By: Oregon State Chamber of Commerce
What We See Coming Up (September 2015):
Hope everyone had a wonderful Labor Day Weekend!
Now that the 2015 ‘long’ legislative session is over, we turn our attention to the ‘short’ 2016 session.
The upcoming February 2016 legislative session is constitutionally limited to 35 calendar days. While initially envisioned as a short session needed to make mid-stream budget and policy adjustments, these new even-year short sessions have become a sprint to re-fight battles from the previous long session.
We will get a better sense of 2016 issues as the Legislature meets for short, three-day blocks of committee hearings in September and again in November. But in the meantime, there are a couple of big-ticket issues we can forecast now.
- Minimum Wage. We believe there will be another concerted effort in 2016 to pass a minimum wage increase along with legislation to allow local governments to increase their own minimum wage levels even higher. Last session, House Speaker Tina Kotek (D-Portland) sought legislation to increase the minimum wage to $13 per hour and allow for higher local minimum wages. There is every reason to believe a similar proposal will be back.
The politics of this issue are made complicated by several factors: (1) progressive activists do not want to see a minimum wage proposal less than $15 per hour, (2) some business groups are actively seeking a “compromise” that would increase the minimum wage up to $12 or more per hour, (3) there is a looming ballot measure that would increase the wage to $15 per hour, and (4) there is a critical mass of moderate democrats who do not want to see further cost mandates on small business in addition to the paid sick leave and retirement plan mandates already passed by the 2015 legislature.
- Corporate Tax Disclosure. There are strong indications that a corporate tax disclosure bill might be in the works again for 2016. Such a bill would require certain C corporations to disclose sensitive – and even proprietary – tax and business data to the Secretary of State to be posted on a public website. This bill is an attempt to politicize business tax returns.
Why do we suspect another effort to pass this bill? Because the lone Democrat on the House Revenue Committee who blocked this bill, Rep Tobias Read (D-Beaverton), was recently removed from the committee. Changes in committees are relatively rare between sessions. From a policy perspective, the only reason to replace Rep Read would be to pave the way for this legislation in the House. OSCC strongly opposes the required public disclosure of otherwise private business tax information.
In other news…
Tax Measures Appear Imminent. Oregon’s government employee unions have filed five versions of a 2.5% gross receipts tax and two versions of a personal income tax increase for the November 2016 ballot. We expect them to move forward to qualify one of each, selecting the measures based upon their polling and political tactics.
Initial estimates from the Legislative Revenue Office indicate that these measures would raise personal income and business taxes by nearly $7 billion – or over 30 percent. To put this in context, the current state budget is roughly $19 billion. If voters approve these tax increases, the size of the state budget would increase more than one-third.
The proposed tax increases are 12 times larger than the Measure 66/67 tax increases passed by Oregon voters in 2010. Measures 66/67 raised taxes personal income and business taxes by $540 million.
The 2.5% gross receipts tax would apply to all business revenue above $25 million for Oregon C corporations. The measures are expected to raise taxes on C corporations by $5.5 billion per biennium. The unions have filed five different versions of this same concept.
On the personal income tax side (which would also affect business owners, S-Corps, Partnerships, and LLCs), Initiative 24 would raise the personal income tax rate to 10.8% for income above $125,000 and 11% for income above $250,000. Initiative 26 would raise the personal income tax rate to 11.5% for income over $125,000, 13.5% for income above $250,000 and 15.5% for income above $500,000.
If one of these initiatives passes, the individual owners of S-corporations, owners of limited liability companies and partners of partnerships operating in Oregon would experience a major increase in their Oregon income taxes of $1.25 billion.
One of the reasons why Measures 66/67 passed in 2010 is because Oregon’s local chambers of commerce did not unify and speak out in opposition to those tax measures. Chambers of Commerce were largely silent.
Oregon’s Chambers of Commerce should not make this mistake again.
Local chambers should take steps now to prepare for these measures by educating their members and preparing themselves and their members to be vocal opponents when these measures hit the ballot in November 2016.