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Oregon Tax Bill Produces Political Dilemma For Gov. Kate Brown

<p>Oregon Gov. Kate Brown gives a speech in this May 2015 file photo.</p>

Alan Sylvestre

Oregon Gov. Kate Brown gives a speech in this May 2015 file photo.

A tax bill affecting tens of thousands of small businesses in Oregon is posing a political dilemma for Gov. Kate Brown.

"We're taking a very hard look at the bill," Brown told reporters after the Legislature adjourned this weekend.  "We're looking at the implications for Oregon's small businesses and Oregon's economy."

The governor, who is running for re-election, will make enemies no matter what she does. Many of her fellow Democrats and advocates for education and other public services are pushing her to sign the bill.

But critics of the bill say she could anger hundreds of thousands of small business owners in the state if she doesn't veto the measure.

Brown also faces the possibility that the tax bill could be referred to the November ballot. That would force her to defend what is technically a tax hike during the fall campaign.

"I understand the position she is in," said Senate Finance Chairman Mark Hass, D-Beaverton, who played a major role in crafting the bill. "She is running for governor."

Democrats pushed SB 1528 through the Legislature in response to the federal tax-cut legislation signed by President Donald Trump last year.

In its own income-tax code, Oregon automatically adopts many federal definitions of income. And one of the biggest impacts of the new federal law is that it would deliver an automatic tax cut for many of the more than 400,000 business owners who pay personal income taxes on their profits.

That would cost Oregon more than $200 million a year in lost income. Groups ranging from public employee unions to Children First for Oregon pushed for the state bill's passage.

But small business groups launched their own lobbying effort, saying it was unfair and burdensome for Oregon to take away the state tax cut embedded in the federal law.

Anthony Smith, Oregon state director for the National Federation of Independent Business, said state financial projections show the federal tax cut bill will eventually make more money for the state — even without taking away the new break for small businesses.

"This is producing a considerable amount of revenue for the state and it's going to come from somewhere," he said, "and it is from small businesses."

Bend Rep. Knute Buehler, the leading candidate for the Republican gubernatorial nomination, also made it clear he's ready to make the measure a campaign issue. He sent out a press release titled: "Gov. Brown Should Veto Mom & Pop Tax Hike."

Rep. Julie Parrish, R-West Linn, also fought the bill during the legislative session. She is being warily eyed by Democrats.

That's because she led the campaign to refer hospital and insurance taxes on Medicaid to a statewide vote in January.  Voters upheld the taxes, but Parrish showed she's capable of collecting the 59,000 signatures needed to put an issue on the ballot.

Parrish said she hasn't ruled out launching a referendum if Brown signs the business tax bill, although she said it would be more difficult because she would face a tighter time frame for collecting signatures.

Still, Parrish added, "I think it's politically savvy for the governor to be taking a pause on this one" because small business owners tend to vote in large percentages.

Hass, the Senate finance chairman, said the threat of a referendum is always high when it comes to tax legislation. However, he added, "I don't think we should let fear guide good policy."

Brown has until mid-April to take action on the bill. Signatures for a referral would have to be collected by early June.

Copyright 2018 Oregon Public Broadcasting

Jeff Mapes is a senior political reporter at Oregon Public Broadcasting. Previously, Jeff covered state and national politics for The Oregonian for nearly 32 years. He has covered numerous presidential, congressional, gubernatorial and ballot measure campaigns, as well as many sessions of the Legislature, stretching back to 1985. Jeff graduated from San Jose State University with a B.A. in journalism.