A proposed constitutional amendment to equalize tax rates and breaks for different types of businesses is one step closer to the November 2020 ballot.

Chief sponsors of the proposed Local, Family and Small Business Fairness Act have collected enough valid signatures to secure a draft ballot title — 1,000 signatures according to state law. The ballot title provides voters a summary of what the initiative would do.

Members of the Oregon Small Business Association said they filed paperwork for the initiative petition in response to Senate Bill 1528 passed earlier this year to scrap a 20 percent tax deduction that was part of federal tax reform last year and would have cost the state $200 million to $300 million in unrealized tax revenue. Oregon tax code automatically conforms to federal code unless state lawmakers pass legislation to disconnect it.

Gov. Kate Brown, who is seeking re-election this year, called the special session after signing Senate Bill 1528, which was unpopular with some members of the business community. The governor said while she was considering Senate Bill 1528, she realized that state lawmakers needed to expand the state’s lower tax rate for “pass-through” businesses to sole proprietors.

She called a special session May 21 to expand the break to sole proprietors with up to $5 million in income and at least one employee working 1,200 hours a year.

Lindsay Berschauer, spokeswoman for the Local, Family and Small Business Fairness Act political action committee, said the governor’s proposal failed to recognize that most sole proprietors don’t employ anyone and would not qualify for the expansion. The initiative would equalize the different tax rates for C corporations and other types of businesses. C corporations pay a 7.9 percent tax rate, while other types of businesses pay 9.9 percent.

“The large corporations can afford lobbyists — the folks to fight for them and protect them,” Berschauer said. “The small businesses don’t have that so this initiative is really about alleviating some of the burden from small business owners by asking voters: Do you agree or not this is fair or unfair?”

Critics of the initiative say it is poorly written and would have a negative impact on state revenue and the social services funded by that money.

“The proposal ignores the fact that C-corporations’ profits are taxed twice, once at the business level and again when the shareholder receives a dividend,” said Daniel Hauser, interim executive director of the Oregon Center for Public Policy. “Pass-through businesses, on the other hand, are only taxed once when the owner passes the profits through to their individual income taxes. Aligning the tax rate individuals pay on their pass-through business profits to the tax rates paid by C-corporations at the business level is ludicrous.”

A draft ballot title is due June 12 from the state attorney general’s office. After that, comments are taken on the proposed ballot title wording, which could be challenged or changed.

Paris Achen

Portland Tribune Capital Bureau

503-385-4899

email: pachen@portlandtribune.com

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