The battle lines are drawn over Measure 97, which would boost state tax revenue by 25 percent.

The measure would generate nearly $3 billion annually by imposing a $30,000 minimum tax on C-corporations, plus a 2.5 percent gross receipts tax when their sales exceed $25 million. At present, Oregon's minimum tax on corporations is capped at $100,000.

There is little middle ground between the public unions — who pushed to put the initiative on the November ballot — and the targeted corporations. Backers say the measure will provide sorely needed revenue to fund education, health care and senior services. Opponents counter the escalating effects through the supply chain will hit consumers at grocery stores and on their utility bills.

"We have had 25 years of inadequate and sometimes erratic funding for schools," said Otto Schell, a lobbyist for Oregon PTA and spokesman for A Better Oregon. "For folks like me who have been advocating and tracking how we fund schools and services, we are hopeful that Measure 97 breaks that cycle of disinvestment."

Passage will create a ripple of unintended consequences, opponents say.

"We know from the Legislative Office research that two-thirds of the tax will be passed along to consumers and other businesses," said Pat McCormick, spokesman for Defeat the Tax on Oregon Sales. "Three out of four customers get their electricity from utilities that will automatically pass the cost through."

As goods and services pass from one affected company to the next, the ultimate costs of so-called tax pyramiding will result in a much higher hit to consumers, McCormick said.

"The company producing silicon will be subject to the tax, the chip maker will be subject to the tax, the product the chip goes into will be taxed, and the retail store where the product is sold could be subject to the tax," McCormick said. "That's why this type of taxation is not used very often."

States employing such a tax, he said, spread it over a wider range of companies with far lower rates.

Measure 97 was advanced by Our Oregon, funded largely by public employee unions. Literature distributed by Yes on 97 focuses on Fortune 500 firms as the answer to solving the state's inability to provide adequate, stable funding for education and social services.

"Over the course of four years, we studied more than 25 different possible ballot measures," said Our Oregon spokesperson Katherine Driessen. "We filed draft measures in 2012 and 2014. We wanted to get this right, and that meant designing a measure that raises enough revenue to make a meaningful improvement in our badly underfunded critical services, hits the right entities and is politically viable."

Opponents point to the Legislative Revenue Office's analysis of the initiative and say that instead of soaking the rich, Measure 97 simply will drown the poor.

"This has a tremendously regressive impact," said Brad Hicks, CEO and president of the Chamber of Medford/Jackson County. "It's going to hit low-income households much more significantly than high-income households. A much higher percent of their income will go to pay for higher prices at the grocery stores and on their utility bills."

Money is pouring in as both sides build up their war chests in anticipation of an all-out assault heading to November. Two years ago, $29 million was raised in the GMO ballot measure fight.

According to the Secretary of State's website, Yes on 97 backers have reported $1.5 million in contributions — $750,000 each from the Oregon Education Association and Service Employees International Union, which represents 55,000 government and service workers.

Six more allied groups have given $518,500 through Defend Oregon, led by the American Federation of Teachers, $250,000; Nurses United Political Action Committee, $100,000; and Oregon AFSCME Council, which represents 25,000 public employees in Oregon, $100,000.

A total of 378 contributors have given just under $8 million to the No on 97, Defeat the Tax on Oregon Sales, led by Albertsons/Safeway, $500,000; Lithia Motors, $455,000; Cambia, $380,000; Portland Automobile Dealers Association, $250,000; and Equilon Enterprise (Shell), $250,000.

Secretary of State spokeswoman Molly Woon said more contributions may have been made during August, when the 30-day reporting period prevailed. The reporting requirement shortens to seven days this month.

There are three types of consumption taxes: retail sales; value-added, used extensively in the industrialized world outside the U.S.; and gross receipts.

The handful of states employing the gross receipts tax have far lower rates and vary the amount from sector to sector. A study by accounting firm Moss Adams noted while a retail sales tax is visibly assessed at the cash register, the minimum corporate tax would apply at every step and becomes embedded in the purchase price. Further, a sales tax generally allows exemptions for basic necessities such as food, prescription medicine and rent.

The Legislative Revenue Office in Salem reports 29,000 C-Corporations file state returns annually, with the measure affecting 1,000 firms. Within that group, 50 corporations will account for about half of the revenue estimates, Legislative Revenue Officer Paul Warner said. Most of those 50 corporations aren't based in Oregon.

The $3 billion raised would account for 1.5 percent of the state's $200 billion economy, he said, moving taxes from 10.1 percent of the state's economy to 11.6 percent.

The immediate impacts are straightforward, said Warner, a former state economist. The enormity of the tax increase and the concentration of its bite create unforeseen risks.

"It's more complicated when you look at the secondary economic and distribution affects," Warner said.

The possibility of a 2.5 percent tax on Oregon sales has Lithia Motors Chairman Sid DeBoer fuming. Even though the Medford-based auto retailer generated more than $3 billion in sales in 2015, regulatory filings show the company's net profit margin was 2.3 percent on the heels of a 2.5 percent margin in 2014. For the first half of 2016, the profit margin dropped to 2.2 percent.

"Basically, it takes all of our Oregon profits, and then some," DeBoer said. "I agree Oregon needs more revenue, but this is a discriminatory tax because it only applies to C-corporations."

