Oregon Businesses Lose Ballot Attempt to Protect Tax Breaks

Businesses wanted voters to protect exemptions, loopholes and tax breaks that collectively cost the state more than $12 billion a year.

oregon-legislature
The Oregon Statehouse
(Shutterstock)
For results of the most important ballot measures, click here.

Oregon voters on Tuesday rejected an attempt to tighten the state’s already stringent supermajority requirement to raise taxes.

Measure 104, which failed with 65 percent of voters opposed, would have expanded the state’s existing supermajority requirement for tax hikes to legislation that also increases state revenue through other ways: namely, changes in tax exemptions, credits, deductions or fees.

Opponents of Measure 104 said the proposal was designed to protect tax breaks for special interest groups. Democratic leaders, including Gov. Kate Brown, argued that the initiative allowed a minority of legislators to dictate tax policy, particularly when it comes to removing tax breaks of questionable value.

Oregon’s supermajority requirement to approve tax hikes was enacted more than two decades ago. But three years ago, the state Supreme Court and a subsequent legislative counsel opinion created what some say is a loophole.

The ruling held that while proposals to increase taxes were still subject to the requirement, lawmakers could eliminate tax rebates and exemptions without the three-fifths majority. While that’s consistent with many of the dozen or so other states with a supermajority requirement for broad-based taxes, it’s led to concerns in Oregon that lawmakers will use the workaround as a way of plugging budget holes or increasing the budget.

The proposed ballot measure would have protected 367 exemptions, loopholes and tax breaks that collectively cost the state more than $12 billion a year. While it failed, a slew of tax-limiting ballot measures across the country were more successful: Florida voters enacted their own supermajority requirement for tax hikes, while voters in Arizona approved a ban on taxing services. North Carolina voters also limited tax hikes by lowering that state's income tax cap.

Supporters of the Oregon measure had argued it's about fiscal discipline. “We think Oregonians want to keep Kate Brown and others' hands out of the cookie jar,” Paul Rainey, a spokesman for the Yes on 10 campaign, recently told the Willamette Week. “Right now, it's too easy to raise revenue without a three-fifths vote."

Real estate agents were the driving force behind the measure. They are especially worried lawmakers will get rid of the state’s tax exemption for home mortgage interest after an attempt to do so last year in the legislature failed.

Also fueling the ire was a move earlier this year by Democrats to decouple part of the state’s tax code from the federal tax code in an effort to avoid a massive state tax break for small businesses. Republican lawmakers have since sued the state over the move, arguing the bill should have complied with the supermajority provision in the state Constitution.

For results of the most important ballot measures, click here.

Liz Farmer is a former GOVERNING fiscal policy writer.
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