SALEM — Oregon Democrats on Monday pitched a flurry of last-minute changes to their plan for a major new corporate tax, desperately seeking a version that can draw enough votes to pass as the legislative session enters its last few weeks.
Lawmakers introduced three variations of a slimmed-down gross receipts tax on businesses that, at least for the first four years, would raise much less new money than previous proposals.
And, for the first time, the joint committee on tax reform also formally entertained a different concept. That version would forgo any type of new gross receipts tax and instead raise more money by increasing the state’s existing corporate income tax.
The two directions illustrate a tactical split between Senate Democrats and more liberal House Democrats as they try to address the state’s short- and long-term budget crunches by imposing a new tax on businesses.
The state faces a $1.4 billion hole in its upcoming two-year budget and expects further budget pain in later years because of rapidly rising expenses, including growing pension costs for government employees and Medicaid costs for low-income residents.
Many House Democrats want a formal floor vote on some form of gross receipts tax, even if the bill is highly unlikely to pass the Senate and may even be voted down in the House. Democrats need at least one Republican vote in both chambers for the new tax.
“What we need is a substantial, game-changing (tax) to raise enough revenue to fund our public services,” said Rep. Phil Barnhart, a Eugene Democrat and committee co-chairman. “Oregon is on the way to being a Third World country.”
Barnhart said it’s unclear, for now, which variation of the gross receipts tax the House might vote on. The plans vary from raising $410 million to $900 million in new revenues in 2017-19, but they all would raise about $1 billion when fully phased in in 2019-21.
“We have to have the courage to take that vote,” Barnhart added.
But Sen. Mark Hass, a Beaverton Democrat and key crafter of the tax proposal in the Senate, indicated on Monday he was open to shifting gears.
With any gross receipts tax vehemently opposed by Republican lawmakers, Hass said the plan to simply increase the corporate income tax was likely more viable for now.
“I’m looking for something that helps with education funding and can get through the building,” he said.
The new proposal would increase the existing corporate income tax rates by 1.4 percentage points to 8 percent for profits less than $1 million and 9 percent for profits more than $1 million. It would raise an estimated $530 million in 2017-19.
“If (a gross receipts tax) is so divisive that it’s going to set the Legislature on fire, I’m open to something more inclusive,” Hass said.
The new approach immediately appeared to win favor with at least one key Republican swing vote, Sen. Alan DeBoer of Ashland, who said the tax reform committee was “on the right track.”
Brighter Oregon, a key business group, meanwhile, said that the committee considering “a bridge tax plan that doesn’t include a gross receipts tax is a welcome development.”
But Pat McCormick, a spokesman for Brighter Oregon, said such a plan also must include “genuine cost containment,” including reforms to public employee pensions.
The tax reform committee took no immediate action Monday, but it is expected to meet again Wednesday.