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Oregon Measure 97: The Granddaddy of 2016's Tax Ballot Measures

With all due respect to Proposition 55 in California and Missouri's Constitutional Amendment 4, Oregon is host to the most talked about and pivotal tax measure on any ballot this November. Oregon Measure 97 (previously IP28) would impose a 2.5 percent gross receipts tax (GRT) on business receipts in excess of $25 million.

Oregon would not be the first state to implement a GRT type tax, but the rate that Oregon is proposing is wholly unprecedented. For comparison, Texas has a top tax rate of 0.75 percent on a much narrower base, Washington's is 0.33 percent, Ohio's is .26 percent, and Nevada's is 0.331 percent. The Oregon tax is therefore between two and a half and ten times higher than every other equivalent tax in the country.

Not surprisingly this massive tax hike would be the single largest in the state's history, with the Legislative Revenue Office estimating that the tax would generate roughly $7 billion every two years (compared to Oregon's last biennial budget of $19 billion), but at the cost of state 20,000 potential jobs, $430 million in lost income, and a marked reduction in household buying power by 2022.

Proponents say the new revenue is necessary to plug a $1.785 billion hole in the state's education budget (which is similar to the argument that they made in support of two other tax increasing ballot measures in 2010).

Measure 97 has been divisive since its inception. Recognizing that a “toxic” fight was brewing, Sen. Hass (D) sought to broker a compromise proposal to levy a GRT that would not be as deleterious to the state's business community. Despite calling his proposal only a first step, Hass was unable to muster any support from Measure 97's advocates.

Other prominent members of the political and media establishment have also recognized the flaws in the Measure 97 and have called on voters to reject it. Former Governor Kitzhaber (D) has declared that Measure 97 would take Oregon in the wrong direction, even if it provided more money to schools. Additionally, at least fourteen newspapers across the state have come out against the tax, with the Oregonian saying its proponents were engaged in magical thinking and the Portland Tribune saying it defied common sense.

For her part, Governor Brown (D) stayed on the sidelines of the issue for most of the last year. While she spent months meeting with legislative, business, and union leaders to discuss the issue, she refused to either broker a compromise or state her position on the matter. In June she announced that, while she was still not formally endorsing the tax, she would release a series of programs that she would fund with the tax's new revenue (she also said she would change the tax code in an effort to offset some of the damage done to the business community). It wasn't until August that she formally announced her support for Measure 97, a move that she later described as “very difficult decision.

Measure 97 began with public support well in excess of the required 50% threshold, but more recent polling reflects the effects of the opponents education campaign. Recent polling shows the pro/con divide to be razor thin, but the pro side is currently failing to muster the majority it will need to enact Measure 97.

Obviously, if Oregon voters approve Measure 97 it will bring about major changes to the state's fiscal landscape, but the ripple effects will not stop at the state border. Although GRTs are nearly universally panned by economists, Oregon would mark the fourth GRT-type tax to be adopted in the past decade or so, and the first adopted via the ballot. (The other states are: Ohio, 2005; Texas, 2007; and Nevada, 2015.) States across the country facing budget challenges, or considering tax reform, could take the passage of such a robust tax as impetus to experiment with GRTs themselves.

MultiState’s policy analysts are tracking all the hot 2016 election issues from a state & local perspective. For more election-related news, click here. For further information about this issue or regarding how MultiState can advance your government affairs function, please contact the author.