Tax Votes Add Complexity to Budget Balancing Challenge

Tax votes that require three-fifth majorities to pass complicate already complex Oregon budget negotiations, which remain opaque and may not have really begun in earnest.

Tax votes that require three-fifth majorities to pass complicate already complex Oregon budget negotiations, which remain opaque and may not have really begun in earnest.

Negotiating a budget deal has the complexity of a Rubix cube. Factoring in one or more three-fifth majority tax votes makes the exercise more like Super Rubix.
 
In addition to finding a tough-love agreement on a budget, Oregon legislative leaders must line up even tougher votes for tax increases that would require at least one Republican and the entire Democratic caucuses in both the House and Senate.
 
It seems likely there will be at least two tax votes in connection with a budget agreement – a hospital provider tax bill and some kind of corporate tax legislation. There also could be a tobacco tax increase.
 
There is bipartisan agreement on the need for a transportation funding package, which would require another vote with at least 36 “yes" votes in the House and 18 in the Senate. Despite two months of public hearings and several months of road show meetings, there isn’t any apparent agreement on what should be in the package or how to pay for it.
 
A question legislative leaders have to ask is how many tax votes their members can stomach in a single session. The answer is usually tied to how relatively painless the tax votes can be made. Removing pain involves painkillers, known in legislative vernacular as political trade-offs.
 
Legislative Republicans have circled the wagons demanding significant spending cuts, including to the Public Employees Retirement System. They believe substantial reductions are needed to make the state budget going forward sustainable, especially when the next economic downturn occurs.

There aren’t any silver bullet solutions for PERS because of court rulings and contractual obligations, which means any spending cuts would be spread over a larger array of state agencies and programs. That means a higher probability of resistance from more corners of the legislative body, including in the Democratic caucus.
 
Some political observers worry that early-session pushes by Democrats on issues such as paid family leave and rent control could dampen Republican willingness to collaborate, or at least delay meaningful negotiations. At the same time, Democratic legislative leaders have allowed some GOP priority bills to move forward with the hope that Republican legislators keep an open mind on future legislation
 
A bigger obstacle is reticence by Oregon’s business community to engage in tax discussions before specific spending cuts are squarely on the table. Senate Ways and Means Co-Chair Richard Devlin has offered a conceptual plan to address the state’s $1.6 billion projected budget deficit in 2017-2019 with $500 million in spending reductions, $500 million in tax increases and a separate deal involving the hospital tax and other health care revenue to sustain the Oregon Health Plan, the state’s Medicaid program.
 
Reports have circulated in the Capitol that some business leaders have approached GOP lawmakers about tax increases, but there isn’t much public evidence yet of significant bipartisan negotiations. In fact, the negotiations seem unusually opaque for this deep into a legislative session, especially considering all the moving parts that will go into an eventual deal.
 
Ordinarily, so-called grand bargain budget and tax talks are convened by the governor. However, Governor Brown hasn’t signaled publicly she is ready to undertake that role.
 
Congressional turmoil has added uncertainty to Oregon budget considerations, though the failure of the US House to repeal and replace the Affordable Care Act removed, at least temporarily, concern about an immediate fiscal impact.