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Tax fight could cause huge economic impact


This is the second part of a larger look at Initiative Petition 28. Click here to read the first part of our coverage.

As unions and business groups prepare for a bruising political fight over a corporate tax measure, there’s one thing both sides agree upon: The economic impact on Oregonians could be huge.

A proposed ballot measure would impose a 2.5 percent tax on Oregon sales greater than $25 million by certain corporations.

The union-backed group Our Oregon says that if voters pass the measure, schools will get a long-needed boost in stable funding. State economists have estimated the tax could generate as much as $2.65 billion annually, which under the measure could also be spent on health care and senior services. At the same time, some businesses have said the tax could force them to move out of Oregon.

Legislative economists in Salem are studying how the proposed tax might affect household incomes, migration and employment in the state.

Largely targets out-of-state corporations

So far, the economists’ research suggests 995 corporations would be subject to the new tax. Of those, 80 companies operate only in Oregon and 163 are based in Oregon but also provide goods and services outside the state. The remainder, 752, are headquartered elsewhere.

State economists have not yet begun the actual analysis of how the tax measure proposed for the November ballot would impact the economy and state revenues.

Legislative Revenue Officer Paul Warner said he plans to update the Legislature on a rolling basis, including during the short 2016 session that begins next week.

“Our intent is to update the revenue committees during the session, probably during the third or fourth week during the session after we’ve done our work on bills assigned to the committees,” Warner said.

Not a new notion

The proposed tax, also referred to as a gross receipts tax, is not a new idea in Oregon.

Our Oregon twice backed off plans to take similar tax measures to voters, most recently in early 2014 when then-Gov. John Kitzhaber convinced supporters and opponents of the corporate sales tax and an anti-union measure to stand down while he pursued tax reform. At the time, Kitzhaber hoped to draft a tax measure he could take to voters in 2016.

Few state officials have tried to bring the groups together since Kitzhaber resigned in 2015, and Gov. Kate Brown said earlier this month that she is not negotiating with the various interest groups.

State Sen. Mark Hass, D-Beaverton, has been trying for several months to bring various parties together to negotiate an alternative.

“Both sides are extremely confident that they’ll prevail,” Hass said, referring to business and labor interests.

For example, the Oregon Business Association wants Our Oregon to withdraw the proposed ballot measure before it will even come to the table to discuss an alternative.

“We would be excited to be at the table to talk about the future of Oregon,” Ryan Deckert, president and CEO of the Oregon Business Association, said recently. “But the first thing that must happen is they’d have to pull (the initiative) from the ballot.”

Ben Unger, executive director of Our Oregon and a chief petitioner on the tax initiative, said his group worked with at least one economist while developing the proposal. However, Unger declined to identify the economist or provide the findings.

Smaller tax on all corporations analyzed

State economists recently crunched some numbers on the effects of a simpler gross receipts tax. Warner presented lawmakers with the findings of a hypothetical gross receipts tax scenario earlier this month.

A 0.4 percent tax, applied to all corporations regardless of annual Oregon sales, would raise approximately $923 million annually, after accounting for economic impacts of the tax. The tax could lead to the creation of more than 6,000 government jobs. But with a private sector employment decrease of more than 15,000 jobs, the net impact would be roughly 9,000 fewer jobs in the state.

Economists found the retail sector would shed the most jobs, according to the model, with a projected cut of more than 3,400 positions. However, agriculture and natural resources would take the greatest proportional hit, with a 1.3 percent decrease in employment.

The 0.4 percent tax would be least costly on a percentage basis for the most affluent Oregonians, those with annual household incomes above $205,869, according to legislative economists. The projected decrease in household income — 0.17 percent for that upper tier of households, and roughly 0.30 percent for all other households — would still be small.

Lawmakers wanted to know whether they could expect similar results, perhaps of larger magnitude, from the Our Oregon measure. Warner said that might not be realistic, because impacts such as job losses might not change proportionally as the tax rate increased.

Unger dismisses the idea that the negative impacts in the economists’ theoretical scenario might also occur under the Our Oregon measure.

“There’s a really big difference between every corporation paying a tax, and only corporations that do more than $25 million in (Oregon) sales paying a tax,” Unger says.

Our Oregon must gather 88,184 signatures ahead of a July deadline to get the measure on the November ballot. As of Dec. 1, supporters had submitted more than 5,500 signatures to the Oregon Secretary of State’s Office, according to agency spokeswoman Molly Woon.

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

Hillary Borrud can be reached at 503-364-4431 or This email address is being protected from spambots. You need JavaScript enabled to view it..