Oregon governor signs tax bill, calls special session

April 7, 2018

PORTLAND, Ore. (AP) — Oregon Gov. Kate Brown said Friday she’ll call a special legislative session before the end of June to broaden certain tax breaks.

Brown made the announcement when she also said she would sign a controversial measure passed by her fellow Democrats in the Legislature to keep Oregon from losing more than $200 million as a result of President Donald Trump’s federal tax overhaul. Unlike most other states Oregon’s coffers were due to take a hit because of the overhaul, due to a quirk in the way the state figures federal deductions for state tax purposes.

“We anticipate a one-day special session,” said Brown, who added that she had already been in conversation with legislative leaders about the move. A spokesman for Brown added that keeping the session to a single day would require a supermajority vote in the Legislature to suspend normal operating rules.

The goal of the special session will be to expand the list of small businesses eligible for preferential treatment under Oregon’s state tax laws. Brown described broadening the state tax breaks as a way to balance out a different bonus that would be blocked under the state tax bill.

The state tax bill - Senate Bill 1528 - targets the effects of the Trump overhaul.

Because of the way Oregon calculates its residents’ state income taxes, a new tax break created in the Trump overhaul is set to automatically carry over into state calculations. That would allow business owners to effectively benefit twice: once when they took the deduction on their federal taxes, and once when the same deduction was used to calculate - and lower- their state taxes. The state economist estimated the benefit would cost the state about $217 million in the its first two years.

The plan Brown will sign blocks much of that loss, letting residents take the deduction on their federal taxes, but not allowing it to be used to calculate state taxes.

Even as she called the double benefit unfair, however, Brown acknowledged that it would benefit some small businesses that are currently not eligible for some Oregon tax breaks. In the special session, Brown said, she will ask legislators to add a new class of businesses - sole proprietorships - to the list of those eligible for special treatment on their Oregon taxes.

Sole proprietorships often include independent contractors and others who do business without employees or any larger business structure.

Brown said she did not have any estimate of how much expanding the tax break would cost the state, but that it would be significantly less than the loss from the Trump plan.

In a statement after Brown’s announcement, Rep. Mike McLane, Republican minority leader in the state House, repeated earlier Republican objections to SB 1528, and questioned whether Brown couldn’t have simply let the Trump benefit carry over, rather than creating a new state benefit.

Nonpartisan state economists had said more than have of the benefit from the Trump overhaul would have gone to the wealthiest five percent of Oregonians. Brown said she did not know whether benefits of the expanded state credit would be more equitably distributed, but that sole proprietor businesses tend to be “mom-and-pop” operations.

Brown said she will convene the session by the end of June. A spokesman for Brown said she will sign 1528 next week.

Update hourly