Antonio Gisbert, lead petitioner of Measure 118, poses with a printed copy of the ballot measure. "So what happens when every Oregonian gets 1,600 bucks? ... Well, all kinds of good things happen," he said.Allison Barr | The Oregonian/OregonLive
But critics say Measure 118 would do more harm than good. For example, some families who receive the rebate could lose eligibility for federal benefits, such as food stamps, according to a state report.
“I’d love to raise taxes on large corporations, especially those that are highly profitable. I’d love to get more cash and flexible money into the pockets of families struggling to afford rent and to put a meal on the table,” said Daniel Hauser, deputy director at the Oregon Center for Public Policy. “Unfortunately, where (architects of Measures 118 have) landed is somewhere that we can’t support.”
The list of organizations and individuals opposed to the measure is extensive. The campaign fighting the measure has received endorsements from hundreds of Oregon businesses, three members of Congress, and numerous state lawmakers and local officials. Meanwhile, the Oregon Rebate PAC, which is funding promotion of the measure, features only eight endorsements from progressive groups on its website, none of which come from elected officials.
The measure has also brought in far more money than all four of the other measures on Oregon’s ballot this November combined. Hundreds of businesses and industry groups have raised nearly $9.3 million to fight the proposed tax. Proponents, meanwhile, have raised about $171,000 since the measure qualified for the ballot.
Pushback from business coalition
Business groups, unsurprisingly, announced their opposition to the measure soon after it qualified for the ballot this summer. They contend that the new tax would force businesses to raise their prices and hurt consumers. They also argue that instituting a tax on gross sales, instead of net profit, unfairly targets businesses with thin profit margins, such as grocery stores and construction companies.
“There’s nothing to keep some of these larger corporations from moving (out of Oregon), which takes the jobs with it, and then it creates a livability and affordability downward spiral in our area,” said Willy Myers, a longtime Oregon building trade union leader.
Though the tax would only apply to gross sales above $25 million, small businesses throughout the state are concerned that it could indirectly harm them.
“If we disincentivize larger businesses from operating here, where we’ve already seen cuts at Intel, cuts at Nike, we can’t afford to lose high income earners that spend their money in small businesses,” said Sarah Shaoul, founder of Bricks Need Mortar, a Portland advocacy group for independent retailers.
Proponents of the measure argue that corporations are overexaggerating their claims and that businesses would use the new tax as an excuse to raise their prices higher than necessary.
“It’s important that Oregonians understand who is behind this effort: the same companies that have been caught lying, scamming and stealing to make themselves richer and everyone else struggle,” Gisbert said in a statement.
While critics of the measure point to a state report stating that the tax would dampen Oregon’s economic growth in the next decade, proponents point out that the report says those estimates come with “considerable uncertainty.”
The fight has resulted in businesses pouring in as much money as necessary to defeat the measure.
In June, Oregon Business & Industry formed political action committee Defeat the Costly Tax on Sales to fight the measure.
Grocery and retail stores, timber companies and insurance corporations have so far poured the most money into the campaign. Fifteen companies have contributed at least $200,000 each, including Oregon-based Standard Insurance, Lithia Motors, Daimler Truck North America, Roseburg Forest Products Co., The Papé Group, PacifiCorp, PacificSource Health Plans and Regence Blue Cross Blue Shield of Oregon.
Hundreds of companies have kicked in $9.3 million to defeat Measure 118. Home Depot contributed $500,000 to the campaign earlier this month.AP
The largest overall contributor to the committee is a PAC that is funded by grocery and retail stores — including Kroger, Albertsons-Safeway and Costco — which donated $1 million in August.
Nearly all the much smaller pot of money the Oregon Rebate PAC has raised since qualifying for the ballot came from wealthy Californians who support universal basic income pilot programs around the country.
Critics of the measure were quick to raise concerns about those out-of-state funders, claiming they view Oregon as a test lab for progressive policy experiments.
Those contributors say that’s not the case. “I look for these things because my budget is very small, but my passion is very big,” said Gisele Huff, a universal basic income supporter from California and the second-largest contributor to the campaign to get Measure 118 on the ballot. “We are willing to put our money where our mouth is and our hearts are.”
Impact on state budget
While proponents of Measure 118 say the rebate program is intended to be revenue-neutral, state analyses tell a different story.
According to reports from the Legislative Revenue Office and the Department of Administrative Services, Measure 118 would deplete the state’s largest source of discretionary spending, the general fund, by $23 million before next July and by $400 million in the 2025-27 biennium.
There are several reasons for that, but the most direct impact would be a reduction in corporate tax revenue for the general fund because the vast majority of Oregon corporations would switch from paying a tax calculated from their profits, which goes to the general fund, to paying a minimum tax based on their sales in Oregon, which would fund the rebate. Under Oregon law, corporations pay the higher of the two taxes – the tax on their profits or a corporate minimum tax. Because the measure would massively raise the corporate minimum tax, most corporations would own that tax.
“Now we have a whole bigger pot, much larger, but then it’s going towards the rebates and not going to support state programs,” said Hauser, with the Oregon Center for Public Policy.
The general fund would take hits in other, less obvious, ways as well. For example, the Legislative Revenue Office estimates that Measure 118 would reduce the general fund by about $70 million per year due to out-of-state insurance companies paying lower taxes. Oregon, like nearly every state, has a law requiring out-of-state insurers that pay higher taxes in their home state to pay the difference in taxes between the two states to Oregon. If Oregon raised its corporate taxes through Measure 118, however, this difference would shrink or disappear for insurance companies from other states, lowering the tax revenue to the general fund.
State analysts say the proposed tax increase would also reduce personal income tax revenue, due to some business owners and corporate shareholders making less money, and reduce payments into Oregon’s rainy day fund, because corporate taxes other than those used to make annual payments to Oregonians would drop.
Lastly, the proposed tax increase could create a massive $1.3 billion problem for the state because of its effect on the state’s corporate kicker. This kicker — which is generated from corporate taxes exceeding state economists’ expectations — helps fund K-12 education and is projected to bring in around $600 million for the biennium ending next June. However, unless lawmakers change the rules, the proposed tax increase would add about $1.3 billion to the kicker. The complication arises because this $1.3 billion would be allocated for the rebate program.
“If there were no changes and Measure 118 becomes law, that just creates a $1.3 billion hole in the general fund,” said Chris Allanach, the state’s Legislative Revenue Officer. “The Legislature could change it, but that has its own issues.”
The proponents of the measure, however, continue to say the measure is revenue-neutral.
“We feel that we’ve done our homework and that our four-page ballot initiative is clear about holding the general fund harmless in this regard,” Gisbert said in an Aug. 19 letter to the governor after she raised concerns about the measure’s effect on Oregon’s economy and budget.
Kotek is far from the only elected official who has come out against the measure. Dozens of lawmakers from both parties announced their opposition this summer, citing state analysts’ projections of its potential impact on Oregon’s economy and budget.
But supporters of Measure 118 say those elected officials have cited misleading or inaccurate reports. In his letter to Kotek, Gisbert laid out his concerns and asked to meet with her. Kotek’s office never responded, according to a spokesperson for the governor’s office.
Gisbert said he was not surprised by the pushback from elected officials: “I think that electeds are showing very clearly that their allegiances are more to their corporate donors than they are to everyday Oregonians.”
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