Oregon’s Pending Political Divorce

Measure 97, which would raise taxes on corporations with more than $25 million in annual sales in Oregon, faces an uncertain future in the general election. However, it does seem certain that it's causing a political divorce in Oregon that will fuel polarization and make compromise harder to find.

Measure 97, which would raise taxes on corporations with more than $25 million in annual sales in Oregon, faces an uncertain future in the general election. However, it does seem certain that it's causing a political divorce in Oregon that will fuel polarization and make compromise harder to find.

Oregon voters can expect political rhetoric to escalate over Measure 97, the initiative to impose a gross receipts tax on corporations with large sales in the state, as the November 8 general election approaches.

However, the more intriguing question may be what will or should happen after the election, regardless of whether Measure 97 passes or fails? Chances are whatever happens will feel like a divorce. Andrew Bulkily, writing for Oregon Business, summed up the situation as going from “gridlock to civil war."

No one disputes that the stakes are huge. Oregon officials estimate Measure 97 will generate $3 billion per year in new state tax revenue. Proponents say most of that tax will be shouldered by large out-of-state corporations that currently don’t pay their fair share of the tax burden in Oregon. Opponents insist that the tax measure will result in higher consumer prices.

Emily Powell, the third generation owner of Powell’s Books, says higher taxes resulting from the passage of Measure 97 could drive the iconic Portland-based independent bookstore out of business. Powell says profit margins in the book business are too small and competition is too stiff to allow the store to raise its prices.

Measure 97 revenues have been touted by supporters, including Governor Kate Brown, as a badly needed and long overdue revenue make-up for K-12 school funding, health care and senior services. Opponents argue that the initiative can’t guarantee how legislators will spend the added tax money and that a big chunk of it will go to cover huge Public Employees Retirement System shortfalls.

There are people on both sides of the initiative who wish a compromise could have been reached to avoid a ballot measure mash-up that could be the most expensive political campaign in state history. Proponents and opponents have each raised double-digit millions of dollars to trade televised jabs this fall. Measure 97 backers weren’t in the mood to compromise, feeling that 2016 could be a moment to push through a major tax change on the ballot.

Which brings us to what happens after the election. If Measure 97 passes, the state’s available discretionary revenue will sharply expand. That would probably erase the projected $1.3 billion state biennial budget hole, but it wouldn’t necessarily determine how the balance of money would be spent. You could expect fierce arguments among interest groups over how much should go to K-12 schools versus investments in health care and senior services – and in higher education. You also could expect some high-profile business response, such as a business like Powell’s Books shuttering.

If Measure 97 fails, the state budget hole will loom even larger, potentially threatening cuts to K-12 and higher education funding and threatening Medicaid expansion. Perhaps worse, many in the business community may refuse to enter into discussions about how to meet that budget shortfall, PERS underfunding or tax reform because of the fractious fight they had to wage to defeat Measure 97. Oregon lawmakers may see hearing rooms full of angry faces unwilling to sit together in work groups to explore solutions.

It’s likely that the political zombie of a state sales tax would re-emerge. The sales tax has been the default idea for how to reduce the volatility of Oregon’s existing income-tax-heavy revenue system. However, sales taxes face their own haunting challenges, such as Internet sales. In Oregon, the appetite for a sales tax by voters has the same taste notes as brussels sprout ice cream.

If Measure 97 passes and Brown wins election, it will give her an effective mandate to guide how the new tax revenue should be allocated. However, it could dampen enthusiasm for climbing the steep hill to craft, pass and avoid a referral on a major transportation funding measure.

If Brown wins, but Measure 97 fails, Brown will have the challenge of trying to patch together a balanced budget, with limited credibility to court business support for alternative tax-generating options.

Brown’s position also would be weakened because she must run for election again in 2018 for a full four-year term. As secretary of state, Brown succeeded John Kitzhaber as governor after he resigned in 2015 and is running this year to fill out the final two years of the former governor’s four-year term.

This is a fairly grim picture. Sort of like a family portrait after a divorce.

Over time, views will soften, the more contentious personalities will be pushed aside and a dialogue can resume. But as the 2016 presidential election has revealed, strong political undercurrents can be unleashed, deepening polarization and crippling efforts to find common ground – or even a table where everyone can sit around to talk.