As our state faces a $1.6 billion budget shortfall, lawmakers are considering a number of ways to raise taxes to bridge the gap. One current proposal asks Oregonians to reconsider Measure 50, their 1990s-era property tax revolt. Senate Joint Resolution 3 (SJR3) – would amend Oregon's Constitution and do away with Measure 50. Property taxes would be based on real market values instead of the formulaic "Assessed Values" we have now.
I was recently part of a group that met with Sen. Mark Hass, D-Beaverton, who chairs the Senate Revenue Committee. He believes that property tax reform (SJR3) is unlikely to get much traction this session. Instead, the Senate Revenue Committee will propose a Corporate Activity Tax ("CAT"), a gross receipts tax modeled after Ohio's CAT.
The precise details are still being discussed. But, unlike Ballot Measure 97 (which would have charged a 2.5 percent tax on gross annual sales above $25 million) the new "Corporate Activity Tax" will have a tax rate of 0.4% to 0.7% on Oregon business sales above $1 million. The Corporate Activity Tax would replace the state's existing corporate income tax and – because it will have a much broader tax base – might also lower some personal income taxes.
In my opinion, a Corporate Activity Tax will be very difficult to pass. It is a type of gross receipts tax, which has proven to be very unpopular to Oregonians. The groups that opposed Measure 97 successfully pushed the idea that a gross receipts tax is really just a sales tax in disguise. Right or wrong, Oregonians were convinced – which is why Measure 97 failed by such a high margin.
Instead, the legislature should focus on fixing the problems with our property tax system. Repeal isn't the only solution. Relevant, necessary reform can be more meaningful. I will be discussing some reform possibilities in my next few posts. Stay tuned.