Democratic leaders in the Oregon House are pushing ahead with plans for another gross-receipts tax on business despite the colossal defeat of Measure 97 last November. The new plan differs in many respects from Measure 97, and that's good. Lawmakers are also pledging to address the spending side of the budget equation, and that's also good.
But we question whether their commitment to reduce costs matches their zeal to raise new revenue.
The new tax proposal unveiled Thursday would levy a 0.95 percent gross receipts tax on businesses with more than $5 million in Oregon sales. The tax would be spread over many more businesses than the Measure 97 version, which targeted the state's largest firms, so the rate is much lower. Still, it's essentially a sales tax, which could wind up being passed on to the consumers, so the House leaders include credits and deductions to cushion the blow for small businesses and low-income consumers.
The plan also specifically dedicates 75 percent of the $2 billion the tax would raise to education. Opponents of Measure 97 objected to the fact that its proceeds would go into the general fund and could be spent for any purpose lawmakers decided.
There is no question the state's existing corporate income tax is no longer a reliable funding source. The number of companies subject to the tax is declining, and the corporate share of state tax revenue ranked fourth lowest among the 50 states, according to an Ernst and Young study of the 2013-14 budget years. That's largely because Oregon does not tax corporate sales as most other states do.
This latest proposal would eliminate the corporate income tax entirely.
Business groups said after Measure 97's defeat that they would consider restructuring corporate taxes, but only if the Legislature addressed the growth in state spending.
House leaders say they're doing that — but their proposed spending cuts lack precision. Where their tax plan is full of details, their spending controls are not.
They propose to cut $650 million in spending (against $2 billion from the new tax) by requiring state employees to make a larger contribution to their retirement plans. How much larger? That's not specified.
They also want to merge the Public Employee Benefit Board and the Oregon Educators Benefit Board and restrict the growth of some health benefits. Again, specifics are hard to come by.
House Speaker Tina Kotek and other House members behind the new tax plan say it would generate enough revenue to extend the school year by two weeks, decrease elementary class sizes and help universities avoid tuition increases. Those are all worthy goals, but voters already have demonstrated that they are in no mood to approve tax increases without significant spending controls.
Rep. Knute Buehler, R-Bend, told the Democratic leaders he wanted them to promise the new revenue wouldn't go for teachers' salary increases, health benefits or PERS payments. The tax plan, he said, was "laser-focused," while the proposed spending cuts were "quite fuzzy."
We agree. And voters will want the same guarantees.