SALEM – Leaders from Oregon's technology industry spoke in favor of a new corporate tax plan Tuesday, during the first public hearing on the proposal introduced by two top Democrats last week.

The tech companies were among businesses that weighed in behind the scenes as House Speaker Tina Kotek, D-Portland, and Sen. Mark Hass, D-Beaverton, developed the proposal. Until Tuesday, however, they hadn't spoken publicly in support of the bill.

"We really want to encourage politicians to come to compromise, instead of take a corner," said Mat Ellis, Founder & CEO of Portland-based Cloudability.

Ellis, who opposed Measure 97 which voters rejected in November, said he's not fond of any tax increase. But companies such as his rely upon Oregon's quality of life, including well-performing public schools, to attract highly skilled workers from other major metropolitan areas.

"If we want to move people from Chicago, New York and the Bay, we have to have the complete package here," Ellis said. "If we can get schools back to being reasonable, that's a big help."

Other tech leaders who spoke Tuesday echoed Ellis' desire for Oregon to increase spending on public education, to give Oregon an edge attracting employees. Kotek and Hass have said they would dedicate new revenue from the corporate tax plan to education from early childhood through universities, and specifically get the next K-12 budget to $8.5 billion.

The two hearings Tuesday on House Bill 2830 – one in the morning, one in the evening – came at a crucial time for the proposal, just over three weeks before lawmakers must wrap up work and go home. Kotek and Hass are trying to muster enough momentum, including at least one Republican vote in each chamber, to push the bill through before adjournment.

But Gov. Kate Brown said last week that lawmakers should first make sure they can balance the next two-year budget and pass a transportation funding bill before attempting the heavier lift of the corporate tax plan. Despite a humming economy, Oregon faces a $1.4 billion budget shortfall to maintain current programs and services, largely due to personnel costs outpacing revenue growth.

Hass and Kotek's plan would temporarily raise corporate income taxes and, beginning in 2019, dramatically change how the state taxes businesses by replacing the income tax with a so-called gross receipts tax. The new tax would be based on businesses' sales of goods and services above $3 million a year, with five different rates based on industry sectors. It would raise an estimated $900 million in the next two years and more in future biennia.

John Calhoun, who held senior financial management positions during a 20-year career at Intel, said it's more difficult for corporations to avoid paying taxes assessed on their sales in Oregon.

"As long as a tax is based upon income, large corporations will continue to find ways to avoid paying taxes," Calhoun said. "When I was at Intel, I helped justify shifting profits to our Asian tax haven. I know how it's done."

"The corporate activities tax will solve that problem," Calhoun said, using another term for the gross receipts tax.

Measure 97 was also a gross receipts tax, but at a much higher rate and on a smaller group of large companies. It would have yielded roughly $6 billion per biennium.

Hass and Kotek's plan is scheduled for more work Thursday, when the Joint Committee on Tax Reform could vote on whether to send it to the House floor. Comments by a key Republican Tuesday suggested it might pass the House.

Rep. Greg Smith, R-Heppner, said the plan would benefit small businesses in his district, suggesting he might provide a key Republican vote. Democrats need one Republican vote in both the House and Senate to achieve the three-fifths supermajorities necessary to pass a bill increasing taxes.

"This is pretty darn good for a lot of small businesses" in rural Oregon, Smith said, referring specifically to businesses on main streets in Milton-Freewater and Heppner. Smith said the only business in those retail districts that might meet the $3 million annual sales threshold to pay the gross receipts tax is Les Schwab Tire Centers.

Smith was responding to comments by Anthony K. Smith, Oregon state director for the National Federation of Independent Business, an association for small businesses. Anthony Smith had testified that "the very concept of taxing a business on its gross sales is objectionable to entrepreneurs," and he said nearly all of the group's Oregon members oppose the corporate tax plan.

Senate Republicans said there isn't the Republican vote to pass the plan in their chamber.

In a statement Tuesday, Senate Republican Leader Ted Ferrioli, R-John Day, said no one in his caucus would vote for the bill he called a "resurrection of Measure 97."

"It is an outdated, hidden sales tax that Oregonians just massively defeated," Ferrioli said.

-- Hillary Borrud

503-294-4034; @hborrud