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Despite tradition of compromise, rivals say a deal is unlikely

TIMES FILE PHOTO - Opponents of Initiative Petition 28, a measure that would impose a gross receipts tax on several of Oregons biggest businesses, say that its passage would hurt both business as well as Oregon consumers.When a proposed statewide $15-an-hour minimum wage measure gave businesses heartburn, Gov. Kate Brown intervened to float a compromise plan earlier this month.

In contrast, Brown has stayed squarely on the sideline when it comes to a new initiative aimed for the November ballot that is arousing just as much opposition: a $2.6 billion annual tax increase on many large corporations.

Aside from some Democratic senators, nobody is proposing an alternative — including the business community that would be affected. That might seem surprising in light of Oregon’s long history of compromise and alternative measures to defuse impending ballot warfare.

So why is Oregon headed for a serious political rumble?

Some say there’s scant incentive for supporters to consider common ground, thanks in part to an expected federal court ruling that could drastically reduce the clout of public employee unions in future election cycles. The sponsors of the measure say they’re done compromising on tax measures as they did under former Gov. John Kitzhaber.

“I think the coalition that’s behind the measure is saying ‘We don’t want to just have peace, we want to make people’s lives better,’” said Ben Unger, the former lawmaker who leads the group spearheading the initiative, Our Oregon. “I would rather help people than avoid disagreeing.”

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For more on the economic impacts of Initiative Petition 28, click here

Huge budget boost

Initiative Petition 28 focuses new taxes on a swath of corporations with $25 million or more in Oregon sales. The tax is not on profits, but on gross receipts. It would generate $5.2 billion in Oregon’s next two-year budget period. That money, which is supposed to boost education and health spending, would increase the state’s $18.5 billion general fund by nearly a third.

The money raised would be seven times the amount raised by the corporate tax measures that spawned a bruising labor-business fight in 2010. Observers are already predicting the opposition campaign alone will spend $15 million to $20 million — a staggering, record-shattering sum.

Supporters, meanwhile, are airing out their arguments that Oregon schools and other services desperately need funding, and that out-of-state companies will bear the brunt of the hike. Opponents, however, say the increase will result in higher prices for consumers and local companies, too.

Rep. Julie Parrish, R-West Linn, is strongly opposed to the gross receipts tax proposal, which she called a “backdoor sales tax.”

“I think it’s a horrible idea,” she said, comparing it to two 2010 ballot measures she opposed when she first ran for her seat in the Legislature. “This is like Measures 66 and 67 on steroids.”

Instead of forcing out-of-state corporations to pay their “fair share,” as the Our Oregon campaign has argued, Parrish said she believes the initiative would push large employers to relocate from Oregon to other states with lower corporate tax burdens. She named Lam Research, the largest private employer in Tualatin, as an example of an in-state company that would qualify for the gross receipts tax.

“Unless you have a forest or a farm or something that is tethering you to the land, you know, companies are portable these days,” said Parrish, who opposes Brown’s minimum wage proposal for similar reasons. “There’s no big reason to stay in Oregon if they’re suddenly going to be whacked by some enormous sales tax.”

Senate President Peter Courtney, D-Salem, has called for a compromise, predicting that the initiative will spark a political bloodbath with lasting negative effects on the state. And Sen. Mark Hass, D-Beaverton, has sought to build momentum behind the idea of an alternative measure.

TIMES FILE PHOTO - Oregon Governor Kate Brown has thus far tried to stay neutral in what may be a coming political battle over a gross receipts tax hike known as Initiative Petition 28. So far, however, there’s little evidence that other political players have been persuaded. And past compromise revenue efforts have not panned out.

Asked whether she would support a special legislative session to come up with an alternative to Our Oregon’s initiative, Parrish responded, “I have a hard time saying yes, because I just watched us waste money.” She cited the failures of Cover Oregon and the Columbia River Crossing infrastructure project as examples of recent government waste.

The proposal has also caught the ire of local Chambers of Commerce as well.

The Tigard Area Chamber of Commerce has joined a coalition of small businesses, chambers and consumers from across Oregon in opposing the plan.

