With less than three weeks in 2020, Oregon Governor Kate Brown and senior lawmakers are still negotiating a possible third special session to extend the state’s eviction moratorium and help landlords whose tenants have defaulted on rent.
House Speaker Tina Kotek and other members of her caucus have one more priority for a special session: the repeal of three new state tax breaks, including one that would largely benefit the top 1% of Oregon earners.
State lawmakers have raised concerns about income inequality in recent months, as they heard from desperate Oregonians who lost jobs or incomes to the pandemic and quickly depleted state payouts of $ 500.
One of the larger tax cuts resulted from the removal of an earlier $ 500,000 cap for joint claimants on the amount of business losses that taxpayers can deduct from other income, such as income tax. B. a spouse’s wages or capital gains from the sale of stocks. This could save taxpayers, which includes individual filers with more than $ 250,000 in wages or other income, $ 47.8 million and the state the same amount in tax losses over the current biennium, according to an estimate by the Legislative Revenue Office costs.
Less than 1% of Oregon income taxpayers had adjusted gross earnings above $ 500,000 in 2017. This is the latest data provided by the US state Treasury Department. The top 3% of Oregon taxpayers had an income of $ 250,000 or more.
A spokesman for Kotek, a Portland Democrat, wrote in an email Friday afternoon that the speaker does not believe there are enough public benefits to justify maintaining these and other tax cuts implemented in the federal coronavirus known as CARES Law is included in the Act and is automatically copied into Oregon tax laws unless lawmakers vote to break with federal policy.
“Spokesman Kotek believes the effects of the tax changes in the CARES Act on government revenues have not paid off for Oregon,” wrote communications director Danny Moran in an email.
If lawmakers don’t vote against the federal measure in 2020, the Oregon tax cut will be law for the 2020 tax year. However, a vote in the 2021 regular session on the separation from federal tax law could be retroactive to file an application in 2020, according to Kotek staff and Legislative Revenue Officer Chris Allanach, who said lawyers upheld the legality. Allanach wrote in an email that lawmakers have yet to work with the Treasury Department to figure out how the state would implement such a change.
Moran wrote, “It’s pretty clear we need to discuss it in 2021, if not in a special session this month.”
In her budget for 2021-2023 released earlier this month, Brown proposed removing the three tax breaks, but suggested doing so from 2021, when the impact on state tax revenues is expected to decrease.
A governor’s spokeswoman did not respond to questions late Friday afternoon on whether Brown supports Kotek’s push to end the tax breaks this year or whether she sees any benefit in keeping the new tax cuts in place for now. Senate President Peter Courtney also declined to comment. Republican House and Senate leaders also didn’t answer questions from The Oregonian / OregonLive.
One of three new federal tax breaks that would automatically be incorporated into Oregon law without legislative action would allow companies with annual sales of at least $ 25 million to deduct more interest from their tax bills. A third provision from the CARES Act allows companies to attribute net operating losses to each of the five years prior to the loss and removes an 80% taxable income cap on the losses. When companies submit modified returns it can result in refunds, The Oregonian / OregonLive reported.
Together, the three new tax cuts could cut state tax revenues by $ 102.9 million in the current two-year budget, according to an estimate by the Legislative Revenue Office this week. That’s less than $ 225 million forecast earlier this year, largely because Oregon’s economy hasn’t been hit as badly as expected earlier this year, economists wrote.
The Democratic-controlled legislature opted not to consider a bill to repeal the new tax breaks during the second special session in August after businessmen and others from across the state sent more than 150 mostly copycat emails in which Legislators were asked to leave the country making the cuts in place. At least four other states – New York, North Carolina, Georgia, and Colorado – that are similarly linked to federal tax law through August, according to left-wing political group Tax Fairness Oregon, which is separate from tax breaks through August under the CARES Act.
At the national level, the Joint Tax Committee of Congress has estimated that 90% of the benefit of the tax savings would go to those with an annual income of at least $ 1 million.
Jody Wiser of Tax Fairness Oregon said the tax cut on wages was particularly egregious and would not benefit business owners alike.
“It’s only good for you when a couple has wages over half a million dollars,” said Wiser. “If a restaurant owner has a wife who stayed home with the kids, they get no benefit.” But a restaurant owner whose wife is a doctor and earns more than $ 500,000 could get tax breaks. “We’ll never know who’s going to get it,” said Wiser.
Sandra McDonough, president of Oregon Business & Industry, said the state’s largest lobby group is opposed to any move to reverse the tax cuts. The legislature and governor should cut government spending rather than raise taxes. “You don’t need it,” McDonough said of the tax revenue. She pointed to a study her group funded earlier this year that found that Oregon’s corporate taxes, which have been among the lowest in the country for years, will rise in years to come.
“This is money companies can keep in their pockets after a really tough year,” said McDonough of the new tax cuts.
– Hillary Borrud; [email protected]; @hborrud
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