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Unclear Democrats' tax plan has the votes to pass

The proposal would temporarily increase corporate income taxes in 2017 and 2018, and replace them with a corporate activity tax in 2019.

CAPITAL BUREAU - Democrats are touting a new business tax plan to raise $900 million, but the GOP and business groups have panned the deal.SALEM — A proposal from Democrats to raise $900 million through new taxes has Gov. Kate Brown's approval, but it's been panned by the GOP and its unclear whether the plan has enough support to move forward.

With about a month to go before the Legislature adjourns, Sen. Mark Hass, D-Beaverton, and Speaker of the House Tina Kotek, D-Portland, have a plan to create a new tax on certain businesses and curtail certain costs associated with state employees, public services and the public pension system.

The proposal would temporarily increase corporate income taxes in 2017 and 2018, which would raise $900 million. The corporate income tax would be repealed in 2019 and replaced with a corporate activity tax on businesses with annual sales of at least $3 million. Businesses with sales less than $3 million would pay a flat fee of $250.

Legislation on new taxes requires a three-fifths majority approval in both the House and Senate.

Although Kotek said Wednesday that "momentum (was) building to go forward with revenue reform this session," in a statement, a spokesman for Senate Republicans doubted there were sufficient votes to pass the proposal.

"The Speaker of the House will not get away with holding this building hostage for a resurrection of Measure 97," said Senate Republicans spokesman Jonathan Lockwood, referencing a 2016 ballot measure to raise corporate taxes, "the (Democrats) do not have the legally required votes to pass it."

Lawmakers have been publicly discussing possible changes to the state's tax structure since the long session began in February, in the wake of the failure of Measure 97, which would have created a gross receipts tax on certain corporations with more than $25 million in annual sales.

State Rep. Cliff Bentz, R-Ontario, the co-vice chair of the Legislature's bicameral committee on tax reform, indicated his displeasure with the proposal in a statement, saying it was "heavy on new taxes and light on structural spending reform."

"House Republicans are not willing to hand out more of their money to bail out a broken system, which is what this latest plan would do," Bentz said.

Kotek issued a statement Thursday saying that both business and labor groups, as well as Democrats and Republicans, had weighed in on the state's "structural budget problems." The compromise — House Democrats and Hass had earlier in the session floated differing versions of a similar tax structure — was developed with input from businesses, Kotek said.

"This is a moment that requires statesmanship, and I believe we have leaders in every caucus in the legislature," Kotek said. "That's why I'm hopeful that despite the rhetoric, some of my Republican colleagues will come forward and help us seize the opportunity."

A spokesman for Brighter Oregon, a coalition of business groups, said Thursday that tax reform was "needed" but time was running out for "thorough review" of a tax on gross sales receipts, such as the one proposed by Hass and Kotek.

Sandra McDonough, president and CEO of the Portland Business Alliance, which is a part of Brighter Oregon, also said that there wasn't enough time left to make major changes.

"With four weeks left, we just don't see how you can move this to get the bipartisan support and to make sure it doesn't get referred," McDonough said.

McDonough reiterated the coalition's position that they'd prefer the legislature lead with cost containment. A proposal to bend the state's cost curve, unveiled by influential lawmakers on the legislature's budget-writing committee this week, drew criticism from some Republicans, who called the proposed measures insufficient.

In a press conference Thursday, Gov. Brown, a Democrat, said she was "very pleased" to see the tax proposal, the most recent in a series of potential changes and tweaks to the state's tax structure in the face of a $1.4 billion gap between state revenues and expenses in the next two-year budget.

However, Brown acknowledged that she did not know whether there were sufficient votes to get it through the legislative process.

"I honestly do not know whether the votes are there at this point in time," said Brown. "But what is most important is that there is a conversation happening, a level of cooperation and coordination that hasn't happened in a really long time."

Brown said she was meeting with legislators on both sides of the aisle, as well as certain businesses and business associations, in an effort to move the discussion forward.

Last month, Democratic leadership touted a statement signed by the Technology Association of Oregon and the Oregon Bioscience Association, which indicated the signatories — including high-profile companies like Genentech, Nike and Zapproved — were "committed to working with legislators and the Governor to build a comprehensive plan that works for Oregon and look forward to a continued collaboration."

"Business engagement is needed to help shape a solution in a way that continues to fuel economic growth, while at the same time provide more stability for the state budget and essential public services," the statement said.

Brown said she felt having a specific proposal from two key Democrats — the Speaker of the House and Hass, the chair of revenue and tax committees — advanced the ball.

"What you have now is a meeting of the minds between key leaders," Brown said.

"My goal is to work with businesses and organizations in the business community that want to be engaged," Brown said.

Brown said it is too early to start calling for a special legislative session to resolve the revenue issues.

Union groups are prepared to go to the ballot in November of 2018, should the push to increase taxes fail at the Legislature.

The Oregon Education Association, a teachers' union, has filed a ballot measure to raise a gross receipts tax of .95 percent on businesses with at least $5 million in annual sales.

In a statement, a campaign manager for a Better Oregon, a coalition of labor groups, criticized the new proposal, saying it wouldn't adequately fund the state's schools and other services.

"We can't keep perpetuating this cycle of piecemeal budgeting and program cuts," said Hannah Love, the campaign manager.