Could measure 118 cost state $1 billion annually?

A proposed corporate tax hike to send every Oregonian a check could end up costing the state more than $1 billion annually, legislative revenue analysts told lawmakers this week.

Voters will decide in November whether to approve Measure 118, which would increase by 3% the corporate minimum tax on sales above $25 million and distribute proceeds to all Oregonians. In 2026, the average rebate could range from about $1,000 to $1,300, according to an analysis released this week.

State fiscal analysts have spent months trying to figure out how the proposed new tax and rebate would affect Oregon’s budget. It’s complicated – it would raise taxes on many corporations, resulting in more tax revenue, but because the rebate would be claimed by many Oregonians as personal income tax credits that reduce their taxes, personal income tax revenue could decrease. Other Oregonians would receive their rebate in the form of direct payments, which would show up on state balance sheets as money spent.

Sen. Mark Meek, the Gladstone Democrat who chairs the Senate Revenue Committee, called the measure a “debacle” and said he was “very much more confused now” after a 45-minute presentation Tuesday about the possible costs.

“From the sounds of it, it was very poorly written,” Meek said. “It was written to be sexy to those people who have children and families that want that money in their pocket but don’t understand the cost, what it’s going to take, and if it’s even going to be a benefit to them.”

The legislative revenue office added expected tax increases, tax decreases and spending together to estimate that the state would receive more money in the current budget cycle, but that it would have a negative cash flow in future budgets. If the measure passed, the state would be down about $547 million in the 2025-27 budget, $2.1 billion in the 2027-29 budget and $2.5 billion in the 2029-31 budget.

That’s money that couldn’t be used for state services, including investing in housing, health care and highways. And it would reduce how much money the state automatically adds to its rainy day fund.

The state would also be on the hook for making sure that anyone who receives social services tied to income – like the Supplemental Nutrition Assistance Program or Employment Related Day Care – wouldn’t see their benefits reduced based on a higher income from the rebate.

“I don’t know if I can stress the complexity of going through every person who is entitled to a rebate and figuring out what the impact on their benefits would be,” Legislative Revenue Officer Chris Allanach said.

Money pouring in

The legislative presentations come as backers of the proposed measure stepped up their fundraising efforts. On Tuesday, the same day that campaigns needed to start reporting contributions within seven days of receiving them, the Oregon Rebate PAC reported that it had received $200,000 in the past month from Jones Holding LLC, owned by California venture capitalist Josh Jones.

Much of the measure’s financial support has come from wealthy Californians, including Jones, who gave $780,000 through his company; the mother and foundation of late Tesla engineer Gerald Huff, which gave nearly $200,000; and Dylan Hirsch-Shell, a former Tesla engineer running for mayor of San Francisco, who gave $100,000.

Opponents, led by Oregon Business and Industry, have raised nearly $9.3 million to defeat the measure. The Defeat the Costly Tax on Sales committee received six-figure checks from some of the largest retailers and manufacturers in Oregon and the nation, including Home Depot, Walmart, Bi-Mart, the Tillamook County Creamery Association, and Daimler Trucks.

A long bipartisan list of opponents includes Democratic Gov. Tina Kotek, most state legislators, labor unions, businesses, and progressive groups, including the Oregon Center for Public Policy. Supporters of Measure 118 have decried its opponents, especially elected officials, as being too loyal to corporate donors.

Sen. Jeff Golden, D-Ashland, said he has heard from constituents who read comments from opponents, including Kotek, about how the measure would have a negative impact on state revenue. But he said he struggles to clearly answer their questions because of the measure’s complexity.

“I feel like I’ve done a poor job trying to make clear why that is,” he said.

Sen. Brian Boquist, R-Dallas, described it as a “disaster in the making” and said lawmakers would have to figure out how to implement the measure if voters approve it. He won’t be among them – Boquist is barred from running for reelection because he missed too many days of floor sessions in 2023, and he’s running for treasurer instead.

“​​It’s so difficult,” Boquist said. “I mean, you’re going to have a single mother of two kids looking at their ballot and saying, ‘OK, I would get $4,800 according to the voters’ pamphlet, if I vote yes. Do I pay my rent? Do I pay my food?’… And you go to the opposite end of the spectrum, and you can have a homeschooling couple with six children, and they could be the ultra-conservative anti-tax people, and they’re going to look at this and say, ‘Well, I could maybe get $12,800 back. I could put that in the college fund for my kid to go to college.’”

oregoncapitalchronicle.com