2013 Legislative Wrap Up: Cutting Tax Loopholes to Fund Priorities

Despite clear support from the public for making sure that big corporations and the wealthy are paying their fair share, legislators couldn’t get past the obstacles that the Republican minority put in the way of reform.

This is part of our 2013 Legislative Wrap series, where we’re giving the rundown on what the Oregonian Legislature accomplished across a range of issues and “grading” them on their work. For more in this series, hit the jump.
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The Loophole LobbyIf the 2013 legislature didn’t do much to rein in the $36 billion in tax breaks Oregon gives away every two years, at least lawmakers didn’t make the situation a whole lot worse.

The session began with a lot of momentum to cut many of the out-of-control tax loopholes draining billions from our schools and critical services. In particular, coming off a clear mandate from the 2012 election, there was strong support for cutting tax breaks that only benefit big corporations and the wealthy.

Unfortunately, Republicans and their allies tied up the much-needed discussion about loophole reform with their ideas about cutting pensions for retirees. A $275 million package of important tax reforms—put together by the House Democrats and Speaker Tina Kotek—needed a supermajority of votes to pass, but no Republicans would vote for it. (This happened despite Republicans getting an $800 million win in the form of cuts to retirees’ pensions.)

Ideas that were proposed to bring in more money for services, but ultimately failed, included:

• Capping itemized deductions for the rich

• Raising the tax rate for big, profitable corporations

• Increasing the tobacco tax

• Reforming the property tax system

• Capping the Mortgage Interest Deduction

Early on in the session, Our Oregon unveiled a list to generate more than $700 million in funds for schools and critical services. Unfortunately, all of these good ideas were blocked by Republicans.

On the other hand, new ideas to create new tax loopholes for the rich were stopped thanks to the many calls and emails from the public to their legislators. These bad ideas included:

• Cutting the capital gains tax rate for the wealthy

• Giving away subsidies that benefit big corporations

• A new “Manufacturing Tax Credit” that would have traded tax breaks for job promises and zero accountability.

Here are two other important, if quieter, failings of the session:

• Not passing a bill that would have put the Corporate Kicker (if it kicks this year) into community colleges. Voters passed Measure 85 last year, which puts the corporate kicker into K-12 schools, but it doesn’t go into effect until the upcoming budget cycle. House Bill 2305 would have made sure the kicker doesn’t go to big, out-of-state corporations this year. It passed in the House, but died in the Senate.

• Not finding a fix for the loophole that allows big corporations to get out of paying their corporate minimum tax. When voters passed Measure 67 in 2010, the intent was for all corporations to pay at least a minimum (and relatively very small) tax. But the Oregon Supreme Court just ruled that Oregon law allows some corporations to use certain tax credits to reduce or wipe out their minimum tax. This will cost the state millions and will only benefit a few very large corporations. In their short February session next year, lawmakers should prioritize finding a way to close up this massive loophole.

In short, Democrats in the House and Senate—for the most part—were poised to pass bills that closed big tax loopholes and raised significant money for schools and other priorities, but they were repeatedly blocked by Republicans who voted in lock-step.

Grade: Taking A Cat For A Walk

loopholecat

For more 2013 Legislative Wraps, check out:

Funding K-12 Schools
The Dirt on Oregon’s Environment

Higher Education: A Step in the Right Direction
Economic Fairness
Senior Services and Health Care
Other Important Bills

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