NEW INITIATIVES SIGNAL TAX FIGHT IN OREGON MAY BE JUST STARTING

Summary: Labor unions line up possible ballot proposals that could follow the current antitax referendum drive if it succeeds The battle over Oregon’s $800 million tax increase could trigger a wider ballot-box skirmish over the state’s financial future.

Labor unions have drawn up an array of tax and revenue initiatives they may take to the streets if voters ultimately overturn the Legislature’s budget- balancing package of temporary and permanent increases.

Taken together, the union-backed proposals could dramatically alter the state’s tax structure, forcing businesses and top-tier income earners to pay more.

At the same time, antitax groups have filed initiatives to further limit property taxes and to cut taxes on capital gains.

And, later this month, a group of lawmakers is expected to begin work on a possible overhaul of the state tax code, which also could wind up before voters.

For Oregonians, the various approaches promise a broad — and potentially bewildering — set of options for how and how much they pay for state government services.

Tim Nesbitt, president of Oregon AFL-CIO, said unions have devoted much of the past two years to studying the state’s tax system and examining possible changes. They’ve taken the proposals that might do best with voters, fashioned them into initiatives and filed them with the state Elections Division.

Among the initiatives are proposals that would:

* Require corporations to pay the same income tax rate as individuals. Currently, business income is taxed at 6 percent, while wage earners pay 9 percent on most of their income.

* Establish a statewide property tax.

* Establish a tax on business transactions.

* Add a 2 percent surcharge to income taxes paid by wealthier Oregonians.

* Make broad reductions in tax breaks taken by business and individual income taxpayers.

The union initiatives “are designed to make sure we have every opportunity available to us, from minor to major, that might make sense to take to voters in November 2004,” Nesbitt said.

Whether they go forward with collecting signatures for ballot measures depends largely on what happens with the current referendum — an effort by tax opponents to overturn the Legislature’s recent tax increase. The decision also will be influenced by the legislative tax reform committee’s actions, Nesbitt said.

The 20-member committee has until June 1 to come up with tax overhaul recommendations that could range from a sales tax to a state “rainy day” fund. The Legislature then has five days to convene in special session and decide whether to institute the proposals.

If the unions decide to go forward with their initiatives, they could be in the middle of their signature-gathering campaigns at the same time the Legislature meets.

Nesbitt said he doesn’t want to upstage or unduly complicate the Legislature’s work on tax reform. But he doesn’t want to sit back and wait, either.

“Sometimes, the threat of something being on the ballot can focus attention on the issue,” Nesbitt said. “It doesn’t preclude anything.”

Rep. Lane Shetterly, R-Dallas, who is heading the tax reform effort for the Oregon House, said he worries that the union initiatives could become “counterproductive.”

“My hope is they’ll come to the table and put their initiatives on hold, or at least not bring them out while we’re working,” Shetterly said. He said he wants labor and business to be an integral part of whatever tax reform recommendations the committee makes.

“We might be able to forestall this battle of the titans between labor and business,” he said.

The most immediate threat, from the unions’ point of view, is the effort to force a statewide vote on the Legislature’s tax package. To balance the 2003-05 budget, lawmakers in August approved a temporary, three-year surcharge on personal income taxes along with other permanent tax increases for businesses, retired residents and others.

Opponents of the tax package have been gathering signatures to put it on a Feb. 3 ballot. To do so, they must turn in 50,420 valid petition signatures by Nov. 25.

“We have no doubts we’re going to make it,” said Russ Walker, Northwest director of Citizens for a Sound Economy, which is overseeing the effort. “Our signature counts are returning at a pace that’s well on target and gives us plenty of buffer for potential errors.”

He said he plans to release a mid-campaign signature count this week.

Walker said he expects the tax fight to go on, regardless of what happens to the referendum. But he said the unions are underestimating the intensity of the public’s antitax feelings.

“It would be a mistake to think that if we defeat this tax increase, the unions can come back and raise taxes in bits and pieces,” Walker said.

Leslie Frane, executive director of Service Employees International Union, Local 503, said her members would like to see top-to-bottom, long-term changes in the state tax system to provide long-term stability and greater fairness.

But, she said, unions also recognize that the changes must be palatable to voters, which is why the initiatives focus on smaller, separate proposals.

“We could have the perfect plan, but if we get defeated at the polls, who cares?” Frane said. “We want a proposal that’s viable, because otherwise it’s just an intellectual exercise.”

Harry Esteve: 503-221-8226; harryesteve@news.oregonian.com

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