July 20th, 2009 5:33 pm | by NIGEL JAQUISS News | Posted In: CLEAN UP, Politics, Politics, Legislature

Governor Signs Tax Hike Bills into Law; Fun Begins

Ted Kulongoski

Gov. Ted Kulongoski signed two controversial tax increases today, setting in motion a process that will probably lead referrals of both measures to the January ballot.

The bills — one of which raises the state's corporate income tax, the other increases the state income tax on the wealthiest Oregonians — have been on the governor's desk since the Legislature adjourned June 29. In recent days, the Oregon GOP has urged Kulongoski to sign both of the bills so anti-tax activists can start gathering signatures to refer them to the ballot.

The timing of the governor's signature is key because under election law, proponents of a referral have 90 days from legislative adjournment to gather the 57,000 55,179 signatures required for referral. But they cannot start their signature-gathering until the governor signs the bills (although both sides of the tax battle have already started to accumulate what promises to be big warchests).

That delay of 21 days led GOP chair Bob Tiernan last week to accuse Kulongoski of being part of "Democrats' attack on the rights of Oregonians through a campaign of denial, deceit and delay." Kulongoski aides have denied any such conspiracy.

Here's the statement Kulongoski's spokeswoman, Anna Richter Taylor, issued today:
Today Governor Ted Kulongoski signed House Bills 2649 and 3405 that establish modest increases to corporations and Oregon's wealthiest individuals to both create a more fair tax structure and greater stability for programs such as education, health care and public safety.

The Governor also signed House Bill 2073 into law, establishing the first permanent funding source for the Oregon Rainy Day Fund.

“Because of the national recession, Oregon is facing an economic crisis that is threatening education, public safety and health care – all critical services that Oregonians rely upon every day,” Governor Ted Kulongoski said. “These modest and targeted tax increases are a major step toward a more fair tax system for middle-class and working families in Oregon and will help meet the needs of families in crisis, stabilize local communities and preserve jobs.”

For the first time since the 1930s, House Bill 3405 increases the corporate minimum from $10 to $150 for corporations with gross sales in Oregon under $500,000. About two-thirds of Oregon corporations currently pay the $10 minimum tax.

About one-third of corporations pay taxes based on a net income tax rate of 6.6%. For these corporations, the tax rate will increase temporarily to 7.9% for net incomes over $250,000 starting in tax year 2009. This rate will last for two years.

For tax years 2011 and 2012, the rate will decrease to 7.6% and then return to 6.6% for most corporations. However, for corporations earning a net income of more than $10 million year, the tax rate will remain 7.6%.

Related to the corporate taxes, House Bill 2073 establishes the first permanent funding source for the Oregon Rainy Day Fund by directing revenue collected from corporate income and excise tax rates above 6.6% to the fund beginning in 2013.

“One of the most important actions taken during the 2007 legislative session was the adoption of the Oregon Rainy Day Fund, which I proposed in my budget to create the state's first general purpose savings account,” said Governor Kulongoski. “This session, the legislature took the next step by establishing a permanent dedicated funding source for the rainy day fund, which is essential to creating greater fiscal stability so our schools and other services won't have to face the same boom and bust cycle with each future economic downturn.”

House Bill 2649 temporarily increases for three years the personal income tax rates on Oregon's wealthiest individuals and joint income filers starting with the 2009 tax year. The current tax rate of 9% increases to 10.8% for individuals earning more than $125,000 and for joint filers earning from $250,000 to $500,000. The rate is 11% on income over $500,000.

In tax year 2012, the rate decreases to 9.9% for individuals with income over $125,000 and for joint filers with income over $250,000.

“I know that families across the state are struggling during this time of economic uncertainty – and under these measures, middle-class families will not be paying a single penny more in taxes,” said Governor Kulongoski. “We are asking corporations and the wealthiest Oregonians to pay their fair share to help protect the vital services we all depend on – education, health care and public safety.”
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