While many state legislatures have adjourned for the year, a number of states are currently holding task force and work group meetings regarding upcoming issues. Oregon Legislators returned to the Capitol last week for ‘Interim Legislative Days,’ a four-day block of Committee Days and work groups. May was also Oregon’s Primary Election. Key General Election face-offs for November 2016 are listed below.
Topics Covered Below:
- Informational Hearing: Legislative Revenue Office Presentation on IP 28
- Work Group: Unmanned Aircraft Systems/Drones
- Work Group: Predictable/Flexible Scheduling
- Dept. of Revenue Ruling – Denies ‘Gigabit’ Tax Exemption
- Legislative Counsel Issues Opinion Interpreting City of Seattle Case
- New Co-Chair of Ways and Means
- Campaigns & Election News
Informational Hearing: Legislative Revenue Office Presentation on IP 28
Supporters of Initiative Petition 28 (IP 28), which would tax the gross receipts of corporations with annual sales of more than $25 million, turned in well over the necessary signatures required to be certified for the November 2016 ballot earlier this month.
During the interim Legislative days, the nonpartisan Legislative Revenue Office (LRO) presented to House and Senate Revenue Committees on the potential impact of IP 28 if adopted by voters in November. The LRO report indicated that IP 28 would function much like a sales tax, because corporations would raise the price of goods and services to recover the 2.5 percent tax on their gross receipts.
IP 28 reflects a major change in the way Oregon taxes its businesses, by taxing based on sales rather than profits. According to the non-partisan Legislative Revenue Office report, the tax would fall most heavily on retailers and wholesalers, and would function much like a sales tax by pushing up the prices Oregonians pay at the cash register.
IP 28 applies only to C-Corporations with sales greater than $25 million. The minimum tax for S-Corporations and for C-Corporations with Oregon sales less than $25 million would not be affected by IP 28. The measure is a series of trade-offs, bringing financial stability to the State and providing additional state revenue in exchange for higher corporate taxes and a weakened economic environment.
The effects of IP 28 vary considerably by industry and business:
- Taxes paid by Oregon retail businesses totaled $70 million in 2013 but would have been $605 million had the new tax structure been in place.
- The finance and insurance industry would have paid $351 million, up from the $75 million the sector actually paid in 2013.
- The manufacturing sector generated $42.2 million in state taxes in 2013. That total would have been $203 million under IP28.
Even within industries, certain businesses would pay more than others under the proposal. "Corporations that manufacture tangible goods in Oregon and export to markets outside the state will be relatively unaffected," according to the report, because Oregon's underlying business tax structure exempts them.
However, that tax structure does not work the same way for services businesses like a software company. According to the report, “corporations that produce or perform services for sale outside the state will potentially be affected because those sales will be allocated to Oregon and not where the customer is located. Conversely, a service-based corporation that sells services into the Oregon market but performs them outside the state will not be affected by the new minimum tax.”
Other findings from the report include:
- IP 28 would generate upwards of $6 billion in new state tax revenue in each two-year budget cycle (previously estimated at $5 billion)
- IP 28 would reduce employment growth by more than 20,000 jobs over five years
- IP 28 would boost average overall wages by shifting work from private sector jobs to government jobs
- Hardest hit industries are retail trade, wholesale trade, utilities, management, and health care
- 1,051 businesses would directly pay the tax (names of businesses not disclosed)
- 50 businesses would pay 51% of the taxes raised by the measure
- The top 100 businesses would pay 66%
- The top 274 businesses would pay 85%
- IP 28 would be the largest tax of any of the five states — Texas, Ohio, Washington, Delaware and Nevada — that impose a “gross receipts tax”
- Households earning less than $21,000 will pay a higher percentage of their income in taxes (10.09%) than households earning over $206,000 (9.38%)
View the Legislative Revenue Office’s Summary and Analysis:
https://www.docdroid.net/4YRzo8A/lro-ip28report.pdf.html
And PowerPoint presentation:
https://www.docdroid.net/drg1mno/lro-ip28presentation.pdf.html
View text of measure:
https://www.docdroid.net/Vr6gkeX/ip28text.pdf.html
Work Group: Unmanned Aircraft Systems/Drones
The Unmanned Aircraft Systems workgroup convened this month regarding the current and future state of UAV policy in Oregon and at the federal level. Oregon State University gave a presentation on the various applications of drone technology and the rapidly changing environment, followed by a similar presentation by the Oregon Department of Fish and Wildlife. ODFW discussed the current and potential research applications of different software and how the university and agency were utilizing such software to conduct wildlife and environmental studies in a noninvasive way not previously achieved.
Next steps in the workgroup will be to address possible educational use exemptions for registration, posting FAQ lists on law enforcement websites for the public (what to do if a drone is flying in your backyard), recording and air traffic around schools, and the possible need for scannable aircraft registration tags.
Work Group: Predictable/Flexible Scheduling
Senator Dembrow-D, Chair of the Senate Workforce Committee convened a stakeholder group of employer and employee advocates to discuss predicable scheduling and flexible scheduling proposals for possible consideration in 2017.
In 2015, labor and worker advocates crafted several proposals which were not advanced that would have mandated predicable or flexible scheduling laws. Highlights of the proposals include:
- Employers must provide employees with work schedule at least 21 days in advance;
- Employers must pay for scheduled hours of work, regardless of hours actually worked, up to a maximum of 4 hours;
- Schedule changes made within 24-hours notice of new schedule requires an additional 4 hours of pay per employee for each shift changed;
- Employers must pay for 4 additional hours of pay if an employee is required to work more than one shift in a 24 hour period;
- Employees are allowed to request a flexible, predictable or work schedule change. Employer can only deny for ‘bona fide business reason.’ If denied, employer must attempt to agree on mutually acceptable schedule.
