A group of Oregon industrial companies said Tuesday they are giving up on efforts to repeal $1 billion annually in new business taxes.

The news means the tax on Oregon sales will almost assuredly go into effect in January, eventually providing an 18% boost in state education spending plus hundreds of millions of dollars for early childhood education.

“Though we will not be moving forward with the referral effort, we will continue to explore opportunities to minimize the negative impacts of this new tax on Oregonians by any means possible, including through legislative action or a potential initiative in a future election,” Oregon Manufacturers & Commerce said in a written statement.

Education boosters, meanwhile, immediately hailed the manufacturers’ retreat while allowing for the possibility some other repeal effort might yet emerge.

“Our kids have waited too long for us to make the investments our schools need," Jim Green, executive director of the Oregon School Boards Association, said in a written statement. "Every obstacle we can clear from their path is a victory.”

The new tax The bill approved by lawmakers aims to raise $2 billion in new business taxes for schools in each two-year budget cycle. The tax won’t kick in immediately, though, and so would raise a little less than half that in the next two years. Here’s how it works: • Businesses pay a tax of 0.57% on sales inside Oregon above $1 million. Groceries, gas, hospitals and long-term care businesses would be exempt. • Businesses can subtract 35% of their labor or capital costs from taxable sales. • To offset anticipated increase in consumer prices, the plan cuts personal income tax rates by 0.25 percentage points for the lowest three of the state’s four tax brackets.

Tax opponents had already raised $1 million toward the repeal effort, nearly all of that from lumber company executive Robert Freres Jr.

Opponents were preparing to gather 75,000 signatures to put the tax before Oregon voters. Political observers considered the signature threshold a relatively low bar and anticipated a heated campaign before a January vote.

On Tuesday, though, Oregon Manufacturers & Commerce said it’s giving up despite a substantial war chest. That decision may reflect the political reality of campaigning against school spending in a state that has struggled for years to fund education. However, the group blamed legislative constraints that it said would make it difficult to run a successful campaign.

The organization cited three factors in particular:

A new law that bans voters from printing their own petition forms would make it more difficult to gather the necessary signatures.

The Legislature’s vote to move a prospective election to January 2020 , instead of the following November. While the early election reduces uncertainty about taxes and funding for businesses and schools, it also leaves less time to raise money to campaign against the tax.

And late in the session, lawmakers passed a series of fixes to the new law. Opponents said the changes were significant enough that they would require a second repeal effort that would appear on the November 2020 ballot.

Julie Parrish, a former Republican state representative and outspoken opponent of the new tax, decried the Democrats’ maneuvers. And she said opponents might be better off waiting for the law to take effect and then gathering signatures for a straight repeal effort, when restrictions on ballot language and the election date wouldn’t apply.

“Then you’ve got a straight-up tax vote,” Parrish said. And by November 2020, she said, businesses and consumers would have seen the effects of the tax first-hand and might be more inclined to oppose it.

House Bill 3427 levies a 0.57% tax on companies’ sales inside Oregon, above $1 million. It sets aside about half the money for grants to local school districts, then divides the rest among programs for toddlers and preschoolers, career and technical education, and programs to prevent dropouts and improve school performance.

Lawmakers designed the legislation to provide about $2 billion in each two-year budget cycle, though it won’t kick in until partway through the new school year. That’s in addition to $9 billion in state schools spending during each budget cycle.

The new tax passed in May on a strict party-line vote, with Democrats muscling the legislation through on the strength of their supermajorities in both chambers. But the partisan nature of the vote belied the political complexities underlying the debate.

Nike, Oregon’s largest company, was a strong proponent of the tax and more funding for the schools. And Oregon Business & Industry, the state’s largest business association, cut a deal to remain neutral on the tax in exchange for provisions that allow companies to exempt a portion of their labor and capital spending from their taxable revenue.

Sen. Mark Hass, D-Beaverton, an architect of the tax, said Tuesday that the coalition favoring the legislation simply outmatched the opponents.

“There has never been momentum to refer this act,” Hass said.

The new tax revenue, coupled with other spending hikes approved during the last Legislative session, deliver the boost in education spending that schools activists had pursued for years.

“Educators and public school families now will have the certainty they need and students deserve," said John Larson, president of the Oregon Education Association, the teachers’ union. "This is very good news for Oregon.”

Opponents, though, complain the new tax adds to the burdens of Oregon businesses that include annual increases in the minimum wage, a new family leave law, mandatory sick time, pay equity requirements and restrictions governing overtime pay.

Additionally, Oregon businesses may be facing another fight that might have taken precedence over the schools tax. A walkout by Senate Republicans last month stymied Democrats’ efforts to pass a bill limiting carbon emissions, a proposal fiercely opposed by many manufacturers.

On Monday, the Salem Statesman Journal reported Senate President Peter Courtney plans to resurrect the effort to limit greenhouse gasses during next winter’s short legislative session.

-- Mike Rogoway | twitter: @rogoway | 503-294-7699

Oregonian staffer Hillary Borrud contributed to this report.