The Long Shadow of IP28

An initiative to raise the tax in Oregon on corporations with large sales is destined to spark a sharp argument over business paying its fair share and taxes that lead to higher consumer prices.

An initiative to raise the tax in Oregon on corporations with large sales is destined to spark a sharp argument over business paying its fair share and taxes that lead to higher consumer prices.

Oregon faces a lot of serious issues, but they all may pale in the shadow of IP28, the proposed initiative that would increase the minimum tax paid by corporations with sales exceeding $25 million per year in Oregon. 

Proponents and opponents will argue about the merits and demerits of IP28, but it is hard to argue with Duncan Wyse, the president of the Oregon Business Council, who says, “IP28 will suck up the money and energy that could go toward other issues.”

Wyse and others worry the debate over IP28 will widen Oregon’s political divides as well as overshadow other important debates ranging from improving rural economies to solving the housing affordability crisis in Portland.

The 2016 Oregon legislative session considered, but failed to pass an alternative to IP28. Backers have until July to collect the needed signatures to place the initiative on the November general election ballot. Few doubt it will make it to the ballot. 

The Oregon Legislative Revenue Office estimates IP28, if approved by voters, could generate as much as $5 billion in new revenue during a biennium. A Better Oregon, the group pushing the initiative, says the additional revenue should go to public education, health care and senior citizen services. 

IP28 would turn Oregon’s corporate minimum tax into a gross receipts tax for larger corporations. Supporters say the measure will force out-of-state corporations that profit from sales in Oregon to pay their fair share of taxes. Opponents claim it would result in higher consumer prices.

Because the initiative exempts other kinds of businesses (S corporations, partnerships, B corporations and limited liability companies), business advisers say corporations may organize differently in Oregon to avoid the higher tax. Critics also note that the initiative can’t bind a future Oregon legislature on how to spend the money it would raise. While lawmakers may feel politically obliged to spend on the purposes proposed by initiative backers, they wouldn’t be constitutionally bound to do so.

Backers say the measure will make up for Oregon’s low overall taxation on business.

There is no doubt or disagreement the initiative will spark a vigorous, if not rancorous debate. The 2010 special election campaigns over Measures 66 and 67 – which raised the corporate minimum tax and increased the tax rate for higher-income Oregonians to raise $733 million – degenerated into name-calling and fractured political relationships, especially between business and organized labor. IP28 would impose a bigger tax change, which former state economist Tom Potiowsky has called a “sales tax on steroids.”

While there is plenty of time for arguments over IP28, its shadow already may have a chilling effect on other campaigns. What shaped up a bombshell election season in Oregon has turned out to be more of a dud. The gubernatorial race is flying under the media radar. The rumored challenge-from-the-left to Oregon Senator Ron Wyden never materialized. The race for the Democratic nomination for secretary of state, which features three candidates with credentials, has drawn little attention.

The 2016 legislature managed to pass a minimum wage bill that will avoid having that issue on the November ballot. But the session itself was marred by partisan wrangling and arguments over the purpose of an even-year, 35-day legislative session. The rancor also has led to a recall effort against Senate President Peter Courtney.

If IP28 casts a long shadow on Oregon politics, the raucous presidential primary is the big elephant in the room. It is the dominant topic of political conversation on news outlets and across kitchen tables. The “Final Five” candidates in the running for the Republican and Democratic presidential nominations are expected to campaign in Oregon prior to the May 17 primary, drowning out pretty much everyone else.

The November general election could be a different matter as the GOP and Democratic frontrunners Donald Trump and Hillary Clinton both have unusually high negative ratings according to national polls. Assuming they capture their respective party nominations, they would mount vigorous campaigns aimed at stimulating voter turnout, with Trump appealing to alienated white blue-collar workers and Clinton trying to recruit younger voters activated by Bernie Sanders’ rhetoric about a rigged economy and establishment politics.

Those appeals for radical change could complicate the efforts of IP28 opponents, who already acknowledge the initiative starts with a majority in support.