Governor Still Won't Say Where She Stands on Proposed Tax Increase but Will Say How She'd Spend the $3 Billion

Brown's plan highlights potential shortcomings of Initiative Petition 28.

Gov. Kate Brown is playing coy on Initiative Petition 28, the proposed corporate tax increase that will raise $3 billion a year in new tax revenue.

Brown, a Democrat, has been close to the public employee unions backing the measure for her 25-year political career—but she has repeatedly declined to take a position on the measure, making the increasingly thin excuse that it has not yet qualified for the ballot. (That could happen as soon as June 6 as the state is apparently nearly finished counting ballots.)

But Brown is happy to say how she'd spend some of the $3 billion.

Today, Brown issued a page-and-a-half "Corporate Tax Implementation Plan" for the measure, suggesting ways the revenue could be spent—and suggesting tweaks to the measure that would make it less regressive to low income earners and less painful for Oregon companies.

Here's the spending part:

Here's the nod to the measure's regressivity (the nonpartisan Legislative Revenue Office said in its analysis that IP 28 will function as a sales tax):

  • Expands the Earned Income Tax Credit.

And here's Brown's attempt to make the measure less painful for Oregon employers:

  • Allows businesses subject to IP-28 to subtract a portion of Oregon payroll costs from their annual corporate tax obligation.
  • Offers investment incentives through the Oregon Growth Fund that benefit Oregon businesses.

Brown also proposed a carve-out for software companies that are located in Oregon but have extensive sales in other states.

  • Addresses “cost of performance” issues for certain industries and sectors by clarifying that the location of the customer purchasing services will be considered the location of the sale, rather than the location of the purveyor of those services, for purposes of determining applicable taxes.

In sum, Brown, while refusing to take a position on the single biggest political issue of 2016, now has a plan for how to use the tax receipts. That plan would, of course, require approval by the Legislature, as would the carve-outs that she's proposing for Oregon businesses.

Oddly, by pointing out what she perceives as weaknesses—it's regressive, will cost private sector jobs, and hurt Oregon businesses in various ways—in a measure on which she has no position, Brown has done a favor for the business interests who oppose the tax increase on companies with Oregon sales of over $25 million annually.

"The governor's plan highlights only a handful of the problems the tax would create," said Rebecca Tweed, a spokeswoman for the Defeat the Oregon Sales Tax Campaign.

In a statement, Brown explained why she was releasing her plan today.

"The time to build the boat is before the tide rises," Brown said. "As I consider the development of budgets and policies for 2017-19, my Corporate Tax Implementation Plan provides a framework for planning that advances my priorities: improve our high school graduation rate, continue economic growth statewide, and protect Oregon jobs."

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