Within hours of Republican State Senators returning to the legislature May 13 from a four day walkout, House Bill 3427 passed along party lines, 18-11. The bill now heads to the desk of Governor Brown, who will sign it into law.
The bill adds $1 billion a year to education spending with a .57% tax on gross business receipts (sales) over one million dollars. A gross receipts tax is considered one of the worst forms of taxation because it taxes businesses even when they are not making a profit and losing money. This $2 billion business sales tax (gross receipts tax) also taxes a product several times, called pyramiding or double taxation, as it moves from business to business. Businesses are allowed to deduct 35 percent of either their labor or capital costs from their total sales. This will cause great harm and cost to many small businesses already feeling the pinch from cross border competition, online rivals and international competitors.
Because this $2 billion gross receipts business sales tax is going to raise prices the authors included a .25% personal income tax cut for taxable income under $125,000 is also part of the package yo pay for the pain it is going to cause poorer Oregonians. Certain grocery and gasoline sales are exempt.
About half the money will go to local school districts in the form of grants, 20% to preschool programs, 15% to dropout-prevention and career and college readiness programs in Oregon high schools mandated by the passage of measure 98 in 2016 and 2017 ORS 327.856 High School Graduation and College and Career Readiness Fund, and the rest to initiatives to improve schools’ performance.