Democrats in the Oregon Legislature are gearing up to raise billions of dollars in taxes next year to boost school spending and cover ballooning public pension costs.
During interim hearings in Salem this week, lawmakers pulled back the curtain on some of the ideas they might consider.
The House Revenue committee introduced more than 50 proposals on Wednesday, and the Senate Finance and Revenue committee was scheduled to consider introducing more than 30 tax bills Friday.
It’s too early to know whether any of the proposals will move in 2019, and there are sure to be other tax plans introduced throughout the session. The Legislature also has yet to attach price tags or revenue estimates to the bills since they were just introduced this week.
A business tax favored by Democrats, public employee unions and some businesses as a way to raise money for education is being worked out behind-the-scenes. It would likely be a gross receipts tax calculated on a company’s sales, or a business activity tax that can be calculated in a variety of ways.
Sandra McDonough, CEO of the state’s largest business association, Oregon Business & Industry, said it was too early for her to comment about the proposals introduced this week.
“It’s a lot of proposals on the table,” McDonough said. “What we have been talking to the legislative leadership about is that we want to be a source of information for how the different tax concepts actually impact employers and their ability to maintain and grow jobs.”
Jody Wiser, founder of the watchdog group Tax Fairness Oregon, said her organization is pushing for a variety of changes in 2019, including changes to commercial and industrial property taxes that would result in a net increase in revenue for the state. Wiser said Oregon’s property tax system results in dramatically different bills for similar properties.
“The variations are very deep,” said Wiser, whose organization tends to support liberal tax policies. For example, she said, Tax Fairness Oregon compared two similar gas stations in Portland and found one pays roughly $7,000 a year in property taxes while the other is on the hook for $18,000. “That’s not fair,” said Wiser, who would like both businesses to pay the higher amount.
Not all the ideas entail raising taxes. One proposal in the Senate would increase the earned income tax credit available to low-income workers and double the standard deduction.
Here’s a sampling of tax proposals under consideration in 2019:
Higher corporate taxes
Lawmakers are looking at a variety of proposals to raise Oregon’s corporate income taxes. Some bills target the state’s corporate minimum tax, for example, by adding more minimum tax brackets or changing the top tier from a set dollar amount to a percentage of a company’s sales. Another would increase the corporate income tax rates.
End the kicker
A proposal introduced by the Senate Finance and Revenue committee on Friday would ask voters to end Oregon’s unique personal income tax rebate known as the “kicker” and instead send the money to a rainy day fund to pay for education during economic downturns.
It’s an idea that is gaining support, including from the state’s major businesses. The rebate is triggered when tax revenues for a two-year budget cycle come in more than 2 percent above economists’ forecast from the start of the cycle. Since it’s enshrined in the state Constitution, lawmakers would have to ask voters to make the change.
Gigabit tax repeal
Lawmakers will try again to repeal a tax break for internet providers. The Legislature unanimously approved it in 2015 in hopes of luring Google Fiber, but after Google abandoned its Portland plans, Comcast moved to claim the tax savings for itself.
A repeal almost passed during the short session earlier this year but died at the last minute in a Senate committee amid intense lobbying from Comcast. As part of a subsequent settlement in an unrelated matter, Comcast agreed not to claim the gigabit tax savings. So the repeal’s chances may be better this time out.
Tax business property at real market value
Lawmakers could put an initiative on the ballot to eliminate tax relief for most businesses that voters had approved for all Oregon property owners in 1997 through Measure 50.
The proposal would tax commercial and industrial properties at their real market value. Measure 50 reduced taxable property values and limited increases to 3 percent each year, effectively divorcing property taxes from property values.
Approval would mean a significant tax increase for many businesses and a windfall for local governments.
That windfall could be blunted, however, by tax caps that would remain in place under 1990’s Measure 5, which limited property taxes to $15 per $1,000 of real market value.
Tax million-dollar homes at real market value
Another proposal would ask voters to do the same for homes sold for $1 million or more.
The proposal wouldn’t affect homeowners’ tax bills until they sold the property for $1 million or more, at which point the new owner would be taxed for the property’s real market value. It would affect homes sold starting Jan. 1, 2021.
Limit relief for everybody under Measure 50
Another proposal would ask voters to limit tax relief for all properties under Measure 50, including residences. It would set a floor for assessed values at 75 percent of a property’s real market value.
It also would exempt from taxation the first $25,000 or the first 25 percent of real market value, whichever is lower.
That would mean bigger property tax bills for most property owners in the Portland metro area, and in other areas where property values have risen quickly.