Education-dedicated revenue plan coming this week, legislators say

Rep. Nancy Nathanson, D-Eugene, discusses tax policy Monday with Legislative Revenue Officer Chris Allanach. Nathanson, a member of the House Revenue Committee, is co-chair of the Joint Committee on Student Success Revenue Subcommittee. (Photo by Jake Arnold, OSBA)

Legislators expect to choose a proposal this week to bring in $1 billion more a year in revenue dedicated to education.

Sen. Mark Hass, co-chair of the Joint Committee on Student Success Revenue Subcommittee, said Monday that the subcommittee will likely offer a plan Thursday, with the bill language drafted sometime next week.

During Monday’s public hearing, the subcommittee discussed refinements to the tax plans it has been kicking around.

The subcommittee has been trying to craft a broad-based tax with a low rate that will add roughly $1 billion a year to Oregon’s revenue after lowering the bottom three personal income tax rates by 0.25%. The subcommittee has settled on some form of a commercial activities tax, which is based on a company’s gross receipts.

The subcommittee has been looking at a straight CAT, as well as two modified versions that allow deductions for inputs and labor. The deductions are meant to nullify some of the effects of “pyramiding,” in which the same good is taxed several times. But the higher the deduction, the higher the tax rate needed to reach the $1 billion goal.

The subcommittee’s plans include exemptions for petroleum and medical providers because of taxes already in place for highways and health care. On Monday, the subcommittee also discussed exemptions for groceries.

Exempting groceries would make the tax more progressive but would also require raising the rate to meet the $1 billion goal. For the straight CAT, it would mean going from a 0.37% rate to a 0.41% rate.

Legislative Revenue Office calculations show the taxes would have a slight dampening effect on jobs and investment in the short term while slightly pushing up the wage index and prices. Over the long term, however, improving the educational system would strengthen the Oregon economy, with economic benefits for businesses and workers, the LRO reported.

Subcommittee Co-Chair Rep. Nancy Nathanson stressed that this kind of tax would add stability to the revenue available for schools.

- Jake Arnold
jarnold@osba.org