Gordon Friedman

Statesman Journal

A ballot measure poised to pit labor groups against business interests would increase the tax burden of Oregonians by about $600 per capita annually and raise more than $6 billion in revenue each biennium.

That’s according to an economic analysis of labor-backed Initiative Petition 28 by the nonpartisan Legislative Revenue Office. If passed, IP28 would create a gross receipts tax on C corporations of 2.5 percent on sales above $25 million.

Revenue collected through IP28 would be earmarked for public education, health care and services for seniors.

The 106 Oregon companies reaching more than $250 million a year in sales would bear about 50 percent of the new tax liabilities. Their increased costs would likely hit consumers via price increases, the analysis showed.

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“This is a big tax policy decision,” Legislative Revenue Officer Paul Warner told legislators Monday.

Sen. Mark Hass, D-Beaverton, chairman of the Senate finance and revenue committee, said there will be “potent forces at work” to keep IP28 from passing.

He said there is an alternative to a fight at the ballot if the Legislature can agree to raise revenue, but perhaps by softer, slower means.

“I know members of this committee would like to see compromise on these goals without going to World War III,” he said.

In February, Hass proposed a "peaceful resolution" via legislative compromise, but it never materialized into a bill.

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IP28 would transform Oregon’s corporate tax landscape.

The state’s business tax rate as a percentage of income would rise above California's, Idaho's and the national average, while remaining below Washington's, which has had a gross receipts tax since the 1930s.

A Better Oregon, the group backing IP28, said it would have the effect of making corporations pay their fair share of taxes.

The analysis shows that if IP28 is passed Oregon's share of revenue from personal income taxes — the highest in the country at 69 percent — would drop to 55 percent.

Yet the framework is regressive; Oregonians earning between $21,000 and $48,000 would feel the greatest effect of price increases, according to the LRO analysis.

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Ryan Deckert, president of the Oregon Business Association said via a statement that IP28 would be "a multibillion-dollar blank check" for the Legislature with "staggering" impacts on jobs.

The legislative analysis showed IP28 would cause a loss of more than 38,000 private sector jobs between 2017 and 2022. Retail and wholesale trade sectors would be hit hardest, according to projections.

Public sector employment is expected to grow, however, because of increased tax revenues.

The measure would also “dampen” income growth by about 1 percent.

To avoid more taxes, companies may transition to S corporations, benefit corporations or spin off their subsidiaries to reduce overall sales.

Republican lawmakers are displeased at the projections.

House Republican Leader Mike McLane, R-Powell Butte, called IP28 "an ill-conceived, disingenuous measure that would have dramatic consequences for family budgets and the economic future of our state." Senate Republican Leader Ted Ferrioli, R-John Day, echoed those concerns.

Last week, A Better Oregon turned in enough signatures to the Secretary of State last week to put IP28 on the ballot.

Senate President Peter Courtney, D-Salem, still holding out hope for a legislative solution, said, “Compromise remains possible if all sides are willing to talk."

Voters take to the polls in November. The Legislature next convenes in February 2017.

Send questions, comments or news tips togfriedman2@statesmanjournal.com or 503-399-6653. Follow on Twitter@GordonRFriedman.

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