Joint Tax Reform Committee works on plan to raise revenue

The Joint Tax Reform Committee held its first meetings this week.

The formal committee grew out of an informal group that had been discussing revenue options. The committee is tasked with reforming Oregon’s corporate tax structure and providing options that would increase state revenues.

The tax reform group is one of five groups meeting to work on addressing the $1.6 billion state budget shortfall.  There is also a PERS reform group, hospital provider tax group, comprehensive transportation package group and cost containment group.

The cost containment group is looking at ways to control rising costs among state and local governments, which includes school districts. Republicans have said that without cost containment measures, no amount of revenue will be enough if state budgets continue to grow at an unstainable rate.

Sen. Mark Hass, Beaverton Democrat and co-chair of the Joint Tax Reform Committee, indicated that moving a tax plan combined with cost containment measures would create a viable package.

“There have been no backroom deals. If anyone has something better – bring it forward,” said Hass during opening comments.

Paul Warner of the Legislative Revenue Office gave a packed room on Tuesday an overview of a business tax rate framework (see Revenue Reform in Oregon and Business Tax Reform Framework).

The revenue raising measure is a trimmed-down version of the Ohio commercial activity tax (CAT), which taxes all businesses at a lower rate. This new structure would replace the current corporate tax structure. Warner explained how the range of tax rates – 0.25 percent to 1 percent – could raise up to $3 billion for the state’s budget.

Warner went on to explain the pyramid effect. Some industries buy individual parts to create their final product. Each part would be taxed separately, increasing the cost of making the final product. Warner said pyramiding would need to be addressed, with possible exemptions or some sort of reduced rate. During the Measure 97 campaign, the pyramiding effect was a factor in businesses’ opposition to the measure.

Many Republicans continue to downplay any need for a revenue plan but can agree with Democrats that the tax system needs an overhaul.

The Joint Tax Reform Committee is expected to meet Tuesdays and Thursdays at 8:30 a.m. for the next two months as they continue to discuss options for a tax system overhaul.

Paul Warner of the Legislative Revenue Office testifies Tuesday before the Joint Committee on Tax Reform.
(Photo by Lori Sattenspiel, OSBA)

- Lori Sattenspiel
Interim director of legislative services
lsattenspiel@osba.org