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

June 22, 2017

After months of discussions, hearings, political maneuvering, and education, the Oregon legislature has abandoned its efforts to create a gross receipts tax 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 tax 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 tax, does have a constitutional restricted property tax, and relies heavily on its individual income tax 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.

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