OHCA Spring/Summer 2019

www.ohca.com SPRING/SUMMER 2019 The Oregon Caregiver 15 Revenue Reform The legislature is working on a proposal to add a consumption-based source of revenue to the state budget. A sales tax is not a politically viable option in Oregon. Oregonians have rejected a sales tax nine times since the 1930s, most recently in 1993. Oregonians also rejected Measure 97 in 2016, which would have levied a 2.5% gross receipts tax on large corporations. Many observ- ers felt that Measure 97 was an overreach as the rate of 2.5% was comparatively much higher than other states with a gross receipts tax (Washington’s B&O for example has a rate of 1.5% or lower depending on the type of business activity) and sought to raise $6 billion per biennium. OHCA has been working with a coalition of groups and businesses that are interested in revenue reform. We are engaging with key legislators as they work on crafting a new consump- tion-based revenue option. At the time of this writing, the legislature is expected to PUBLIC POLICY support a version of a commercial activities tax proposal combined with reductions in personal income tax rates. The proposed commercial activities tax would levy a relatively low tax rate of less than half a percent (.49 for example) on Oregon-based sales. The tax would not apply to the first $1 million of sales and there may be a deduction for a portion of the businesses’ labor costs or business inputs. The tax would not apply to non-profit organizations and would likely exempt motor vehicle fuels and groceries. We also anticipate that the tax would not apply to any revenues subject to the nursing facility provider assessment. The proposed personal income tax changes are likely to be a reduction in the 5%, 7% and 9% tax rates to 4.75%, 6.75% and 8.75%, respectively, and could include other tax relief for low-income taxpayers. We do not anticipate that the 9.9% rate would be reduced for higher income earners, but, because of the way marginal tax rates work, every Oregon- ian with taxable income would experi- ence a reduction in their personal income taxes. We do not anticipate that corporate income tax rates paid by c-corporations would be reduced. Even if the legislature is able to garner the super-majority votes (36 in the House, and 18 in the Senate) for this revenue package, it is likely that there will be an effort to refer the measure, or a portion of it, to the ballot for voters to have the final say on whether they support the commer- cial activities tax, the personal income tax cuts, and the additional investments in education, or not. We will keep you updated on developments in this impor- tant policy area. Phil Bentley, J.D., is the Senior Vice President of Government Relations at OHCA.