House Democrats on Thursday proposed to levy a 0.95 percent tax on Oregon businesses' sales over $5 million. The tax would bring in a net of $2 billion for schools and other essential services in the upcoming biennium.

The proposal is likely the first of several as lawmakers seek to refine a rough plan presented to a joint tax reform committee Tuesday to overhaul the state's corporate tax code.

That plan called for taxing Oregon businesses' sales instead of their profits, but didn't provide many details, other than a taxing companies' sales over $1 million at rates between 0.25 percent and 1 percent. The Democrats' proposal shrinks the tax base by upping the threshold and puts the rate at the high end of the scale.

The broad plan also seeks to address the negative effects of the tax proposed in the voter-rejected Measure 97, including higher consumer prices and job loss, with credits and deductions for small businesses and low-income Oregonians.

The proposal from House Democrats would earmark three-quarters of the $2 billion in new revenue for education, a move to appease those who voted against Measure 97 because there was no requirement that lawmakers spend the money on schools.

Most lawmakers agree that increased taxes should be paired with cuts in spending to close the state's $1.6 billion budget gap.

At Thursday's meeting, Rep. Phil Barnhart, D-Eugene, co-chair of the tax reform committee, said a reworking of Oregon's corporate tax system is long overdue.

"The current structure is unsustainable. ... We have the worst of both worlds," he said, noting that the revenue from the corporate income tax is both volatile and is decreasing over time.

Barnhart said while a gross receipts tax could be painful for businesses in the short term, increased funding for education would strengthen the economy in years to come.

-- Anna Marum

amarum@oregonian.com

503-294-5911

@annamarum