Companies with more than 35 shareholders are required to register as C-corporations. Many of the state's incorporated firms are S-corporations and taxed differently.

"It will cost about $1,000 a car, whether we make money or not," DeBoer said. "We're not able to pass that on, because our competitors won't be paying it and won't have to raise prices."

The Legislative Revenue Office analysis finds private sector employment will fall by more than 38,000 jobs over a five-year period, primarily in retail, wholesale and health services. Public sector employment will add 17,700 positions during that period, with policymakers determining where the growth occurs.

"It's indisputable taking resources out of the private sector and putting them into the public sector means the private sector won't have as much money for employees," Warner said. "If public sector spending goes where the labor force will be more productive and improve infrastructure, then you can see gains in both sectors over time, but that depends on the use of funds."

Gov. Kate Brown threw her support behind the measure in early August, citing the need for a more stable revenue base.

“There is a basic unfairness in our tax system that makes working families pay an increasing share for state and local services, including public schools, senior services and health care,” Brown said.

Senate Finance Committee Chairman Mark Hass, D-Beaverton, said the initiative process is no place to develop tax code and predicts rancor will rule in the coming weeks as the sides step up their campaigns.

"We introduced a compromise in February to avoid this war we're now entering," Hass said. "We were holding hearings and reviewing computer simulations, and then the public employee unions started circulating their gross receipts plan. I was optimistic we could come together and avoid a big fight."

His plan included a tax cut for middle-income workers.

"We probably had enough votes in the Senate to do it or at least offer it as an alternative ballot measure," Hass said. "But we had a hard time getting traction in the House and with the governor; it was uphill sledding. Some people looked at me like I had three heads."

Whether Measure 97 passes or fails, Hass is sure his committee will go back to the drawing board.

"Both scenarios are pretty messy," he said. "After a thousand miles of scorched earth, people will be upset with one another and relationships will be broken. But we will still have to do something. It's statutory, not constitutional, therefore we can make any changes we want to make."

Phoenix resident Mark Kellenbeck, co-founder and co-chair of Main Street Alliance of Oregon, who views the tax plan as a necessary remedy, pans the idea grocers will raise prices to cover their taxes.

"Oregon would see little to no adjustments in price," Kellenbeck said. "For the really big, big corporations and internationals, Oregon sales are so small that it's just half a percent of their total. Grocery prices would affect the poorest, but I don't think you'll see it."

Steve Olsrud, vice president of Sherm's Markets operating in Medford, Klamath Falls and Roseburg, wouldn't be subject to the tax, but many vendors supplying goods on his store shelves would be.

"The price of everything will go up," Olsrud said. "Most people think they can tax the big guys, because they make tons of money. But everything just runs downhill."

The Rogue Valley's largest non-medical employer, Harry & David, will be affected, but to what extent it's hard to know.

"Harry & David does not believe this measure is in the best interests of Oregon's business community, its workers or the overall economic growth of our state," wrote Joe Pititto, spokesman for 1-800-Flowers.com, Harry & David's parent firm.

Pititto declined comment on what passage might mean for the gourmet food and gift company.

Moss Adams' analysis indicated nonprofits and hospitals may be forced to increase costs or reduce or terminate programs.

"Every Oregonian including the state and its municipal bodies would undoubtedly see an increase in the cost of everyday items, such as utilities, food, medicine, clothing, and transportation," the report stated.

Companies paying the tax will be able to claim it as a deduction on their federal taxes. Even so, Jennifer Young, a Moss Adams director, said companies on tight margins flirting with a loss could suffer.

"A net loss deduction wouldn't do much good," she said. "Even if a business is losing money, it would still owe this tax to Oregon. It's a frightening prospect for a business on very low margins."

With Public Employee Retirement Services liabilities swelling to $21 billion this year, the Legislature is confronted with past commitments and future demands.

"While it's widely acknowledged that the text of the measure says the money would go to education, health care and senior services, there is no requirement that the money goes to those places at all; it just goes to the general fund," Young said. "You can't fault the motives of proponents, but there are going to be a lot of unintended consequences if this passes."

Lower oil prices have returned major airlines to profitability. With the likes of Delta, United and Alaska flying in and out of Oregon, ticket prices would undoubtedly rise as well.

"The airlines selling tickets will presumably be affected as will fuel sales at the airport," said Port of Portland Executive Director Bill Wyatt.

He added taxes on jet fuel would still go to the state Aviation Department, while automotive fuel, batteries and tires go to the State Highway Fund. The Legislative Revenue Office analysis projects passage would raise $250 million for the highway fund.

In a state saddled with comparatively high personal income, capital gains and property taxes, there are few directions to turn other than corporate and consumption taxes.

Should legislators have differing opinions than proponents on how Measure 97 revenue is spent, Schell intimated there would be political ramifications.

"I'd suggest any legislator who ignores the language in the measure, does it at their peril," the lobbyist said. "It isn't like we created some new project, this is for real core services in Oregon."

Either way, the matter almost certainly will end up back in the Senate Finance and House Revenue committee.

"When all this starts coming out on TV with the claims and counter-claims, the average Oregonian isn't going to know what to do," Hass said. "The divisiveness comes at a really bad time. When we were trying to work on this last February, we had the problem in Malheur County. Before that it was the shooting in Roseburg, and having to replace the governor. The last thing we need is a divisive campaign."

Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31