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OREGON REVENUE POLICY IN THE WAKE OF THE GREAT RECESSION

OREGON REVENUE POLICY IN THE WAKE OF THE GREAT RECESSION. CONTEXT & ACTIONS NOVEMBER 2009. THE U.S ECONOMY: IMBALANCES ROOT OF “GREAT RECESSION”. COMPARISON OF MAJOR ECONOMIC CONTRACTIONS. DECLINES IN THE GENERAL FUND REVENUE FORECAST. SHORT-TERM OUTLOOK: SLOW RECOVERY. LONG ROAD AHEAD

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OREGON REVENUE POLICY IN THE WAKE OF THE GREAT RECESSION

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  1. OREGON REVENUE POLICY IN THE WAKE OF THE GREAT RECESSION CONTEXT & ACTIONS NOVEMBER 2009 Legislative Revenue Office

  2. THE U.S ECONOMY: IMBALANCES ROOT OF “GREAT RECESSION”

  3. COMPARISON OF MAJOR ECONOMIC CONTRACTIONS

  4. DECLINES IN THE GENERAL FUND REVENUE FORECAST

  5. SHORT-TERM OUTLOOK: SLOW RECOVERY

  6. LONG ROAD AHEAD OREGON PAYROLL EMPLOYMENT (QUARTERLY IN THOUSANDS)

  7. GENERAL FUND REVENUE OVER THE LONG RUN(%CHANGE FROM PRIOR BIENNIUM)

  8. LEGISLATIVE ACTIONS TO FILL PROJECTED $4 BILLION BUDGET GAP (GENERAL FUND/LOTTERY BUDGET IN MILLIONS OF $)

  9. MEASURE 66(HB 2649) • ESTABLISHES NEW MARGINAL PERSONAL INCOME TAX RATES FOR HIGH INCOME FILERS • FOR 2009,2010 & 2011 TAX YEARS: 10.8% MARGINAL RATE APPLIES TO TAXABLE INCOME >$250K (J) & $125K (S), 11% MARGINAL RATE APPLIES TO TAXABLE INCOME >$500K (J) & $250K (S) • FOR TAX YEARS 2012 & BEYOND: 9.9% MARGINAL RATE APPLIES TO TAXABLE INCOME >$250K (J) & $125K (S) • PHASES OUT FEDERAL TAX SUBTRACTION STARTING AT ADJUSTED GROSS INCOME OF $250K (J) & $125K (S) BEGINNING WITH 09 TAX YEAR • CONNECTS TO FEDERAL EXCLUSION OF FIRST $2,400 UNEMPLOYMENT BENEFITS FOR 2009 TAX YEAR ONLY

  10. TAXPAYERS AFFECTED BY MEASURE 66 TAX INCREASE(PROJECTED FULL YEAR RETURNS FOR 2009 TAX YEAR)

  11. MEASURE 67(HB 3405) • ESTABLISHES NEW CORPORATE INCOME TAX RATE STRUCTURE • RETAIN 6.6% RATE ON NET INCOME < $250K • FOR TAX YEARS 2009 & 2010 APPLY NEW MARGINAL RATE OF 7.9% FOR NET INCOME > $250K • FOR TAX YEARS 2011 & 2012 APPLY MARGINAL TAX RATE OF 7.6% ON NET INCOME > $250K • STARTING WITH TAX YEAR 2013 APPLY MARGINAL RATE OF 7.6% TO NET INCOME > $10 MILLION. • ESTABLISH NEW CORPORATE MINIMUM TAX • FLAT $150 FOR S-CORPS & PARTNERSHIPS • C-CORP MIN STARTING AT $150 FOR OREGON SALES < $500K UP TO $100,000 FOR OREGON SALES > $100 MILLION. C-CORP MIN ROUGHLY EQUALS 0.1% OF OREGON SALES. • NEW SECRETARY OF STATE FILING FEE STRUCTURE • ADDITIONAL $50 ANNUALLY FOR DOMESTIC CORPORATIONS • ADDITIONAL $225 ANNUALLY FOR CORPORATIONS BASED OUTSIDE OREGON

  12. MEASURE 67IMPACT ON CORPORATE TAX PAYERS(2009 TAX YEAR: C-CORPS ONLY)

  13. GENERAL FUND/LOTTERY REVENUE & EXPENDITURES(IN MILLIONS OF $)

  14. PERSPECTIVES ON THE 2009-11 BUDGET • ALL FUNDS BUDGET UP 9.2% • FEDERAL FUNDS UP 33.3% • FEDERAL FUNDS INCREASE ACCOUNTS FOR 75% OF ALL FUNDS INCREASE • GENERAL FUND/LOTTERY BUDGET DOWN 1.0% • GENERAL FUND/LOTTERY BUDGET 12.4% BELOW ESSENTIAL BUDGET LEVEL

  15. STATE RESERVE POSITION: IMPACT OF REFERENDUM PASSAGE(IN MILLIONS OF $)

  16. STATE RESERVE POSITION: IMPACT OF REFERENDUM DEFEAT(IN MILLIONS OF $) *ELIMINATES $200 MILLION TRANSFER TO SSF

  17. IMPACT OF MEASURES 66 & 67 ON GENERAL FUND REVENUE GROWTH(IN MILLIONS OF $)

  18. WHAT LIES AHEAD? • REFERENDUM ON REVENUE RAISING MEASURES • RECESSION TECHNICALLY OVER—BUT HOW STRONG & HOW LONG FOR RECOVERY? • IS INFLATION A DANGER? • REPLACEMENT OF FEDERAL STIMULUS & USED RESERVES

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