Can a Tax Increase be Justified in State Awash in Money?

Date: May 21, 2021

Unemployment insurance tax relief bill slowly -- too slowly -- moving through Senate. NFIB calls on members to act

State Director Anthony Smith reports from Salem on the small-business agenda for the legislative and political week ending May 21

It’s Day 123 of the 160-day Oregon Legislative Session and we are quickly approaching the final weeks of the 2021 session. Policy committees are winding down and things will be picking up in the Joint Committee on Ways and Means and the Joint Committee on Tax Expenditures. As you can read about more below, lawmakers have a lot more money to spend than they originally thought.

Here are the quick highlights of what’s been going on, and what’s coming up, with more information below on each topic:

  • New Guidance on Masks and Vaccination Status: The CDC is saying one thing about masks for fully vaccinated Americans, but state officials in Oregon are saying something else. In a press conference on May 18, the Oregon Health Authority took questions from the media about how Oregon will enforce the new rules, but many practical questions remain unanswered.
  • Tax Increases Should be Off the Table: On May 19, the Oregon Legislature received some incredible news from state economists – the state of Oregon is overflowing with cash. With a huge kicker coming back to taxpayers, and projected revenues up big for the next several budget cycles, politicians will be hard-pressed to justify any tax increases for the remainder of this session.
  • NFIB Members Taking Action on Two Key Bills: HB 3389 (UI Tax Relief) passed the Senate Committee on Labor and Business, but it’s making a detour in the Joint Committee on Ways and Means before it heads to the Senate floor. SB 483 (Presumption of Retaliation for OSHA Complaints) has twice been scheduled for a work session, but no action has been taken by the House Committee on Rules yet. We’re asking NFIB members to take action immediately on both bills.
New Guidance on Masks and Vaccination Status

Following the CDC’s announcement last week, the Oregon Health Authority released new guidelines on mask requirements for businesses. Under the updated guidance, people who are fully vaccinated will no longer be required to wear a mask indoors, in most public settings where vaccination status is checked.

The guidance says if a business or employer chooses to no longer require masks and physical distancing, the business or employer must require visitors to show proof of vaccination and review the proof of vaccination. In that case, a business would need to have a policy for checking the vaccination status of customers and employees if they are not wearing masks.

Here’s what NFIB had to say in response:

“Unfortunately, this new guidance isn’t very helpful for Oregon’s small businesses – and again puts them in a no-win situation. They can redirect staff away from their regular duties to start scrutinizing vaccine cards and take on the additional liability concerns that come with that, or they can continue to require masks for everyone, regardless of vaccination status. Either way, the state is asking our small businesses to be the bad guys.”

Oregon residents no longer need to wear masks outdoors, whether vaccinated or not. But masks are still required in a number of public places such as on public transportation and in schools, hospitals and clinics, homeless shelters, youth and adult correctional facilities, and long-term care facilities.

During a press conference earlier today, Gov. Kate Brown said this is a temporary, interim measure that she expects will end when 70% of adult Oregonians have received their first dose of vaccine. Oregon is on track to reach that bar by mid-June, at which time the state’s county-based risk level framework should also come to an end.

Tax Increases Should be Off the Table

Lawmakers are characterizing the latest state revenue forecast as “stunning” and “unbelievable.” State economists are now predicting a $1.4 billion kicker refund for Oregon taxpayers (which will show up as a credit next year when Oregonians file their 2021 tax returns) and more than $1 billion in additional revenue for the Legislature to spend in each of the next several biennia, including the current biennium that ends June 30.

This revenue boon in General Fund and Lottery dollars comes on top of the $2.6 billion that has been allocated to the state from the Biden Administration’s American Rescue Plan Act (ARPA). Long story short, Oregon has more financial resources available than ever before – and that would be true even without the infusion of one-time federal funds from ARPA.

Simply put, there is absolutely no justification for tax increases this year – and perhaps even during future legislative sessions. Oregon has already passed significant tax increases in recent years. In fact, according to Ernst & Young and the State Tax Research Institute, business taxes in Oregon will have increased by 41% by 2022, when taxes already passed are fully phased in.

Numerous proposals have emerged this year to raise taxes on businesses, from restricting or eliminating Oregon’s pass-through entity tax rates to disconnecting from the tax-saving provisions of the federal CARES Act for net operating losses. Probably most egregious was a proposal to treat forgiven Paycheck Protection Program loans as Oregon taxable income. All these proposed tax increases should be off the table now that Oregon’s revenue outlook is so incredibly strong.

However, we’ve been down this road before – and even in prior years when a kicker was in play, the Legislature couldn’t resist taking advantage of its supermajority to raise taxes on a three-fifths vote. Let’s hope the circumstances we find ourselves in today are so overwhelming that even the most fervent tax-and-spend politicians will show some restraint. Anything less would just be punitive against the business community.

NFIB Members Taking Action on Two Key Bills

The Unemployment Insurance Tax Relief bill, HB 3389, passed out of the Senate Committee on Labor and Business May 18 on a unanimous vote. However, the bill was referred to the state’s budget committee, the Joint Committee on Ways and Means, so the legislation must now clear one more hurdle before it goes to the floor of the Senate for a final vote.

As a reminder, the bill will provide $2.4 billion in UI tax relief to Oregon employers over the next decade by providing short- and long-term solutions to what would otherwise be an automatic payroll tax increase to replenish the state’s Unemployment Insurance trust fund. NFIB testified in support during the public hearing and submitted written testimony for the record.

Even though HB 3389 looks like it has the momentum to pass in the Senate, we aren’t taking any chances, especially now that the bill has been assigned to another committee. Whether you’ve done so already or not, please consider taking action now and asking your state senator to prioritize the passage of HB 3389 right away.

SB 483 (presumption of retaliation) passed the Senate on a party-line vote of 18-12 and has been assigned to the House Committee on Rules, which is made up by members of House leadership. NFIB testified in strong opposition to this misguided legislation on May 6.

As you’ll recall, with complaints to Oregon OSHA at an all-time high due to the ongoing pandemic, organized labor and plaintiff’s attorneys are seeking to make it easier for employees to sue their current or former employers.

The bill establishes a presumption of retaliation when an employer takes any sort of adverse employment action against an employee if that employee has filed a complaint with OSHA within 60 days of the time of the complaint. With a presumption of retaliation in place, it would be the employer’s responsibility to prove that they did not break the law. It’s a “guilty until proven innocent” approach that runs contrary to how our system of justice is supposed to work.

SB 483 was originally scheduled for a work session yesterday, and then again today, but the bill was pulled from the agenda right before the meeting started and has been rescheduled for May 25. Rep. Daniel Bonham (R-The Dalles) has authored an amendment that would require the aggrieved employee to demonstrate that an employer had actual knowledge that employee made an OSHA complaint, which seeks to address the predicament employers would face when an employee makes an anonymous complaint to OSHA. This is an improvement to the bill, for sure, but it doesn’t change the underlying problem that this bill assumes employers broke the law, and in order to defend themselves against potentially frivolous lawsuits, they must spend thousands of dollars in legal bills to prove they never did anything wrong in the first place.

Please consider taking action now so that legislators know that this bill is bad for small business.

Previous Reports and Related News

Photo snip courtesy of the Oregon State Capitol Webpage

 

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Let’s hope the circumstances we find ourselves in today are so overwhelming that even the most fervent tax-and-spend politicians will show some restraint. Anything less would just be punitive against the business community.

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