In the bloodbath that always comes with the final weeks of a legislative session, meaningful tax reform saw the guillotine early.
On June 22, leaders in the Oregon house and senate announced alongside Governor Kate Brown that their best attempts for hiking taxes on corporations had died a dispiriting death.
Facing pushback from the business lobby and the mounting rancor of a phalanx of unwilling Republicans, the goal of forcing big companies to pay a larger share—a central focus given the defeat of high-profile Measure 97 last November, and a centerpiece in the quest to fill a $1.4 billion budget gap—simply didn’t have the three-fifths majority required to raise revenue.
“It has become clear that the Legislature will not have the necessary support to achieve structural revenue reforms this session,” Brown said in her June 22 statement, issued jointly with House Speaker Tina Kotek, D-Portland, and Senate President Peter Courtney, D-Salem. What’s more, the leaders have signaled this kind of large-scale reform won’t be a priority in a special legislative session, or next year’s “short” session of the legislature.
Why should you care? Well, beyond the funding hole lawmakers are going to have to paper over partly with service cuts, the failure means you’re likely going to be pelted over the head with the issue of corporate taxation for at least the next year.
A Better Oregon, the public sector union-dominated coalition that’s been beating the drum for higher business taxes to fund schools and other priorities, is cooking up at least three new measures for the November 2018 ballot.
One is a tax hike that’s not so different from Measure 97, which became the most expensive ballot measure in state history. The other two could make it easier to hike taxes that state business interests have so successfully fought in recent decades (remember: Oregon has some of the lowest corporate taxes in the country). None of the three measures are likely to go unchallenged, assuming petitioners can wrangle enough signatures to get them on the ballot.
So in the interest of fair warning, here’s a rundown of what the next big fights over corporate taxation might look like.
The Tax Hike
The centerpiece of the proposals is a tax increase for any corporations that do $5 million or more in in-state sales. This so-called “Invest in Oregon’s Future” proposal is being pushed by the state’s largest teachers’ union, the Oregon Education Association, as a means of raising billions for schools.
Conceptually, the proposal isn’t too different from Measure 97. It bases its tax rate on companies’ Oregon sales, as opposed to their profits, and will undoubtedly be lambasted by opponents as a “hidden sales tax” on consumers.
But unlike Measure 97, which applied to a certain segment of corporations that sold at least $25 million, the new proposal would apply to corporations of all stripes, and have a lower threshold of in-state sales before the hike applies. That larger base means the new proposal can tax businesses at a lower rate—0.95 percent of all sales above $5 million—and still reap roughly $3 billion every two years, the OEA says (it’s not completely clear how it reached that estimate). The proposal says all that money would go toward K-12 and higher education, though under state law it’s likely a portion would be required to be spent on roads.
Hanna Vaandering, president of the OEA, says a fresh crack at raising taxes on the ballot is necessary, after what she sees as obstruction on the part of corporate interests in this year’s legislative session.
“When it comes time for them to bring something to the table, they pick their toys up and go home,” Vaandering says. “At the end of the day, Oregonians are going to have to choose between funding education and protecting large corporations.”
For the last 20 years or so, Oregon lawmakers looking to raise revenue have been snarled at by the state’s somewhat-unique requirement that all tax increases get approval from a three-fifths supermajority in both the house and senate. That calculus proved fatal for tax reform once again this year, when no senate Republicans would sign onto proposals concocted by Kotek and state Sen. Mark Hass, D-Beaverton.
So the OEA wants to do away with the three-fifths requirement—at least when it comes to funding schools. Initiative Petition 26, called “Kids Deserve Quality Schools,” would allow legislators to hike taxes on corporations by a simple majority vote whenever the state isn’t funding schools at a level mandated by Oregon’s “Quality Education Model” (QEM).
The QEM was established around the turn of the century as a means for legislators to calculate how much money is necessary to meet their education objectives. But according to an OEA analysis, those funding levels have never been met. Even a record $8.2 billion schools budget recently passed by legislators for the next biennium only amounts to about 82 percent of ideal funding under the model, says OEA lobbyist Laurie Wimmer.
Under IP 26, legislators interested in closing that gap (specifically by taxing businesses) would have an easier time doing so.
“The failure has not been a failure of will, but a failure of means,” Wimmer tells the Mercury. “Most [legislators] genuinely do care, but they are mechanically hamstrung. This is another tool.”
The Mandatory Report
Measure 97 supporters blame part of its defeat on a dearth of information about how much Oregon tax corporations were actually paying.
So the Service Employees International Union (SEIU) and American Federation of State, County, and Municipal Employees (AFSCME) are teaming up on Initiative Petition 25. If passed, the proposal would require publicly traded companies that pay state taxes to file a publicly available form with the Secretary of State’s Office that lists how much they paid, their total taxable income, any credits they received, and more. What’s more, the proposal would require companies to provide that information from tax year 2016 on.
Polling by Our Oregon suggests that the general notion is popular. According to a recent telephone survey, nearly three-quarters of likely voters would probably support a measure requiring greater tax transparency. But if Measure 97 revealed anything, it’s that such early popularity can falter in the face of mounds of cash in opposition.
Supporters are undeterred.
“I have every expectation they’ll oppose it,” says SEIU Local 503 Executive Director Brian Rudiger. “It will be very hard for the opponents of Measure 97 to articulate to voters why they shouldn’t have this level of transparency.”
CORRECTION: This story has been changed to reflect that the Oregon Legislature requires a three-fifths supermajority to pass a new tax, not two-thirds.