SALEM – Democrats in the Oregon House upped the ante for a corporate tax overhaul Tuesday, when they postponed a vote on the state's $8.2 billion K-12 schools budget for another week to allow more time for tax negotiations.
At the same time, lawmakers in both chambers acknowledged the outlook for a deal is not good. Even the representative who called for the schools budget delay on Tuesday acknowledged it was a last-ditch tactic.
"We're running out of time, but you know what? Sometimes the Hail Mary pass connects," Rep. Barbara Smith Warner, D-Portland, said in an interview Tuesday after the House voted 35-24 along party lines to delay the schools budget vote. The Senate already passed the K-12 budget with bipartisan support earlier this month.
"We've done amazing work on structural revenue reform work in this session," said Smith Warner, a vice chair of the Joint Committee on Tax Reform. "And I think it's critical we give ourselves every opportunity to keep pushing that forward."
Warner, Speaker Tina Kotek and other House Democrats want to replace Oregon's current corporate income tax with a so-called gross receipts tax, which is calculated based on a company's annual sales of goods and services. It's the same type of tax that was included in Measure 97, the mammoth tax initiative voters rejected in November.
The Oregon Education Association teachers union also added to the pressure Tuesday, with the announcement it was beginning to gather signatures necessary to eventually circulate petitions to get two corporate tax measures on the ballot in 2018. One initiative could raise as much as $1.75 billion annually for K-12 and higher education through a corporate gross receipts tax, and the second would make it easier for the Legislature to raise corporate taxes to pay for education.
The Legislature is trying to close a projected $1.4 billion budget gap to maintain current programs and services, through a combination of cost trimming measures and revenue increases. A package of health care taxes could raise $550 million and a cost saving proposal could narrow the shortfall by an additional $270 million over the next two years, but lawmakers still face a significant deficit.
It's unclear House Democrats will be able to achieve more than a symbolic vote on their corporate tax plan, because any bill to raise taxes requires a three-fifths supermajority vote in both chambers. Democrats need at least one Republican to vote with them in the House and Senate, and no Republicans have signaled support at this point.
One tax proposal that could have some promise of Republican support would keep most of the existing corporate income tax rules but raise the rates. It was among several new proposals introduced Monday during meetings of the Joint Committee on Tax Reform. Sen. Alan DeBoer, R-Ashland, has previously said the state needs to raise additional revenue and he described the rate increase proposal as "on the right track."
Sen. Mark Hass, D-Beaverton, led the intensive legislative effort over the last year to craft a gross receipts tax that makes economic sense and can pass. But on Monday, sensing the lack of support for his preferred plan, Hass said he would support any plan that would raise more money for schools. For example, the state could raise $530 million in additional revenue over the next two years under the corporate tax rate increase proposed Monday compared with roughly $400 million to $600 million under the latest gross receipts tax proposals introduced the same day.
"I'm hoping for something we could pass that raises some money for education," Hass said in an interview. "I'd rather it be more unifying than dividing."
House Democrats' move to delay the K-12 schools budget vote until June 27 means they'll subsequently have just two weeks left before they must adjourn under the state Constitution.
House Democrats may introduce their own plan to overhaul corporate taxes as soon as Wednesday afternoon, when the House Committee on Revenue is scheduled to meet. The details of the potential plan are unclear, since it would likely surface as an amendment replacing an existing bill.
House Revenue Chairman Phil Barnhart, D-Eugene, confirmed the committee might pursue this strategy. "That's certainly one thing we're considering," Barnhart said Tuesday.
Barnhart had few answers to other questions about the corporate tax, such as whether a House Democrat tax plan could get the Republican votes necessary to pass and why the caucus was eschewing the special Joint Committee on Tax Reform formed explicitly to work on the issue this session. Barnhart and Hass are co-chairs of that committee.
"You need to ask other people about it who actually know what's going on," Barnhart said.
Barnhart was clear on one thing, however: It's "not likely" he would vote for a tax plan that increases revenue simply by raising the existing corporate income tax rate.
-- Hillary Borrud
503-294-4034; @hborrud