Legislative watch: Tax proposals under review, cap and invest moves forward, but faces long odds

After a whirlwind ten days, the legislature hones its agenda. 

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The legislature will whittle down its to-do list by the end of this week, as some proposals move forward and others die.

Thursday marks the deadline for most bills to move out of their first-review committees and into other committees or the House and Senate floor. Prospects for cap and invest look grim but key tax proposals are gaining momentum.

“The shape of the session will very much be determined over the next couple of days,” says lobbyist Len Bergstein, owner of Northwest Strategies, “[as] we see what the last bills standing are.”

Environmental legislation

The House and Senate versions of the Democrats’ cap and invest carbon pricing plan, dubbed the Clean Energy Jobs bill, will likely die in committee this session. Both bills moved out of their first-review committees on Thursday. But they still face an uphill battle. The ways and means committee they’ll ultimately need to pass through doesn’t have a deadline for pushing bills to the floor, and not enough of its members back the legislation.

“The votes aren’t there on the ways and means committee,” says Mike Freese, a lobbyist with the Romain Group. “We’re led to believe neither bill will move to the floor.”

A cap and invest victory depends on reconciling several entrenched divides, between conservative and progressive businesses, urban and rural legislators and differing visions from the Senate and House Democratic leadership.

Chances of these factions aligning this session are slim to none.

“It’s a very complicated game of chess in a building that’s very reticent to do a big thing in the short session,” Bergstein says. “But a bill that is revenue neutral and pared down could move. The House leadership wants this badly.”

“It’s a very complicated game of chess in a building that’s very reticent to do a big thing in the short session,” —Len Bergstein

Yet House lawmakers haven’t made any progress in committee meetings. The amendments added to the cap and invest bills in the first week, in Freese’s opinion, did nothing to move the policy closer to the political center, where it might appeal more to rural Oregonians.

The proposed Cleaner Air Oregon rules, also moved forward from first-review committees.

Yet the legislation faces fierce opposition from industry groups. Mark Johnson, CEO of Oregon Business and Industry, said the Department of Environmental Quality will have a difficult time funding Cleaner Air Oregon, the entity that will administer the air quality program, unless an alternative to Gov. Brown’s pollution control proposals moves forward.  “There’s an opportunity with funding in a compromise solution,” Johnson said. OBI and other industry groups have been lobbying legislators to pass a less stringent version of Brown’s plan.

Budget and Taxes

The Senate passed a bill today creating $140 million in state revenue, and those funds could pay down part of the PERS liability. The bill responds to federal tax changes to repatriation for multinationals by eliminating a technicality that would have drained state coffers. The bill now moves to the House for a vote.

That leaves Democrats and Republicans debating whether to use the money for PERS, or store it in a rainy day fund for education and other services. The Senate version opts for the rainy day fund.

“I think the odds are that it will go into a rainy day fund,” Bergstein says. “People may not know quite how to apply it to PERS.”

In fact, PERS reform has gone nowhere. “There’s almost no conversation,” Freese says. “They’re talking about it in terms of 2019.”

Another key tax issue involves capping tax cuts for some small businesses. Legislators are reviewing small business tax cuts included in the “Grand Bargain” package of bills passed in 2013. Those cuts included a lower tax rate for income from qualifying pass-through entities, like S-corporations and partnerships.

“The shape of the session will very much be determined over the next couple of days [as] we see what the last bills standing are.” —Len Bergstein

Democrats now want to cap that tax cut so it primarily benefits smaller businesses and those with lower incomes, not just doctors and lawyers. The businesses most affected by the change would be those with high capital costs, including construction and agriculture.

“Republicans see it as a tax increase on small business,” Freese says. “Democrats are styling it as a broader tax cut. It’s just how it’s phrased.”

The major tax bills, Freese says, have moved out of the Senate Finance and Revenue committee. House versions are already on the floor, and could go to a vote by Wednesday.

This story was updated to include comments from Mark Johnson, president of Oregon Business and Industry. 

This story was updated Thursday to reflect the latest status of the Cleaner Air Oregon rules and the Clean Energy Jobs Bill.