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Oregon’s Quest for a Gross Receipts Tax Ends…For Now

2 min readBy: Nicole Kaeding

After months of discussions, hearings, political maneuvering, and education, the Oregon legislature has abandoned its efforts to create a gross receipts taxA gross receipts tax, also known as a turnover tax, is applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding. this legislative session. This morning, Governor Kate Brown, Speaker Tina Kotek, and Senate President Peter Courtney announced that all consideration would stop until 2019.

Following the defeat of Measure 97 on the ballot in November, Oregon’s legislature explored creating a gross receipts taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. in a quest to balance its budget—the state has a $1.4 billion deficit for the upcoming 2017-2019 biennium—and to add stability to the state’s revenue streams. Oregon does not have a general sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. , does have a constitutional restricted property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. , and relies heavily on its individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. to generate revenue, which is an incredibly unstable revenue source.

The legislature held numerous hearings this winter and spring on creating a gross receipts tax, particularly within its Joint Committee for Tax Reform. Originally, the proposal mirrored the Ohio Commercial Activities Tax, with a low, flat rate, but quickly morphed into a multitiered rate structure with numerous exemptions. For instance, the latest version excluded computer and electronic manufacturing equipment in excess of $5 million.

Even with all the consideration, Democrats in both chambers were unsuccessful at convincing Republicans to support the plan. Oregon requires a three-fifths majority to create a tax, and Democrats were one vote short of this super majority in each chamber of the legislature.

Republicans continued to speak out against the new tax, citing much of our research on the perils of creating a gross receipts tax.

It was rumored that the legislature would resume deliberations in the fall during a special session, but the statement issued by Governor Brown, Speaker Kotek, and Senate President Courtney stated that this possibility is not on the table. Conversations will resume during the 2019 legislative session.

Instead, the state will use other revenue sources, such as a health care provider tax, to balance the state’s budget by its July 10th constitutional deadline.

However, the threat of a gross receipts tax in Oregon is not gone. Public-sector unions have already filed a ballot initiative for the 2018 general election ballot, and they announced this week that they’ve begun collecting signatures on Initiative Petition 27.

The quest to create a gross receipts tax in Oregon takes a breather for a year, but it is certainly not over.