Oregon Governor John Fitzahaber has been working with leaders from both the business and labor communities to find a compromise measure on tax increases that might be palatable to the public. However, in a move that has elicited strong reactions from both business and labor groups, a union-backed organization called Our Oregon recently proposed ballot measures that would seek to raise corporate tax rates in Oregon if the governor’s plan fails.
As The Oregonian reported in late April, Our Oregon – a union-backed organization that has been deeply involved the state’s tax struggles, including Gov. Fitzhaber’s attempts to build a tax plan supported by both labor activists and the business community – recently filed six ballot measure proposals that would each, in varying ways, increase corporate tax rates in Oregon. These measures come just days after a $275 million tax increase failed to get enough votes (a three-fifths majority) needed to move out of the Oregon House of Representatives, though local labor lobbyists deny that there is any connection between the lost vote and the introduction of the measures.
Proposed Corporate Tax Reform Measures
Our Oregon argues that it is committed to the governor’s process, and that it has put forward these measures only as a case of ‘hope for the best but prepare for the worst.’ If the governor’s plan does not pan out, it will have already cleared the legal hurdles in order to gather the signatures required to put these initiatives to a vote. The six measures, which, according to Our Oregon, could raise $150 million to upwards of $ 2 billion, are as follows:
1. Large Corporations Should Pay Their Fair Share I: Remove the existing $100,000 minimum cap on corporations with more than $100 million. Instead, the state would tax revenue over $100 million at 2%
2. Large Corporations Should Pay Their Fair Share II: Same as above, except that the state would tax revenue over $100 million at 1%.
3. Invest in Oregon’s Future I: Remove the current minimum tax for C-corporations that have over $10 million in sales. Replace it with a gross receipts tax of 0.25%.
4. Invest in Oregon’s Future II: Same as above, except the gross receipts tax would be graduated from 0.25% for C-corporations with over $10 million in sales to 1% for C-corporations with over $100 million in sales.
5. Fund Oregon’s Priorities: Raise corporate income tax rate to 10% on profits above $10 million.
6. If Corporations are People, Let’s Tax Them Like It: Change the corporate income tax structure so that it operates like personal income tax rates.
Proposed Measures Pit Labor Against Business Interests
Our Oregon notes that its interest in raising corporate taxes comes from the fact that Oregon’s corporate taxes are among the lowest in the nation. In order to provide money for schools and social services, it seems only fair to corporate rates that are already low, rather than raising rates on individuals.
Business advocates, on the other hand, claim that corporate tax rates are low precisely because Oregon does not have a sales tax, so raising corporate rates would harm the state’s economy. Business advocates also characterize Our Oregon’s filing as a union putting unfair pressure on the business community during tax negotiations.
If history is any guide, Our Oregon’s move will not prove entirely decisive. In 2011, after making a similar move to propose tax measures, the organization conceded to a modest compromise measure, at the urging of Gov. Fitzhaber. However, given the potential acrimony engendered by any type of tax reform negotiations, both employers and employees would do well to track these negotiations carefully.
If you have any questions about how these tax debates may impact you or your union, please contact one of our attorneys who can help guide you.