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Oregon Democrats announced they have abandoned plans this year to enact a corporate gross receipts tax because they have been unable to secure the votes necessary to pass the measure.
“While we are moving forward on several major cost containment measures, it has become clear that the Legislature will not have the necessary support to achieve structural revenue reforms this session,” Gov. Kate Brown, Senate President Peter Courtney and House Speaker Tina Kotek said in a joint statement June 22.
Oregon lawmakers had been considering various proposals that would eliminate the corporate income tax and instead shift the burden to higher grossing businesses through a gross receipts tax. Driving the effort is the need to fill a $1.4 billion budget hole.
Democrats, who control the governor’s mansion and both chambers of the Legislature, are instead considering a more modest plan to limit eligibility for passthrough entity tax rates for companies operating in the following sectors: agriculture, mining, manufacturing, wholesale trade, transportation and warehousing, information, and accommodation and food services. The House Revenue Committee approved June 21 an amendment to H.B. 2060 that would raise $196 billion in the 2017-19 biennium and $227 million in the 2019-21 biennium, according to a analysis by the Legislative Revenue Office.
House Republican Leader Mike McLane said in a June 21 statement that he was troubled that Democrats appeared “ready to pass this tax increase on small businesses on a simple majority vote in clear violation of the Oregon Constitution’s supermajority requirement.”
The two parties have been tussling this session over the interpretation of the phrase “bill for raising revenue” with respect to a state Constitutional mandate requiring a three-fifths vote of the Legislature to pass such bills. The Legislative Counsel’s office has interpreted the language to apply to bills that either raise tax rates or enact a new tax.
The Legislature is now poised to cobble together a series of smaller measures to fill the budget hole including cost-cutting steps and the passage June 21 of new taxes to pay to for Medicaid.
The focus for legislative action on structural tax changes now turns to 2019. “We have laid the groundwork for long-term reform to bring balance to our budget and tax system,” the governor and Democrat Legislative leaders said in their statement. “As the Legislature closes out its business, we will also start planning the next steps to lead to success in the 2019 session.”
Several states facing budget deficits have also mulled gross receipts regimes for corporate revenue in 2017, including Louisiana, Oklahoma, Oregon, and West Virginia. But none have passed. Amid a growing disenchantment with corporate income taxes, and concerns over the trickle-down impact of potential federal tax reform, states are increasingly considering transaction-based systems targeting business gross receipts.
In 2016, Oregon voters defeated Measure 97, a gross receipts tax supported by public employee unions.
To contact the reporter on this story: Paul Shukovsky in Seattle at PShukovsky@bna.com
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