We anticipated that the 2022 short session would be all defense, and for the most part we kept the forces of greed from scoring. It was a smile to hear Chris Allanach, the able civil servant who heads the Legislative Revenue Office, tell House Revenue Chair Nancy Nathanson (D-Eugene) that her committee had completed its business for the session after the brief work session that sent to the floor the modified omnibus tax bill, SB 1524.
Starting out in the Senate Finance Committee, the bill was like a blob in a horror movie, picking up viruses over 16 days of consideration, threatening the integrity of the tax code each time Chair Lee Beyer (D-Springfield) added something to it. Beyer has been a business and development cheerleader throughout his career, and over the past decade, in a second stint in the Senate, he chaired the Business and Transportation Committee. When Finance Chair Ginny Burdick resigned in November, President Peter Courtney appointed Beyer to succeed her. He retires at the end of the year.
We wondered about the terms Beyer and Nathanson set in divvying up committee bills. Short-session procedures restrict their numbers, so sometimes diverse provisions that in long sessions get discrete consideration get combined into one vehicle. Nathanson took three items: forestry taxes, including the governor’s “forest accord”; an inflation adjustment for cannabis taxes; and an extension of the Historic Property Special Assessment. (She did so, generally in a conservative—small “c”—manner.) Beyer was to handle school funding related to the 2020 wildfires, the annual connection to the federal tax code, and a miscellaneous policy and technical bill, SB 1524. The Blob.
Gain Share
The Blob’s most controversial item was extension until 2030 of the Gain Share program, which since 2007 has sent General Fund revenue to localities that give property tax breaks to businesses through Strategic Investment Program agreements. Gain Share, most of which is lavished on Washington County, has had no formal review since 2015, when the legislature renewed it for nine years. It was scheduled for review in 2023, an exam its proponents sought to avoid. As did many legislators from Washington and other counties who would like their localities to take a bite of the General Fund.
We were among many opposing Gain Share (and as we reported last week, we had a piece in The Oregon Way explaining why). When the bill finally got to House Revenue March 1—seven days before adjournment—Nathanson explained her intention to delete the extension: Tax expenditures are supposed to be reviewed on a schedule and as part of a budget, not just because they’re popular. After presumably counting votes (or accommodating her colleagues), Nathanson amended her plan and proposed a one-year extension, until July 2025.
Beyer’s second bit of mischief would have extended to medical technicians an income tax credit provided to certain medical providers (doctors, nurses, etc.) in rural areas. The champion of the provision was first-term House Revenue Republican Bobby Levy (Echo). Levy told the Senate Finance Committee that some of her constituents in Morrow County, on the Columbia, had moved to Washington, so it was important to try to retain technicians in Oregon by opening the state’s wallet. We testified that the provision was unexamined and unjustified: The pandemic-induced chaos in the health care labor force is not confined to rural counties on the state’s border.
Nathanson, in opening her March 1 hearing, explained why she was excising Levy’s provision—the same reason she’d sought to remove Gain Share. No one on the committee protested.
A minor bit of Beyer largess is section 1 of the omnibus: increasing production subsidies disbursed by Oregon Film to moviemakers who shoot in the state (“Portlandia,” “Grim,” etc.). We testified against it in House Revenue, as we had in Finance, bringing data gleaned from the Department of Revenue: Of the $20 million the state spent this year to subsidize movies, $1.4 million went to the purchasers of the tax credits that finance the program. The top beneficiary in fiscal 2022 is US Bank: Last fall it bought $7 million in tax credits for $6.58 million, easing its Oregon income tax liability by $420,000. The top individual purchaser erased $258,000 in taxes.
The only member of either committee to question the provision was Rep. Khanh Pham (D-Portland), who asked Oregon Film head Tim Williams whether depleting the fund faster, as the increase in subsidies will do, would prompt him to return to the committee for an increase in total tax credits sold to finance it. (The legislature has doubled the volume since 2016.) Williams replied that it would be a good problem to have, but that he had no plans to do so. Uh-huh. We implored the committee to rethink how it subsidizes movie productions and eliminate the financing fee it gives to millionaire taxpayers. (Oregon Film helpfully explains how you can save up to 10% of your income tax obligations.)
The omnibus bill also addresses the closing of rural pharmacies by exempting certain independent stores from the CAT on prescription drugs. But the crisis in small-town pharmacies has nothing to do with the CAT and everything to do with the cartel of Pharmacy Benefit Managers that are strangling drug stores across the country. (Much of CVS revenue comes from its PBM subsidiary.) We told legislators that they might congratulate themselves for a feel-good measure (that depletes K-12 funding), even as pharmacies continue to shutter. The feds are on the case: In January the Department of Health and Human services proposed rules to address the PBM cartels.
Other revenue provisions
Nathanson added to the omnibus a provision to allow farmers loss carrybacks as compensation for their obligation under HB 4002 to pay workers time-and-a-half after 40 hours (an omission in the 1938 federal labor law because most farm labor at the time was Black). That debate occurred far over the heads of TFO and the tax committees (we lobbied against a separate provision giving farmers tax credits—in effect having the state pay for the overtime). That minority Republicans didn’t walk over the farmworker bill was something of a coup for a functioning legislature, though of course majority Democrats had to pay for it.
Most of the other bills we opposed died. Nathanson effectively killed two by declining to schedule votes. HB 4097, sponsored by five members of her committee, would have created a tax credit for volunteer firefighters. HB 4043 was an ill-conceived plan to retain low-income housing by giving tax credits to sellers if the new owners maintained modest rents. A provision in a veterans bill, HB 4066, would have provided 100% property tax exemptions for disabled veterans over 65. The provision was dropped to avoid referral to Revenue (and the bill died in the Senate).
Among bills on their way to the governor:
- SB 1502, which is part of a deal with the timber industry, creates a tax credit for certain small forestland owners in exchange for leaving the trees alone. But it has faults we hope to see corrected, like no sunset date and treating with kid gloves forestland owners who break the deal.
- HB 4055 extends the lapsed Harvest Tax. We have been urging the tax committees to engage in broader reform, recognizing the legislature’s hollowing out of taxes on timber and shifts in ownership structures over the past three decades.
- HB 4054, the historic property tax benefit reform, collapsed over design, technical issues and the politics of having two dozen interests at the table. One proposed reform, which would have limited the benefit to commercial property, fell by the wayside, even after The Oregonian published a story citing big tax breaks for the owners of multi-million-dollar homes in Portland. The committee settled for a two-year extension with modifications.
We supported SB 1506, allowing localities to ask their voters to raise cannabis taxes up to 10% to cover revenue losses from diversion into drug treatment under Measure 110, which passed in 2020. When that idea failed, Republican Senator Lynn Findley (Malheur) proposed a version that would allow only Ontario to ask its voters the question (the city is booming with pot shops serving folks from Idaho). After the bill died on the Senate floor, Nathanson proposed to insert Findley’s plan in the omnibus bill. But she didn’t have the votes either. GOP colleagues on her panel, Greg Smith (Heppner) and Werner Reschke (Klamath), praised her for trying.
We know the feeling. We had some successes. As is often so, we were the only opponent of a provision, and somehow it died, or got less worse. (Our testimony is on our website.) Nathanson appeared to be of like mind on many matters within her control.
As for us, our task is contesting a Gilded Age. We’ve begun planning for 2023.