Tax reform bill put under intense public and committee scrutiny
The Joint Tax Reform Committee rolled out House Bill 2830 in two public hearings Tuesday. The hearings were held before packed rooms, with overflow seating for lobbyists and the public to listen. Passionate arguments were made for and against proposed changes to Oregon’s tax structure. HB 2830 is a compromise between Democrats in the House and Senate, both of whom had put forward comprehensive revenue proposals earlier in the session.
HB 2830, the “bridge plan,” would temporarily increase the corporate income tax until a new commercial activity tax would begin. The plan’s estimated net revenue impact in the 2017-19 biennium is $898 million. Revenue generated from the activity tax would be directed into a new Education Strategic Investment Fund, about $470 million in the next biennium.
Legislative Revenue Officer Paul Warner walked the committee through amendments that reflected its work over the past several weeks. The committee looked at simulations of how the tax would affect businesses and corporations while generating revenue at different percentages of the tax rates. The amendments would bring the activity tax online on Jan. 1, 2019. Different sectors would be taxed at different rates. The sector categories would be services, retail and trade, wholesale, natural resources, and “all others.” There would be a flat $250 tax for receipts of less than $3 million. The $3 million threshold would exempt most Oregon small businesses.
Legislative Revenue Officer Paul Warner provides the Joint Tax Reform Committee on Thursday with the expected impacts of the tax changes in House Bill 2830. (Photo by Jake Arnold, OSBA)
Anthony K. Smith, representing the small-business association National Federation of Independent Business, testified that "the very concept of taxing a business on its gross sales is objectionable to entrepreneurs," and he said nearly all the group's Oregon members oppose the corporate tax plan.
Smith’s testimony during the hearing ignited a discussion that continued into the committee hearing later in the week. The committee spent most of its time talking about the impact the activity tax would have on small businesses.
During the Thursday hearing, Rep. Pam Marsh (D-Ashland) and Rep. Barbara Smith Warner (D-Portland) urged their colleagues to keep in mind the human effects from the bill.
“There are other residual benefits that come to this in the increase in funding of education, human services, etc.,” Smith Warner said. “Just a reminder to always look at the broader perspective and not just stick with the economists who only have two opinions because they have that many hands.”
Tax reform continues to be the major issue this session along with cost containment. The two topics are linked, and if one is brought for a vote, the other is expected to be voted on as well. The sticking point is whether the proposals can go far enough to gain traction from either the Republicans on the cost containment side or the Democrats for a revenue package.
OSBA continues to support tax reform and HB 2830 to help fund chronically underfunded schools if tax reform is paired with cost-containment measures.
A recent poll conducted for OSBA returned clear results. Oregonians care deeply about fully funding education and would support changes to the state’s revenue system to do so. They strongly support K-12 education, and they believe both education funding and high-quality education should be priorities for the Legislature. Furthermore, most voters would prefer large businesses and corporations pay more taxes to do so.
House Bill 2830 is scheduled for a hearing again Monday, June 19, and is expected to be moved to the full House.
- Lori Sattenspiel
Interim director of legislative services