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Our opinion: Governor needs to oppose gross receipts tax

Kate Brown needs to demonstrate she is the governor for all of Oregon, and not just a leader for the public employee unions.

It is past time for Brown to step in and oppose the latest attempt to make a mess of Oregon’s tax system. This threat to good public policy comes in the form of Initiative Petition 28, which has collected the signatures needed to appear on the November ballot.

It is being sold — quite cynically — as a progressive means of extracting more than $3 billion a year from the state’s largest corporations. The measure’s actual effect, however, will be quite different, as it will hit low- and middle-income Oregonians the hardest in the form of higher costs for food, medicine, clothing and utilities.

That conclusion is not just our opinion, but is supported by the recent analysis from the nonpartisan Legislative Revenue Office. It’s also supported by statements from affected utilities, such as Portland General Electric and PacifiCorp, whose rates are regulated based on their cost of doing business. They will have no choice but to pass the added costs — estimated at 3 to 5 percent — along to their customers.

Initiative Petition 28 would place a gross receipts tax of 2.5 percent on the sales of certain companies with more than $25 million in Oregon revenues. The companies involved, about 1,000 altogether, account for 88 percent of corporate sales in the state’s retail trade sector.

So, in effect, IP 28 represents the worst kind of sales tax — one that taxes the essentials that people purchase on a daily basis. Because the tax is assessed against affected corporations at all points in the supply chain, the effect on consumer prices will, in many cases, be far greater than 2.5 percent.

The burden that IP 28 would place on low- and middle-income Oregonians may be an unintended consequence of a simplistic idea, but that’s the very reason it is wrong to write tax laws in the form of initiative petitions. It was wrong when Don McIntire and others did it with 1990’s Measure 5 property tax limit. It was wrong when Bill Sizemore did it with Measure 47’s property tax cap. And despite their intentions, it is wrong for public employee unions to do it today.

That’s why it is important for Brown to change course and make a strong statement. A measure that would increase state revenues by more than $6 billion a biennium — an astounding 25 percent increase — will cause unforeseen collateral damage throughout the economy. Brown has been staying “neutral” on this important issue, while at the same time proposing ways to fix the law if it should be approved.

That’s not leadership.

Brown instead should make it crystal clear she opposes this attempt to use the initiative process — yet again — to push through a sweeping one-sided tax measure. If she solidly opposes IP 28, she will take the air out of its campaign. In doing so, she will set the stage for true fiscal reform, either in a special legislative session this year or during the 2017 regular session.

Oregon needs substantially more revenue for schools and other vital services, but it also must have a thoughtful, balanced approach to raising the money. One measure of leadership is having the strength to tell your allies when they are misguided. Now is the time for Brown to take command — and show exactly why she wanted to be governor in the first place.