Measure 97 could mean the end for Powell's Books

Business Tribune

Emily Powell, President and Owner of Powells Books, says the proposed Gross Receipts Sales tax affecting companies in Oregon with more than $25 million in annual sales would apply to Powells and would ruin the company.

Answers were edited for clarity and brevity.

How would the proposal affect the Powells Books tax bill?

Were challenged every year already to figure out how were going to be viable for the next year, and this is about a fifty times increase on our current tax bill. We dont know how were going to pay it. Were relatively low above the $25 million mark. If youre over 25 you are all the same.

Are there any other costs?

The challenge for all of us, and for the small businesses too, its not just the bill for the 2.5 percent tax, I fully expect our power bill will go up, many of our utilities will go up, and probably some of our cost of goods will be impacted. I fully expect our margins will go down from some of our suppliers  because theyll be impacted as well  its going to hit us in a lot of places. Pacific Power have already said theyll be passing this increase along as a price increase. Were not sure yet but some of our publishers and wholesalers will be impacted, and they may now say, instead of offering us a previous discount, they may say were going to have to cut that.

Random House sells a lot of books in Oregon, and they, or our main distributor, Ingram Content Group, will be impacted, and if nothing else they will be impacted by these other costs, power and utility increases etcetera.

Have any other states enacted similar legislation?

We dont have enough of a volume in any other state to be impacted. My understanding, from a report by the Oregon Legislative Revenue Office, is other states gross receipts taxes are dramatically smaller, like much less than one percent. This is the most massive gross receipts tax I believe nationwide. So while we may be involved in other states where that tax is present, we havent felt the impact.

What can you do? Lobby politicians?

Were not being quiet about the fact that this could have a devastating impact for us. Frankly, Im equally concerned about the rest of the community, and Im equally concerned about where this money is going. Its a shocking remedy, and I dont think it is a remedy. As a businessperson I would never say We have a problem in this certain area, and just write a blank check for $1,000. Wed stop, work on it, analyze it, and figure out what might cost to solve this problem, and then figure out how to make do with a little less. This is the total opposite approach, its Heres $6 billion, go spend it. But theres absolutely no accountability, it just goes into the general fund. To me its shocking, its a huge price tag and I dont anticipate that its going to be successful. We are working with the campaign, talking to our employees so they understand what were facing. We dont typically get involved in politics as a business because we want to feel we are an open institution for everyone, but this one feels so important we have to pull ourselves off the sidelines. Were still figuring out how we are going to use our voice.

Can you survive?

We havent yet been able to answer that yet. There arent many places to cut money. Itll have to come out of services, meaning will we have to decrease hours, customer service, inventory? Or personnel, because thats everyones biggest bill. Its an area were going to have to consider. And thats the other concern, what kinds of job cuts will Oregon see?

Can you just put the price of books up?

Other businesses may be able to, but we cant. Our new books, the prices are set by the publisher, the prices are printed on the outside of the book. And were already challenged to be competitive against national companies. Amazon, Barnes & Noble, Costco, Walmart all sell books. So to say theres this tax in Oregon that requires us to raise prices dramatically makes us dramatically uncompetitive. Im going to be suffering even if I do raise my prices, I dont know by how much. And then Im going to see a steep sales decline because people dont want to buy my books. So Im in a whole lot of trouble.

How about raising the prices of used books?

Theyre less expensive, so to make up the that gap Id have to raise them, might not be 20 percent higher, it might be 200 percent higher, I dont know. For us, the price increase isnt going to work. Its not even remotely possible. I say this without trying to be dramatic, I dont know how we are going to pay this bill. Yes, we could shrink the company but wed still owe 2.5 percent, you have to pay this bill. We want to provide the same service to our customers we always have, to be competitive. I dont have an answer.

How is your father (Powells Books former boss Michael Powell) taking this?

He is equally scared, we are not sleeping very well over here.

How does this jibe with your personal politics?

Im not sure how we define whats a big company or a small company, a good company or a bad company. Were all providing jobs, were all providing benefits, were all trying to be good corporate citizens and good citizens. I think there are a lot of Oregon family businesses that dont yet get the implications of this bill. I think the fallout will be much large than anticipated. We wont understand it until its explained.

What can you do about it between now and November?

Im not giving upon any avenues, politicians are campaigning right now, so I am talking to everyone I can. Weve met with (Governor) Kate Brown and her representatives. Shes considering it.

We have to talk to the community and voters and help them understand that a bad idea never helped a good cause. We all agree the tax system is in trouble and needs fixing, and our schools are in trouble and need revenue, but this measure isnt the solution. This money is just going to the general fund, so how do we know who its helping? I want to solve education in this state, but I dont have any guarantees that this money is going to do anything remotely helpful. And I dont have it anyway! If I did have it Id still be concerned.

Were expecting that the average family would see $600 a year out of their pockets every year just in price increases: groceries and utilities. Thats a lot of money. Ill probably see a sales decline from that impact alone.

Any other specifics about the way Measure 97 is worded?

I dont see a lot of upside. Theres nothing in the bill that says this money goes to schools. We have to have more than a conversation, we have to get down to work on solving the problems that this bill is interested in addressing, but we have to find another solution.

A lot of voters out there want to make a difference, they see the problems and say this is at least something, I dont think it is. I think its a big, potential injury to consumers and businesses without solving the problem.

What is Measure 97?

Measure 97 (formerly Initiative Petition 28), a looming ballot measure that, if passed in November, would represent the largest tax increase in Oregons history.

It would bring in an estimated $2.65 billion in new money each year.

Measure 97 is being backed by public employee unions and others, including education and social service advocates.

Businesses and others caution that placing such a large sales tax on C-corporations will hurt the economy by raising the costs of consumer goods, including essentials such as food and electricity, and driving some companies out of Oregon.

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