[5]
Prepare for Additional Payroll Tax Withholding in 2026
By Oregon Business and Industry [6],
What’s happening: An effort to refer this year’s transportation tax and fee package to voters likely could overlap the implementation of a key part of that package: the doubling of the state payroll tax supporting public transit. The result will be messy and confusing, and OBI is communicating with relevant state agencies to provide answers for OBI members.
The tax and fee package: Passed during this year’s special legislative session, HB 3991 will raise about $4.3 billion over the next decade through a collection of taxes and fees, from a 6-cent-per-gallon increase in the state gas tax to a doubling of the employee-paid payroll tax supporting public transit. Beginning in January 2026, that tax will increase from 0.1% to 0.2%. Employers must collect the tax and remit it to the state, and the increase may take employees by surprise. OBI has created a tool kit with tips for talking with employees about the increase, which you can find here.
The referral effort: Opponents of the transportation package are collecting signatures to refer it to the ballot for an up-or-down vote (learn more about the effort at www.stopthegastax.com). They have until Dec. 30 to submit about 78,000 valid signatures. On Nov. 25, they reported having collected more than 150,000.
Overlap and potential confusion: Following the Dec. 30 submission deadline, the Secretary of State’s Office will work to verify signatures, a process that could take several days and perhaps longer than a week. Assuming enough valid signatures have been submitted, the referral will qualify for the ballot, and the relevant parts of HB 3991 will be paused, including the doubling of the payroll tax, at the time of qualification. Employers will still have to collect the additional tax between the law’s Jan. 1 effective date and the date at which the referral qualifies for the ballot, however. OBI is working with the state to answer some important questions, including what employers should do with that money until the legal status of the doubled tax is determined. OBI will provide answers to members about this and other questions as soon as they’re available.