Lawmakers change what a tax is

By Anthony K. Smith
Oregon NFIB

In 1995, the Oregon Legislature was worried about taxes. Legislators were so worried about runaway tax increases, and the punitive effects of higher taxes on Oregonians, that they passed House Joint Resolution 14, which referred a statewide ballot measure to voters asking them to amend the Oregon Constitution with a new requirement that would limit the Legislature’s own power to raise taxes.

In the Spring of 1996, voters approved Ballot Measure 25, which added just seventeen words to Article IV, Section 25 of the state Constitution: “Three-fifths of all members elected to each House shall be necessary to pass bills for raising revenue.”

The measure passed with 54.7 percent of the vote.

Since adopting the original language of the Oregon Constitution, bills for raising revenue were always required to originate in the House of Representatives, just like the United States Constitution. But now a second procedural requirement was in place, one that has now been adopted by 15 other states in some form or fashion. Oregon’s three-fifths threshold is still a low bar compared with states like California (two-thirds) or Oklahoma (three-fourths).

This is where a 2015 Oregon Supreme Court case, City of Seattle v. Dept. of Revenue, comes into play. The lawyers that work for the Legislature determined that based on the ruling in this case a bill for raising revenue probably requires the creation of a new tax, or a change in tax rates that results in additional revenue. However, if the bill simply expands the base of taxpayers required to pay the tax, or limits the number of taxpayers qualified to pay at a lower rate, the court might not consider a bill that results in more revenue to be the same as “a bill for raising revenue.”

Since that court ruling, the Legislature has become increasingly bold in its willingness to test the boundaries of what constitutes a bill for raising revenue. In 2017, the Oregon House of Representatives passed HB 2060, a bill that would have raised $100 million per year by raising taxes on small businesses with fewer than 10 employees – and those in certain industry sectors. It passed with just 31 votes, not the 36 votes required to meet the three-fifths threshold.

In 2018, both chambers passed SB 1528, a bill that raises an estimated $200 million per year by “disconnecting” from the new 20 percent federal deduction for qualifying pass-through business income. This bill is currently sitting on the governor’s desk, awaiting her signature or veto. Nearly 400,000 Oregon businesses are likely to be affected by her decision either way. The bill passed with 32 votes in the House and 16 votes in the Senate, failing to meet both three-fifths thresholds (36 in the House, 18 in the Senate). It also originated in the Senate, a violation of that first procedural requirement which was always part of the state Constitution.

Finally, during the last two legislative sessions, several bills have been introduced with the intention of placing a cap on statewide carbon emissions – while at the same time raising hundreds of millions of dollars per year in new state revenue to be spent on clean energy economic development projects. Better known as “Cap & Trade,” supporters of these bills have dubbed the concept the “Clean Energy Jobs Bill” or “Cap & Invest.” Any state “investment” implies the raising of revenue and any “clean energy jobs” created would come from the legislatively-directed spending of that revenue. No version of this bill has passed yet, but legislators are already planning to bring it back in 2019 – and without a three-fifths clause.

Without question, the spirit of Measure 25 has been eroded over time, prompting taxpayer advocates to propose Initiative Petition 31 to the voters this fall. This constitutional amendment would clearly define “raising revenue” as any tax or fee increase, whether accomplished by the creation, imposition or increase of any tax or fee, or by the modification, elimination or change in eligibility for any exemption, credit, deduction or lower rate of taxation.

Proponents of the measure have until July 6 to turn in the 117,578 signatures required to qualify IP 31 for the November 6 General Election ballot.

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