Increase revenue through cutting tax breaks or decreasing business subsidies

Oregon’s budget is out of balance, and the Democrats believe business doesn’t pay enough in taxes. The Democrats, lead by Sen. Mark Hass have been negotiating with business interests and Republicans to enact ta reform that increases some business taxes, so far without success. The negotiations are nevessary because Oregon requires a 60% legislative majority to pass tax increases, and the Democrats are one vote shy.

But There are two ways the Democrats could help balance Oregon’s budget and make Business pay that don’t require a 60% majority.  Eliminating current tax breaks, or eliminating spending that directly benefits large businesses.

Eliminate Tax Breaks

Based on recent case law it appears the Oregon legislature could by a simple majority modify or eliminate special tax breaks, exemptions and programs that reduce corporate taxes, because it isn’t a “tax increase”. Here’s the caselaw.

In City of Seattle v. Department of Revenue, 357 Or 718 (2015) the Oregon Supreme Court basically found that:

  • The fact that a bill will bring additional money into the treasury is not enough to make it a bill for raising revenue. This is true even if increased revenue was one of goals of the legislature in enacting the bill. The relevant question is “whether the bill possesses the essential features of a bill levying a tax.”
  • A bill with the essential features of levying a tax is one that “directly” levies a tax, as opposed to regulating how a tax is applied. Stated differently, bills “to secure what may be deemed a just or expedient basis for the levying of a tax” are not bills for raising revenue. As noted by LC, setting the “rate” is considered levying a tax; setting the base that the rate is applied to is not.[4]
  • Because removing a tax expenditure generally is not a bill that actually levies a tax, but rather one that regulates how a tax is applied or credited, it is not a bill to raise revenue.

A short list of  breaks that could be eliminated include:

  • Enterprise zones,
  • Single Sales Factor,
  • the Film and Video Labor Rebate and Tax Credit,
  • equipment property tax exemptions,
  • the Oregon Business Retention and Expansion Program,
  • IC-DISC and pass-through income tax breaks, and
  • the Industrial Site Readiness Program.
  • the Oregon Investment Advantage
  • Small manufacturing business expansion program
  • Qualified research activities credit
  • Strategic Investment Program

This would be the State equivalent of the federal Nuclear option. Republicans would immediately challenge these cuts as “tax increases” and subject to the 60% rule.

But that’s fine. We can have an open frank and honest discussion about each and every one of these programs and credits and they can be defended on the merits.

Cut Business Subsidies

Over the past 1o years the State has accelerated the resources it spends supporting and developing business opportunities for Oregon businesses. Cutting these programs would help the State balance it’s budget. Some of these programs include:

  • Business Oregon,
  • Regional Solutions,
  • Connect Oregon,
  • Oregon Inc,
  • ONAMI,
  • OTRADI,
  • OWET,
  • Oregon BEST,
  • PIE,
  • Drive Oregon and SOAR Oregon,
  • state-sponsored trade missions,
  • the Wave Energy Trust
  • the Agriculture and Forestry Departments
  • Oregon RAIN,
  • the Oregon Metals Initiative,
  • the Oregon Research Collaborative.
  • public support of farmers’ water needs,
  • the Western Juniper Industry Fund,
  • the Main Street Grant Fund, and
  • the Advanced Manufacturing Research Center.

Should all of these programs be cut? Probably not. But putting them on the chopping block will require their sponsors to justify and objectively show that these programs are worth the bang for the buck. And, it will allow Oregon Democrats to ask…how should we pay for these programs that are using public funds to generate private profit. The question should be: Whats the taxpayers return on investment?

Lets have business justify their public investment and ask them…how should the cost of these programs be fairly allocated?

Should a lower income laborer in Baker County be subsidizing the Portland start up software business?

 

* Thanks to Jody Wiser where I stole much of the list of tax credits and exemptions and taxpayer supported business development/assistance programs.

 

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