and giving lawmakers more to spend (and a bigger refund). for taxpayers).

Profits tend to be more volatile than sales, as companies often operate close to breaking even. Even a modest increase in sales can trigger a huge increase in profits, while small drops in revenue sometimes push a business into the red.

In 2009, for example, corporate profits in Oregon fell 41% at the start of the Great Recession, then doubled the following year.

Oregon’s corporate taxes are therefore a key barometer of business health. In their presentation to lawmakers this month, state economists warned that the current bull cycle cannot last forever – though they also noted there were no signs of an immediate slowdown. .

“Just because we don’t think it’s durable doesn’t mean it won’t stick around longer,” McMullen said. “It’s just a matter of when.”

–Mike Rogoway | [email protected] | Twitter: @rogoway |