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Ore. Special Session: Will Proposed Tax Cut Do More Harm than Good?

Gov. Kate Brown's proposed tax break would cost the state about $13 million a year, according to the Legislative Revenue Office. (Edmund Garman/Flickr)
Gov. Kate Brown's proposed tax break would cost the state about $13 million a year, according to the Legislative Revenue Office. (Edmund Garman/Flickr)
May 21, 2018

SALEM, Ore. – A special legislative session called by Gov. Kate Brown begins in Salem Monday.

Brown is gathering lawmakers in an effort to extend a tax break for so-called pass-through businesses, or those in which profits go to the owner, who then pays taxes on his or her income instead of corporate taxes.

The governor says that tax break should include sole proprietors, who were left out when a tax break was passed in 2013.

That idea faces a lot of pushback from legislators.

Juan Carlos Ordoñez, communications director for Oregon Center for Public Policy, says more than two-thirds of benefits from the current tax break are going to Oregonians with incomes higher than $500,000 a year.

"While the governor has raised an inequity in the existing tax program, it's important to recognize that there are bigger problems with this tax scheme, bigger inequities,” Ordoñez points out. “One of those inequities is that we're taking money away from school and essential services to fund some of the richest business owners in our state."

According to the Legislative Revenue Office, expanding the tax cut could cost the state $13 million a year by 2022.

Ordoñez says the break already creates a two-tier structure in which business owners end up paying a lower tax rate than their workers.

Short of getting rid of it, Ordoñez says it would be best if the proposal were revenue neutral.

At a public hearing last week, state lawmakers suggested eliminating the reduced tax rate for the higher-income earners who benefit from it.

Ordoñez also suggests putting an expiration date on the tax cut.

"This forces the legislature periodically to review the tax break to see how it's working,” he states. “Is it achieving the goal that the Legislature had for this tax break? And if not, then reform it or get rid of it. But it forces the legislature to look critically at the way it's spending monies through the tax code."

Lawmakers are planning for a weeklong session.

Eric Tegethoff, Public News Service - OR