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New Oregon business taxes? Panel explores ideas

By KRISTENA HANSEN
Of the Associated Press

SALEM — Leaders in the Oregon Legislature are forming a temporary, bipartisan committee that'll spend the next several weeks hashing out a business tax-overhaul plan that may go to voters for final approval in a special election.

In a memo Wednesday — coincidentally the same day President Donald Trump unveiled a sweeping-tax cut plan — House Speaker Tina Kotek and Senate President Peter Courtney, both Democrats, orchestrated the creation of the Joint Tax Reform Committee with the 14 lawmakers who handle the state's money-making policies in the House and Senate revenue panels.

The new Tax Reform Committee will hold public hearings to flesh out final details of a proposal to overhaul Oregon's current system of taxing corporate income. That revenue-boosting proposal — already “a couple-hundred pages” long, Sen. Mark Hass told the Associated Press — will serve as the second major component to a broader plan to address the $1.6 billion-deficit that looms over Oregon's 2017-19 budget.

The other big piece was disclosed Friday - a plan to reign back the state's spending through hiring freezes, revising collective bargaining rules with labor unions and curbing public employee health and retirement costs.

Hass, a Democrat who is chairing the new Tax Reform Committee, said the final draft of the business tax plan may go to voters in a special election, potentially as early as this fall. That could leave the door open for a similar showdown between businesses and labor unions that ensued last year over Measure 97, the unions’ now-defeated business tax hike proposal.

“I'm not naive here, I know there's many businesses that don't want anything to with do tax reform,” Hass said.

Opposition is already stacking up among certain players in the local business community, which agreed to come to the negotiating table with unions and lawmakers after voters struck down Measure 97. The revenue proposal now underway in Salem is similar to Measure 97: It would replace the current corporate income tax with an Ohio-style “commercial activity tax” on business transactions — not to be confused with a sales tax that consumers outside of Oregon commonly pay at the cash register.

“We really don't think that that is feasible right now, we just had an election about that ... if it ends up, we already have groups that'll put it on the ballot and we'll have another big fight and we just don't see that that's really good for Oregon,” said Sandra McDonough, president of the Portland Business Alliance who spoke on behalf of Brighter Oregon, the Oregon Business Plan Coalition's new campaign name.

Both Hass and McDonough emphasize the importance of a two-pronged approached to the budget crisis: curbing government spending and raising new revenue.

Labor unions and Democrats say businesses, whose local tax rates are on the lower-end of the national spectrum, should pay more into the state's tax system that's reliant on Oregonian household incomes. The state's lack of a sales tax and voter-approved caps on property taxes from the 1990s further hamper lawmakers’ ability to find new revenue.

Local businesses and Republicans say Oregon's money problems stem from “runaway spending” by state government that, over time, has driven up pension and health care costs at unsustainable rates. They note that the economy generated over $1 billion in new money for the state's 2017-19 budget, while costs to keep services going at their current levels are going up $3 billion.

“We need to see a movement toward cost control and then when we do, we want to go to the table and talk about new tax revenue, including taxes paid by business to fund specific outcomes like better high school graduation rates, on-time college completion and third-grade reading scores,” McDonough said.

In addition to last week's cost-cutting plan, Gov. Kate Brown signed an executive order for a hiring freeze for the remaining two months of the current two-year cycle, beginning May 1. On Thursday, Brown is expected to sign two additional orders, the details of which are unknown, involving employee-compensation bargaining and the collection of outstanding debt owed to the state.

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