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The Curious Math of Corporate Oregon

Blog Post
November 23, 2009By Chuck Sheketoff

Poster_Child_Bess_Wills_Gresham_Ford The Sunday Oregonian featured a story comparing two businesses and their different views of Measures 66 and 67. Paloma Clothing’s owner Mike Roach said he supports the measures. The other business owner, Bess Wills of Gresham Ford, said that the new minimum tax will cost the business $30,000 and might mean laying off a worker or raising the price of cars she sells.

Let’s examine the numbers behind Gresham Ford’s claim. Gresham Ford is the assumed business name of McRobert Motor Co., Inc. According to its filing with the Oregon Secretary of State, McRobert’s president is Sylvester Gonzales of Whittier, California, and Bess Wills, also listed at a California address, is the Secretary of the corporation. For the purpose of this post, I’ll just refer to the entity as Gresham Ford, the company’s preferred public name.

The Oregonian story doesn’t state so, but Wills’ claim that Gresham Ford will go from paying just a $10 a year corporate minimum tax to $30,000 under the new schedule presupposes that Gresham Ford is a C-corporation, rather than an S-corporation. Measure 67’s new minimum income tax sliding scale based on Oregon sales, modeled on a proposal the Oregon Business Association presented to the Legislature, applies only to C-corporations (see PDF chart explaining Measure 67).

Of course, unless Gresham Ford discloses its tax return, we don’t know for sure that the company is a C-corporation. That’s because whether a corporation is an S-corporation or a C-corporation is not a public record – it is an election made on federal tax returns that’s recognized under Oregon law. If Gresham Ford has been paying $10 because they are an S-corp, its new tax would only be $150 under Measure 67.

But let’s accept for now Wills’ implicit assertion that Gresham Ford is a C-corporation, as well as her claim that the company will have to pay $30,000 under Measure 67. What does that tell us?

If the company has to pay that much, it means that Gresham Ford has $25 million to $50 million in annual sales. That of course raises the question “how does a company that size get away paying just $10 under current law?”

If Gresham Ford had just $160 in profits on their $25,000,000 to $50,000,000 in sales, their state tax would be $11 ($160 times 6.6 percent corporate income tax on profits).

How can Gresham Ford have $25,000,000 to $50,000,000 in annual sales of cars, repair services and parts and have less than $160 in profits? They must have a damn good accountant.

But let’s assume they do just pay $10 (if they don’t, they are either lying to The Oregonian or they are paying $10 because they are an S-corp and they are lying about facing a $30,000 tax under the measure).

So now let’s see if $30,000 really means they may have to lay off an employee or raise car (and maybe repair and parts) prices.

The $30,000 represents just 0.06 percent to 0.12 percent tax on Gresham Ford’s sales of cars, repair services and parts. That means that when they sell a vehicle or parts or repairs for $25,000, the tax associated with that $25,000 sale would be only $15 to $30 dollars. Is that really something that’s going to break the bank?

Heck, Gresham Ford donates 10 percent of repair costs (that’s about 100 times the minimum tax liability), or $100 on the purchase of a new car, to the charity of choice of their customer (Be sure to mention the Oregon Center for Public Policy next time you get your car repaired there or when you buy a car from Gresham Ford!).

Not only does the math fail to support Wills’ claim, she ignores that Gresham Ford hires its employees to help the business make money. Do they hire workers for any other reason? By laying off a worker, their business would suffer.

Gresham Ford’s arguments are curious, at best.


This post was originally published on www.blueoregon.com on November 23, 2009. The original post can be found at http://www.blueoregon.com/2009/11/the-curious-math-of-corporate-oregon/.