“Because IP 28 would be a tax on gross sales — not profits — businesses would be required to pay the tax regardless of whether they’re making a profit or not,” said Debi Mollahan, the Chamber’s CEO. “That would force many employers to raise prices or cut jobs in order to stay in business.

Mollahan said that the issue is too complex to be brought up by the Oregon Legislature during the incoming short session, but she said that something needs to be done to stop the proposal.

“Ultimately the costs of this huge new tax increase, if passed, will fall on Oregon small and medium-sized businesses, as well as Oregon consumers and families, in the form of higher prices for almost everything we buy,” she said.

Kitzhaber effort failed

The initiative has its roots in a Kitzhaber-led push to tackle the belief, widespread in Salem, that the money flowing into state government has not kept up with demands for government services. After his return to office in 2011, Kitzhaber sought to forge a compromise between business and labor, involving talks, polling and focus groups in Eugene and Bend. Those efforts were put on hold when all sides concluded that the hoped-for sales tax measure wasn’t the answer.

“We really worked hard to find something that everyone could agree to,” recalled former Kitzhaber chief of staff Curtis Robinhold. “In the end, we didn’t find new revenue options that everyone could agree to or that we thought would pass muster with the voters.”

Kitzhaber always planned to seek out other alternatives in his final term, participants and former aides agree. But that never happened, thanks to escalating controversy over the appearance that his fiancee, Cylvia Hayes, profited personally from her role in his office.

In January 2015, as Kitzhaber struggled to cope with the situation, the union-backed Our Oregon group filed its petition for the tax increase. The measure likely wouldn’t have had the governor’s support because of his belief in avoiding large-scale ballot warfare, participants in the talks say.

Weeks later when Kitzhaber resigned, that became less of an issue for the public employee unions backing the measure.

Unions not in compromising mood

Meanwhile, a ruling that is expected this summer by the U.S. Supreme Court could hamper those unions’ ability to raise political funds in the future, potentially adding to the urgency behind the measure, several Democrats say privately.

Heather Conroy, executive director of Service Employees International Union Local 503, said the urgency is primarily because years of talks have gone nowhere.

“We really just cannot wait any longer to put forward a solution. ... We need to see change,” she said.

Brown, who’s running for re-election and is expected to receive strong union support, has not taken a position on whether the initiative makes sense.

“It’s a complicated issue, and she’s consulting with stakeholders, and she has not reached a conclusion about it herself,” said spokeswoman Kristen Grainger. “There’s definitely still time to consider the measure and what’s going to happen.”

House Speaker Tina Kotek, D-Portland, who generally leans in support of the measure, said she hadn’t heard any alternatives from the business community, and added that a much smaller measure probably would not be enough to make Initiative Petition 28 go away.

“We have a revenue problem in this state,” Kotek said. While the measure is not perfect, she said, “it would solve our revenue problem.”

Oregon Business Association head Ryan Deckert said the magnitude of the tax increase has businesses focused on beating the measure, rather than modifying it.

“It kind of focuses the mind; job one is to defeat that,” he said. “I think there’s just a collective ‘No way.’”

He, like initiative supporter Unger, expressed confidence about who will win.

“We think that when consumers and citizens in Oregon see how this will affect them, they will react negatively,” said Deckert, a former Democratic state senator.

Duncan Wyse of the Oregon Business Council, sounds resigned to a brawl.

“We’re not negotiating with the unions on this proposal,” he said. “If they want to take the proposal off the table and have a conversation, fine, but they haven’t done that. They’re very committed, as I understand it, to put it on the ballot.”

Though efforts by Hass and others did not lead to a serious push for the February legislation session, an April special session is still possible if a compromise is within reach.

State Sen. Betsy Johnson, D-Scappoose, said more needs to be done.

“I think it is incumbent on the entire Legislature to avail ourselves of every opportunity to seek middle ground,” Johnson said. But, she added, with a “looming election season, I think that middle ground is harder and harder to find.”

Mark Miller and Geoff Pursinger contributed to this report.

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