House Demos want tax break look; sales tax bill surfaces

SALEM, Ore. (AP) — While a group of House Democrats said a closer look should be taken at tax breaks to find revenue for schools, a prominent Democratic senator introduced a bill to establish a state sales tax.

Sen. Kurt Schrader, co-chairman of the Legislature’s budget committee, on Tuesday acknowledged his sales tax gesture mainly is “just to get a discussion going.”

Schrader believes Oregon, as one of just five states with no sales tax, is much too dependent on the income tax. He introduced a bill in the 2003 Legislature to impose a business activity tax.

Oregonians have defeated sales tax measures nine times at the polls — most recently in 1993.

Schrader said his proposed 5 percent sales tax measure, Senate Bill 382, actually would cut taxes for almost all citizens by reducing income taxes, broadening homestead property tax exemptions and other steps.

He estimates the sales tax would yield as much as $400 million a year from the untaxed “underground economy” of people who don’t report income and from tourists.

Schrader acknowledged that revenue-raising bills are supposed to start in the House — where Republicans hold the reins — but said “we’ve had problems in the past get this discussion going in the House.”

A prominent anti-tax activist pounced on Schrader’s bill.

“It’s more of the same old, and I guess there’s some people who will never get the message,” said Russ Walker, executive director of the Oregon chapter of FreedomWorks, formerly Citizens for a Sound Economy.

The organization led the campaign against a legislatively approved tax boost that voters defeated last February.

Also, the majority House Republicans were cool Tuesday to the minority House Democrats’ call for moving to end some tax breaks, saying that is a tax increase by another name.

“I’m not enthused about solving our shortfall by shifting the burden onto businesses,” said Rep. Tom Butler, R-Ontario, chairman of the House Revenue Committee that has jurisdiction over bills to raise revenue.

The Democrats pitched a “strong schools plan” with mostly familiar themes, including a hard look at tax breaks that they said cost the state $8.8 billion in general fund revenue.

School advocates are sharply criticizing Democratic Gov. Ted Kulongoski’s proposed $5 billion school support budget as inadequate, saying it will cause more classroom crowding and shortened school districts in some places.

Fiscal analysts estimate that maintaining all existing services would require an additional $300 million to $400 million.

“For four years our schools have been on a downward slide,” said House Minority Leader Jeff Merkley, D-Portland. “Today we draw a line in the sand.”

Kulongoski, along with legislative leaders of both parties, acknowledge there’s little or no chance of tax increases, especially after voters have defeated proposed budget-balancing tax boosts twice in the past two years.

“We absolutely must look at the tax giveaways,” said Rep. Steve March, D-Portland.

Democrats didn’t specify which breaks should be ended but in the past have criticized allowing tax credits to businesses for the costs of complying with pollution control laws, for example.

It requires three-fifths approval in the House — 36 votes — to pass any revenue-raising bill. Republicans outnumber Democrats 33-27 in the chamber.

Democrats hold an 18-12 majority in the Senate, but measures to raise revenue by law must start in the House.

Kris Kain, president of the Oregon Education Association, the state’s biggest teacher’s union, applauded efforts to put a spotlight on tax breaks.

“It am really heartened to know they’re looking at this way of revenue recovery. We have thought for a long time it makes sense,” she said.