Business Group Files Paperwork to Begin the Referral of Newly-Passed Billion-Dollar Tax Increase

Oregon Manufacturers and Commerce will seek to repeal the new gross receipts tax in House Bill 3427 while leaving in place the reduction in income taxes the bill included.

Oregon Manufacturers and Commerce today filed paperwork with the Oregon secretary of state's elections division aimed at a partial repeal of House Bill 3427, the $1 billion tax dubbed the "Student Success Act."

Lawmakers approved the bill earlier this month after Senate Republicans briefly stopped coming to work in an effort to slow its passage.

Republicans and business groups objected to the passage of a new .57 percent tax on gross receipts (effectively, sales) of over $1 million by any Oregon business. That tax is expected to bring in more than $1 billion a year, which lawmakers say will be allocated to early childhood education and K-12 schools.

Oregon Manufacturers and Commerce and other business groups dislike the mechanics of a gross receipts tax, which they say can lead to "pyramiding," in which a product may be taxed multiple times as it changes hands in the process from being a commodity to a finished product.

In Oregon's initiative process, individuals or groups may refer all or part of legislation. Proponents of the tax referral will have 90 days from the end of the current legislative session to gather 74,680 signatures to put the referral on the 2020 ballot. Shaun Jillions, the executive director of Oregon Manufacturers and Commerce, has extensive experience in qualifying measures for the ballot.

In the case of the referral of HB 3427, Oregon Manufacturers and Commerce chose not to refer the other major component of the bill, a reduction in the personal income tax of .25 percent for Oregonians in the lowest three income tax brackets (5, 7 and 9 percent).

Those personal income tax reductions would cost the state $423 million in 2019-21; $699 million in 2021-23; and $756 million 2023-25, according to calculations by the non-partisan Legislative Revenue Office.

That means if OMC qualifies its measure for the ballot and voters repeal the tax increase, the state could actually end up with less revenue as a result of the Student Success Act, not more.

Oregon Manufacturers and Commerce spokesman Preston Mann says his group favors increasing education funding but not through a gross receipts tax.

"We solidly support game-changing investments in our schools, we simply disagree over the mechanism by which to make those investments," Mann says. "With the state presently taking in record revenues, there are plenty of better options than establishing a $2.8 billion [in 2021-23] hidden sales tax."

As to why the group only referred the corporate tax increase and not the personal income tax reduction, Mann says his group never opposed the personal tax reduction.

"Our concern with HB 3427 has always been with regard to the regressive nature of a gross receipts tax and the impact of pyramiding on Oregon businesses," he says. "To that end, this referral is focused on exclusively on those provisions."

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