Kate Brown's small-business tax cut Monday afternoon, allowing the Legislature to wrap up the special session in a single day. The votes were bipartisan in both chambers, with some Republicans voting for the Democratic governor's plan and some members ...and more »
Updated at 6:17 p.m.
SALEM – Lawmakers in the Oregon House and Senate passed Gov. Kate Brown's small-business tax cut Monday afternoon, allowing the Legislature to wrap up the special session in a single day.
The votes were bipartisan in both chambers, with some Republicans voting for the Democratic governor's plan and some members of Brown's own party voting against it.
For Brown, the session was a win that the former legislative leader ensured by personally calling individual lawmakers in recent weeks to request their votes. She brushed aside reporters' questions Monday evening about why she didn't push for ambitious tax reforms or proposals to tackle housing affordability.
"You have to have cooperation from both sides of the aisle, and urban and rural," Brown said. "No one brought me a housing policy that would meet that criteria ... We went with my very simple, straightforward proposal that would ensure tax fairness for our small businesses."
Brown's practical approach won the support she needed from many Republicans, who had warned they would slow down the session if the governor allowed lawmakers to stray outside the narrow tax change.
In the Senate, three Republicans joined most of the chamber's Democrats to pass Brown's plan on an 18-12 vote. When it became clear the governor's plan had more than enough votes to pass, Democrat Sen. Sara Gelser of Corvallis switched her "yes" vote to a "no."
"I think it was important to get through the day," Gelser said, explaining that she wants to repeal the existing tax break that Brown's bill will expand. "The governor made an important statement about equity."
The margin was much wider in the House, which passed Brown's plan, 51-8, with Democratic Rep. Barbara Smith Warner excused.
Last month, Brown called for the special session to expand a controversial business tax break that lawmakers passed during the 2013 special session. The governor cast it as a fairness issue and pushed for lawmakers to allow sole proprietors access to the lower income tax rates already available to certain other businesses. At the same time, Brown announced her support for a law to prevent businesses from receiving a much larger break on their Oregon taxes.
Most of the testimony on the House floor came from Republicans who assailed Brown for signing into law Senate Bill 1528, which prevented that larger state tax break from taking effect. Businesses were set to receive that tax benefit automatically because Oregon is among a handful of states that largely copy federal tax code, including a new federal deduction for businesses in the Republican tax overhaul passed by Congress in December. Democrats argued earlier this year that many of those businesses already receive a break on their Oregon taxes under state law and did not need a new state tax deduction.
Under Oregon's 2013 tax break, people with pass-through businesses pay a 7 percent tax on income under $250,000, a rate otherwise reserved for joint filers with income up to $17,400. The Legislature created that tax break during the last special session, which focused on trimming public pension costs and raising taxes. The benefit is available to people with as much as $5 million in taxable income from partnerships and other pass-through businesses; multiple owners of a single qualified business can each pay the lower rates up to that $5 million cap.
Rep. Phil Barnhart, a Eugene Democrat who carried Brown's bill, was tepid in asking other lawmakers for their support. "What this bill does very simply ... is it deals with what appears to be an omission in the 2013 law," he said. Barnhart, who supported an unsuccessful House Democratic plan last year to trim the tax break, is not seeking re-election this year.
It had been unclear whether Brown would be able to get her tax proposal through the Legislature in one day as she hoped. Top Democrats told lawmakers to plan for a weeklong session, and Senate President Peter Courtney said he did not know whether there were enough votes to pass Brown's bill.
Courtney and other lawmakers also questioned whether the small-business tax cut rose to the level of emergency necessitating a special session. But Brown pointed out that the Legislature held a similar session in the past to vote on tax policy to benefit multinational corporations, and she scheduled the session during interim committee meetings when lawmakers are already in Salem.
On Monday morning, lawmakers on a joint committee quickly and succinctly discussed Brown's proposal, then approved it without any amendments.
Rep. Greg Smith, a Heppner Republican, questioned why Brown crafted a proposal that will mostly benefit higher income earners. Legislative economists forecast that more than 75 percent of the $11 million annual tax cut would go to sole proprietors who earn at least $200,000 a year. Approximately 12,000 tax filers might be eligible, although economists predict roughly half will take advantage of the benefit.
"What if we reverse this and give those who are trying to get off the ground in the first year or two the greatest opportunity?" Smith said.
No one answered the question, and Smith voted to pass Brown's plan, House Bill 4301, out of committee. Republicans in both chambers ultimately waived procedural rules, an action that was necessary for Brown to get her plan through the Legislature in one day.
Meanwhile, the division among Democrats in the Legislature was clear from the morning committee hearing when Sen. Mark Hass, a Beaverton Democrat, changed his vote to "yes" as a courtesy to move the bill out of committee. Hass later voted "no" on the bill during the Senate floor vote.
After taking pains to compliment Brown on her fairness and likability, Hass said "the jury's still out" regarding the effectiveness of the 2013 tax break in achieving the economic benefits touted by supporters. Since no one has studied the economic impact, Hass said, it's unclear what the state is getting in return for the $240 million per biennium tax cut.
"I suspect, like many things around here, it's a mixed bag," Hass said.
-- Hillary Borrud
business casual business business insider business lease business card business english business model canvas business class business intelligence business casual dress code