SALEM — Democrats in the state House on Monday proposed raising a variety of taxes — on premium cigars, certain businesses and some individual taxpayers — and using the money to extend expiring tax credits that help people with low incomes.
The chairman of the House Revenue Committee said the committee should take up the bill Tuesday and decide whether to forward it to the full House.
Most Oregon tax credits are set to expire every six years, giving lawmakers a chance to decide periodically whether they should be continued, modified or dropped. The Democratic bill would continue a variety of credits, most of them aimed at helping working families, children and people with disabilities. The Earned-Income Tax Credit, a popular option for people who work for low wages, would be expanded so more people qualify.
“We’re trying to do good policy, with some particular outcomes in mind, and also balancing the need to pay for them,” said House Speaker Tina Kotek, D-Portland.
Several Republicans objected to marrying tax credits, which decrease revenue, with tax increases in a single bill. The move allows Democrats to get around a requirement that revenue-raising bills be approved by a supermajority of the House and Senate. While Democrats have the majority of both chambers, they’d need to gather support from at least one House Republican to advance the tax increases on their own.
“If this is constitutional, that part of the constitution has no meaning,” said Rep. John Davis, a Wilsonville Republican who serves on the Revenue panel.
The debate over taxes highlighted a simmering disagreement between Democrats in the House and the more conservative Senate. Sen. Mark Hass, a Beaverton Democrat who leads the Senate’s revenue committee, sounded a pessimistic tone about the bill’s chances in that chamber.
“We’re going to try our best to find some middle ground, but I’m not sure the majority of the Senate will vote for a tax increase,” Hass said. “I just can’t say.”
The House bill is estimated to raise nearly $50 million in new revenue over the next two-year budget cycle. It would eliminate a tax credit that helps people pay for long-term care insurance. Kotek said it’s used primarily by people who would buy the coverage anyway.
It also would lift a cap on cigar taxes. Oregon taxes cigars at 65 percent of the wholesale price, up to 50 cents per cigar. Lifting the cap is estimated to generate more than $5 million a year. It would affect nearly all premium cigars sold in Oregon, said Paul Cosgrove, a lobbyist for the Cigar Association of America.
“It’s, generally speaking, a bunch of small retailers and small wholesalers,” Cosgrove said.
The bill also would prohibit businesses from using tax credits to offset the corporate minimum tax, which voters increased in the controversial Measure 67 special election in 2010. The corporate minimum is generally paid by businesses that are unprofitable or high revenue but low margins. The bill also targets a provision that allows Oregon taxpayers to subtract their federal tax liability from their income when calculating state taxes, up to $6,350. The cap typically grows with inflation, but the bill would cap it for six years.