Small business means a lot to Gov. Kate Brown. At least that’s what she says. “Small businesses are the backbone of Oregon’s economy, creating 70 percent of new jobs in the state,” she says.
“We can encourage job growth by giving small-business owners and emerging entrepreneurs the tools they need to expand.”
So if you are one of those small businesses, you might think that Kate “Small Business” Brown will be getting ready to veto Senate Bill 1528. If she vetoes it, it means many small businesses get a tax break.
But not so fast. The bill was backed by Democrats. It squeaked through the Democratic-controlled House and Senate. And Brown is, of course, a Democrat.
Much of the debate about the bill focused on one aspect of it — a new deduction under President Trump’s federal tax cuts for what are called pass-through businesses. Pass-through businesses tend to be smaller, such as sole proprietorships, S-Corps and limited liability companies. Income for owners of those businesses passes through the business to owners. Owners pay personal income taxes on that income. The family-owned company that owns The Bulletin, Western Communications, is an S-Corp.
The way Oregon’s tax code works is it is connected to the federal tax code. If the Legislature did nothing, businesses would get that tax break. But Democrats don’t like the tax break and aim to disconnect it from Oregon’s tax code with the bill before Brown.
Why don’t Democrats like the tax break? Democrats argue the state needs the money to pay for things the state does. Pass SB 1528, and the state gets to keep about $250 million for 2017-19. It could add up to $1 billion by 2023.
The bill obviously raises revenue. If the bill didn’t pass, the state wouldn’t get that money. Bills that raise revenue are supposed to originate in the Oregon House. SB 1528 didn’t. Bills that raise revenue are supposed to pass with a three-fifths majority in both houses. SB 1528 didn’t. Instead, Democrats relied on a legal interpretation that says this bill that raises revenue isn’t a bill to raise revenue because it’s a change in a deduction. Such is the surrealism of Salem.
Even if you are a surrealism fan, it would be astonishing for a governor who has declared so forthrightly that she wants to give small businesses tools to expand to aim to take $1 billion away from small businesses.