We’re watching, with growing dismay, as states try to balance budget shortfalls by increasing taxes. In many cases we’re seeing taxes being increased retroactively.
Oregon Votes to Increase Taxes on Business and Wealthy Individuals
Yesterday, Oregon voters passed two separate measures. The first called for an increase in the marginal personal tax rate (currently 9%) for people making more than $125k ($250k for households) of 1.8% and 2% if you’re making more than $500,000. They also made this change retroactive for 2009, meaning no opportunity to plan for the unexpected increase.
The second measure, also retroactive to 2009, increases corporate tax rates. It raises the minimum corporate annual tax from $10 to $150, which will be applicable to C Corporations, S Corporations, LLCs and Partnerships. However, if you are operating as a C Corporation (or an LLC electing C Corp status), and you made more than $500k in Oregon-based revenues, your company will now be subject to a 0.1% tax on revenues. That comes out to an extra $5,000 your business could be paying. It’s not clear from the state’s information whether this 0.1% is based on gross or net revenues.
This unfriendly business climate has caused at least one of our clients to move operations out of Oregon. It seems likely that other businesses will follow suit.
Pennsylvania Realty Transfer Tax Hit
Another client got a tax hit courtesy of PA. After moving a piece of real estate she got a $7k tax bill. This is after being advised by the state that no transfer tax would be assessed.
California Goes Retro with Taxes
Another of our clients received a property tax bill for a property she sold … two years ago. The state reassessed the transaction and asked her for an additional $10,000.
I can’t see how retroactive tax bills or sudden shifts in policy will help business owners and investors move forward in this economy.
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- A Tax Strategy Might Be Worth More Than You Think
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