Large and small businesses in Grant County could see immediate benefits from passage of the Tax Cuts and Jobs Act in December — from agriculture to timber — but the hospital could see increased costs from an increase in uninsured patients.
The Oregon Farm Bureau praised the bill.
“This bill lowers taxes for the vast majority of our agricultural families,” Oregon Farm Bureau President Barry Bushue said in a press release.
Bushue noted, in addition to simplifying tax rates, the bill eliminates the estate tax for families up to $11 million while maintaining annual indexing for inflation, which covers most family farms and ranches.
The bill also preserved or improved several key tools for small businesses, such as cash accounting, carry-forward of net operating losses and bonus depreciation, Bushue said. The latter, also known as immediate expensing, will allow farmers and ranchers to write off costs of qualifying purchases up to $1 million — twice the amount previously allowed. Immediate expensing will also be allowed for used, not just new, equipment, he said.
Bruce Daucsavage, president of Ochoco Lumber Co., the parent company of Malheur Lumber Co. in John Day, told the Eagle he expects to see several positive opportunities in the new tax bill.
“We’re constantly doing tax planning,” he said.
As a limited partnership, Ochoco Lumber will not realize the advantages of the corporate tax rate reduction from 35 percent to 21 percent, and the company is too large to benefit from the first-ever 20 percent tax deduction allowed for small businesses, Daucsavage said.
But there were other benefits in the bill, he said — especially the accelerated depreciation deduction, which will allow companies to write off investments in new equipment in one year rather than over seven to 10 years.
“We can now write off the entire amount and put the saved dollars back into our business,” he said. “That will help the logging industry. It will spur equipment sales, and it could attract foreign investment.”
Daucsavage said Ochoco Lumber likely will invest in new pollution control and sawmill equipment as part of a plan to expand production in John Day.
“This is expensive equipment,” he said. “Expanding production will mean modifying the existing facility.”
The plans are not new, but the tax changes “pushed the plan ahead sooner,” he said.
The lumber industry is capital intensive, Daucsavage said, and the timber supply has changed over the years to smaller-yielding logs. About 10 percent of the timber brought to the mill in John Day was once small-diameter logs. Now it’s about 70 percent, he said.
That means less of each log ends up as lumber, but the sawdust, chips and shavings are sold to different customers, while the bark and other waste is burned in the mill’s boilers, he said. The company also produces pellets, but the market for these non-lumber products is a “roller-coaster ride,” he said.
Daucsavage said the new tax bill has improved the opportunity to retain existing jobs. He noted that company employees will benefit from the doubling of the standard deduction and child tax credit and the lowering of individual tax rates.
“They’ll get a raise in 2018, maybe by their second paycheck,” he said.
Once withholding tables are adjusted, less money will be withheld in paychecks, he said. That’s money employees could spend or sock away for retirement. Overall, a lower corporate tax rate could improve the stock market, which in turn could improve the performance of 401(k) retirement plans, he added.
“It’s a trickle-down effect,” Daucsavage said, noting that this would depend on how corporations use their tax savings.
Health care impacts
Derek Daly, CEO of the Blue Mountain Hospital District, told the Eagle the new tax bill could have negative impacts on hospitals, however.
“Hospitals really are not expecting to benefit from these tax cuts in the same manner that other organizations and individuals will,” he said. “Part of this is due to the fact that most hospitals, clinics or health systems are nonprofit corporations or government-related entities for which the corporate tax rate or business-deduction changes will not be applicable.
“The other aspect is that the bill as currently presented repeals the Affordable Care Act’s individual insurance mandate, which will lessen the insured population. If anything, hospitals will expect to see increasing uncompensated care costs as the uninsured population rises.”
In a Dec. 20 press release, Gov. Kate Brown also expressed concerns about potential impacts to healthcare.
“Thousands of Oregonians stand to lose access to the life-saving healthcare they rely on,” she said. “And while Republicans work so hard to shove this bill through, they have still failed to take the obvious step to reauthorize the Children’s Health Insurance Plan (CHIP), which provides access to care for over 80,000 children and pregnant women in Oregon. This is absolutely unacceptable.”
Brown said she had directed the Office of Economic Analysis and Revenue Department to provide an analysis of how the new tax bill will impact Oregonians.