Oregon Lawmakers Enter Special Session on Tax Breaks

The move is the latest reverberation from President Donald Trump's 2017 federal tax overhaul. Democratic legislators blocked part of that plan after finding it would benefit some Oregon businesses twice - and cost the state $217 million in its first two years.

Posted: May 21, 2018 3:14 PM
Updated: May 21, 2018 5:59 PM

By TOM JAMES , Associated Press

SALEM, Ore. (AP) — Lawmakers on Monday passed a tax break aimed at small businesses in Oregon during a one-day special legislative session convened by Gov. Kate Brown.

The Democrat Brown and legislative leaders in the majority party emphasized keeping the session focused only on passing the new break, which targets small businesses known as sole proprietorships, and limiting it to a single day. The tax plan passed 51-8 in the House and 18-12 in the Senate. Both votes included Democrats who broke from their party to vote against the measure.

Republicans objected to the scope of the plan as early numbers showed it benefiting established businesses more than struggling entrepreneurs. The plan specifically blocks more than 100,000 of the smallest businesses in the state from benefiting, or about 90 percent of sole proprietorships.

The move is the latest reverberation from President Donald Trump's 2017 federal tax overhaul. Democratic legislators blocked part of that plan after finding it would benefit some Oregon businesses twice - and cost the state $217 million in its first two years. But Republican legislators balked, and when Brown OK'd the block she promised to call the special session to create another, separate break for small businesses.

House Republican Minority Leader Mike McLane said Monday the process was forced through by the majority party.

"This is the governor's bill - any attempt to by the Republicans to shape it or modify its language were rejected by the Democrats," McLane said. McLane said his main request in negotiations had been to broaden who qualified for the bill, but that it had been denied.

House Speaker Tina Kotek, a Democrat, said legislators from her party had negotiated in good faith.

Passing the plan in a single day represented a success for Democrats, especially Brown, who first declared the ambitious timeline. Normal legislative rules require a days-long process of passing bills back-and-forth between committees.

Voting to suspend the rules required Republican cooperation: McLane said that despite objections, his caucus had agreed that holding up the process would only delay the inevitable, since Democrats control the Legislature.

The controversy surrounding the plan traces back to the Trump overhaul, which created a flat 20 percent deduction for pass-through income — business income claimed as personal income by a business owner. The Trump deduction affects only federal taxes, but because Oregon's personal income taxes are calculated using numbers from Oregonians' federal tax returns, the deduction was set to benefit some business owners twice: once on their federal taxes, and once when it reduced their state bill.

The first Democratic plan, passed earlier this year as Senate Bill 1528, allowed people to keep the federal deduction, but required it to be added back before calculating state taxes.

The new plan, called HB 4301, targets business owners who would have been eligible for the Trump deduction, but by expanding a state deduction instead - with a much smaller price tag.

"Republicans and Democrats in both houses support fairness for small businesses in Oregon," Brown said. "We were pleased to be able to get this done in one day."

Current state law gives a tax break on pass-through incomes to some types of businesses, but not sole proprietorships, which are often the smallest independent businesses, and include many independent contractors: The new Democratic plan expands that to include sole proprietorships.

The plan has a key limit: only businesses with at least one employee qualify, eliminating single-person operations.

About 12,000 businesses appear to be eligible, at an initial cost to the state of around $12 million per year, according to documents from legislative economists.

But the single-employee limit disqualifies about 90 percent of sole proprietorships, or just over 100,000 single-person businesses, said Chris Allanach, head of the nonpartisan legislative revenue office.

Early numbers also showed more than 40 percent of the benefit flowing to business owners already making more than $500,000 per year.

"Those sole proprietors who are just trying to get off the ground... get the least amount of benefit," said Rep. Greg Smith, a Republican, during the bill's first hearing of the day.

Sen. Mark Hass, a Democrat, said in the same hearing that broadening the break without study was hasty. Hass later voted against the bill.

Oregon Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 4243

Reported Deaths: 153
CountyConfirmedDeaths
Multnomah116559
Marion96025
Washington73917
Clackamas31211
Deschutes1250
Umatilla1163
Linn1159
Polk9812
Lane733
Yamhill707
Jackson660
Benton555
Clatsop450
Klamath440
Jefferson330
Malheur320
Coos310
Douglas270
Wasco241
Josephine231
Hood River180
Columbia160
Lincoln120
Morrow110
Curry70
Union60
Tillamook60
Crook60
Wallowa20
Lake20
Sherman10
Harney10
Grant10
Baker10
Unassigned00

California Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 111951

Reported Deaths: 4172
CountyConfirmedDeaths
Los Angeles550012362
Riverside7486323
San Diego7481269
Orange6261147
San Bernardino5246204
Alameda339096
Santa Clara2776141
San Francisco258842
Kern225038
San Mateo210484
Tulare184484
Fresno174335
Santa Barbara164912
Imperial163427
Contra Costa145037
Sacramento140056
Ventura107833
San Joaquin85834
Kings7464
Stanislaus74429
Sonoma5534
Monterey53010
Solano51722
Marin48314
Merced2837
San Luis Obispo2691
Placer2159
Santa Cruz2132
Yolo21124
Napa1123
Madera1062
Humboldt1013
El Dorado900
San Benito872
Sutter462
Del Norte450
Butte440
Nevada411
Shasta394
Mono371
Mendocino300
Yuba301
Lake210
Inyo201
Amador190
Mariposa161
Glenn160
Calaveras150
Siskiyou70
Colusa50
Lassen50
Tuolumne40
Plumas40
Tehama41
Alpine20
Trinity10
Sierra10
Unassigned00
Medford
Overcast
61° wxIcon
Hi: 73° Lo: 53°
Feels Like: 61°
Brookings
Clear
52° wxIcon
Hi: 64° Lo: 49°
Feels Like: 52°
Crater Lake
Overcast
54° wxIcon
Hi: 67° Lo: 49°
Feels Like: 54°
Grants Pass
Overcast
59° wxIcon
Hi: 72° Lo: 49°
Feels Like: 59°
Klamath Falls
Overcast
54° wxIcon
Hi: 68° Lo: 48°
Feels Like: 54°
Isolated showers and storms Monday
KDRV Radar
KDRV Fire Danger
KDRV Weather Cam

Community Events