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Beaverton lawmaker offers compromise on gross receipts tax

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Sen. Mark Hass says his proposal could avoid ballot battle


SALEM — Looking to head off a nasty and costly ballot fight, a state senator has introduced a proposal to levy a new tax on corporations while cutting income taxes for many low- and middle-income Oregonians.

Sen. Mark Hass, D-Beaverton, pitched the concept as an alternative to a much-bigger corporate tax measure proposed for the November ballot by the union-backed group Our Oregon. Hass and Democratic leaders in the Oregon Senate would like to avoid a bitter and expensive political battle between business and labor groups, which many people expect if the Our Oregon measure goes to voters.

Hass’s package, unveiled Monday, would eliminate the state’s corporate income tax and instead impose a 0.39 percent tax on all corporations’ sales in Oregon, a model that Ohio adopted in 2006. As a result, the tax base is much larger and the rate is lower than in the Our Oregon initiative, which would impose a 2.5 percent tax on larger corporations with sales of more $25 million.

His bill has support from Senate Democratic leaders, but faces a major hurdle in the Oregon House, where Democratic leaders have so far refused to consider an alternative corporate tax measure. Any tax legislation must originate in the House.

Senate Majority Leader Ginny Burdick, D-Portland, said resistance from business and labor groups to any alternative has also dulled the prospects for legislation.

“There just has not been the kind of interest that you need to make a move like this and have it succeed,” Burdick said. “It just does not exist right now.”

Senate Democrats on Monday listed tax reform as one of their priorities for the 2016 session, even though they acknowledged the issues would likely receive nothing more than discussion. In addition to upping corporate taxes, Senate Democrats said they want to look at other ways to relieve the state’s inordinate reliance on income taxes by reforming “kicker” refunds and the property tax system.

“When people ask me personally what is the one thing we could do to help Oregon, I say completely revamp our tax system,” said Senate Majority Whip Elizabeth Steiner Hayward, D-Beaverton. “We see the crises we have every time we have a recession because we are so dependent on our personal income tax, so we need to think about that.”

Hass said the Legislature could either pass its own corporate tax plan, or refer a measure to voters in November.

“While the rhetoric continues to escalate, a compromise is now sitting here on the shelf,” Hass said. “It’s transparent, easy to understand and substantiated by credible economists. The Legislature could pass this plan today.”

But Hass said lawmakers could hold a special session to pass a tax bill, just as it did in 2012 to benefit Nike. “At stake then was 500 jobs,” Hass said.

Hass’s proposal could lead to the creation of 4,454 new jobs, with 2,903 in the public sector and 1,551 in the private sector, according to an analysis by legislative economists. Most of the public jobs would be teachers.

A tax on corporate sales, also known as gross receipts, is a tax on consumption that Legislative Revenue Officer Paul Warner described as “slightly regressive.” Hass attempted to offset some of the impact by including income tax cuts for lower and middle-income workers.

On average, Hass said his proposal would result in a tax cut for households with disposable annual incomes of up to $58,000. It would double Oregon’s standard deduction for personal income taxes and increase the earned income tax credit to 18 percent of the federal earned income tax credit.

Economists in the Legislative Revenue Office helped Hass develop the proposal, and they estimated it would raise an additional $1 billion per biennium. Half the revenue would pay for education, and the remainder would pay for personal income tax cuts and the elimination of the corporate income tax.

State economists project $500 million in added taxes for K-12 and higher education in the 2017-2019 budget cycle, but more in future cycles, including $550 million for education in the 2019-2021 budget cycle.

“We would expect that the (corporate tax revenue) would grow,” Warner said.

The economic benefits of Hass’ proposal primarily stem from the income tax cuts. The Legislative Revenue Office recently analyzed a nearly identical corporate sales tax scenario, and found it would cause a net loss of 9,000 jobs.

Legislative economists have estimated Our Oregon’s corporate tax measure might generate $2.65 billion annually for the state, but are still working on an analysis of the economic impacts of the tax, for example on employment and consumer prices. Our Oregon conducted analysis of the economic impacts of the proposal, but the group has declined to release the findings.

The Capital Bureau is a collaboration between EO Media Group and Pamplin Media Group.