While the proposals did not advance, employer advocates were able to pass a 2-year preemption on local governments from adopting the above related provisions. This preemption expires July 2017. To-date, there are no statewide predicable scheduling laws on the books, however Vermont does have a law allowing an employee to request a flexible schedule with certain parameters. The City of San Francisco adopted a ‘Retail Workers Bill of Rights’ in 2014 (operative in 2015) and the City of Seattle is currently considering a similar law.
View ‘Center for Popular Democracy’ work group presentation: https://www.docdroid.net/5fJlZSK/rachel-deutch-slides.pptx.html
Dept. of Revenue Ruling – Denies ‘Gigabit’ Tax Exemption
In 2015 the Oregon Legislature created a tax exemption in hopes of luring Google Fiber's superfast Internet service to Oregon. The new law created an exemption from Oregon’s property tax to companies that offer Internet connections of at least 1 gigabit per second. The PUC ruled in February that Comcast, Google Fiber and Frontier were eligible for the tax exemption. The second step of the process was approval by the OR Dept. of Revenue. Earlier this week, the Department ruled that Comcast, Google Fiber and Frontier were not eligible for the tax break (Google Fiber and Frontier Communications do not currently offers gigabit service in Oregon). It is anticipated that Comcast will appeal the decision.
Legislative Counsel Issues Opinion Interpreting City of Seattle Case
The Oregon Legislative Counsel office issued a legal opinion interpreting what bills raise revenue based on the recent City of Seattle court case. According to the opinion, Legislative Counsel is advising Legislators the elimination of a tax deduction or tax credit is not a bill for raising revenue. This has significant implications. For example, a vote to eliminate the mortgage interest deduction would only require a simple majority even though it would increase taxes by a billion dollars.
View opinion: https://www.docdroid.net/KYdrPE9/lcseattleopinion.pdf.html
New Co-Chair of Ways and Means
Rep. Nancy Nathanson-D, Eugene, was appointed the new Co-Chair of the Ways and Means Committee. Nathanson assumes the seat from retiring Rep. Peter Buckley, an Ashland Democrat who has been co-chairman since 2008.
Campaigns & Election News
IP 28 – $5 Billion Tax Increase (Corporate Minimum Tax Increase)
On Friday, May 20th, a coalition of public employee unions submitted the final batch of 130,000 signatures to qualify IP 28 for the November ballot (only 88,100 required).
Oregon Primary Election Day was Tuesday, May 17th.
Turnout
Over 1.2 million Oregonians cast ballots in the primary election, only the second primary election in state history with more than 1 million ballots turned in. (The other election was 2008 with Barack Obama and Hillary Clinton at the top of the primary ticket.) The state’s motor-voter registration program has added more than 50,000 new voters this year.
State House of Representatives
[political make-up: 35 Democrats – 25 Republicans]
All of the State House seats are up for election in 2016. The Democrats will look to increase their majority, reaching “super-majority” status, or the 36-votes required to raise revenue, while the Republicans will look to narrow their margin by protecting their 2 swing seats and picking up open contests. Swing seats where major election battles are expected include:
HD 20 – Voter Registration: Rep = 35% Dem = 36% Ind = 29%
Incumbent Rep. Paul Evans-D, a teacher at Chemeketa Community College, will face political newcomer Laura Morett-R, co-owner of Morett Construction, in the General Election. In 2014, this campaign battle cost upwards of $990,000.
HD 30 – Voter Registration: Rep = 27% Dem = 36% Ind = 37%
This open seat, vacated by Rep. Joe Gallegos-D saw over $1M spent in the 2014 election. Dan Mason-R, a community manager, is the returning challenger, having lost to Gallegos in 2014 by 1900 votes. He will face Janeen Sollman-D, a recycling and customer service specialist.
HD 40 – Voter Registration: Rep = 30% Dem = 38% Ind = 32%
Previously held by Rep. Brent Barton-D, this has consistently been one of the most expensive legislative battles in Oregon. In 2014 over $1.2M were spent ($780,000 by Democrats and $453,000 by Republicans). The swing district will see a November showdown between Mark Meek-D, a small business owner and Republican Evon Tekorius-R, an Oregon City School board member and co-owner of Teknical Associates Inc.
HD 51 – Voter Registration: Rep = 29% Dem = 36% Ind = 35%
Previously held by Rep. Shamia Fagan-D, this seat is another where the campaign battles exceed $1 million ($1.045M in 2014). Janelle Bynum-D, a steering systems engineer with General Motors, will face Happy Valley's mayor, Lori Chavez-DeRemer-R.
HD 52 – Voter Registration: Rep = 31% Dem = 36% Ind = 33%
Democrat Mark Reynolds, a retired teacher, will face off with Republican incumbent Mark Johnson, a general contractor.
HD 54 – Voter Registration: Rep = 29% Dem = 36% Ind = 35%
Incumbent Republican Knute Buehler, a physician, will face Gena Goodman-Campbell-D, a coordinator with the Oregon Natural Desert Association.
State Senate
[political make-up: 18 Democrats – 12 Republicans
The State Senate rotates which 15 seats are up for election every two-years. Given this make-up, this batch of seats is traditionally more safe democrats seats, making it a difficult year for Republicans to pick up seats. There will be at least two new-comers to the Democratic caucus replacing retiring Legislators:
SD 21 – Rep. Kathleen Taylor-D will be the nominee to replace Sen. Diane Rosenbaum-D.
SB 22 – Rep. Lew Frederick-D will be the nominee to replace Sen. Chip Shields-D.
This legislative update was provided by CompTIA's contract lobbyist Amanda Dalton. Please contact me if you have any questions or would like any additional information regarding this update. Thank you!
