WORK SESSION: HB 2043 B, HB 2166 B

 

PUBLIC HEARING: HB 2747 B

 

TAPES 145-146, A-B

 

SENATE REVENUE COMMITTEE

JUNE 16, 2003   1:00 PM   STATE CAPITOL BUILDING

 

Members Present:                        Senator Ryan Deckert, Chair

                                                Senator Ted Ferrioli, Vice Chair

                                                Senator Tony Corcoran

                                                Senator Lenn Hannon

                                                Senator Charlie Ringo

                                                Senator Bruce Starr

                                                Representative Elaine Hopson

 

Witnesses Present:                        Lynn Partin, Housing and Community Services Department

                                                Matt Blevins, Oregon Environmental Association

                                                Senator Kurt Schrader, District 20

                                                Ralph Groener, AFSCME

                                                Laurie Wimmer Whelan, Oregon Education Association

                                                Mike Roach, Portland Clothing

                                                Tim Nesbitt, Oregon AFL-CIO

                                                Kappy Eaton, League of Women Voters

                                                David Williams, Oregon School Employees Association

                                                Ellen Lowe, Oregon Food Bank

                                                Marcia Kelley, Women’s Rights Coalition

                                                Joe Schweinhart, Associated Oregon Industries

                                                Michael Slater, SEIU Local 503

                                                Debra Buchanan, Department of Revenue           

 

Staff Present:                            Paul Warner, Legislative Revenue Office

                                                Dick Yates, Legislative Revenue Office

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Tara Lantz, Committee Assistant

 

TAPE 145, SIDE A

 

004

Chair Deckert

Calls meeting to order at 1:30 pm.

 

OPENS WORK SESSION ON HB 2166 B

 

015

Lizbeth Martin-Mahar

Explains HB 2166 B which adds acquisition costs to the list of eligible costs for the farm worker housing corporate excise and personal income tax credit and the –B5 amendments (Exhibit 1) which decreases the total certified cost amount allowed for the farm worker housing credit to $7.25 million each year in order to make it revenue neutral in the current biennium. Refer to staff measure summary (Exhibit 2). Discusses revenue impact (Exhibit 3).

 

 

 

034

Sen. Deckert

Asks if Partin worked with Sen. Ferrioli on the amendments.

 

 

 

036

Lynn Partin

Responds that she did work with Sen. Ferrioli and that everyone is happy with the amendment. Explains what the amendment does.

 

 

 

048

Sen. Ferrioli

Offers support for the –B5 amendments.

 

 

 

056

Sen. Ringo

MOTION: MOVES HB 2166-B5 AMENDMENTS DATED 5/28/03 BE ADOPTED.

 

 

 

061

Sen. Deckert

ORDER: ROLL CALL VOTE: MOTION PASSES: 6-0-0.

SENATORS ANSWERING AYE: CORCORAN, HANNON, RINGO, STARR, FERRIOLI, DECKERT.

 

 

 

065

Sen. Corcoran

MOTION: MOVES HB 2166 TO THE SENATE FLOOR WITH A DO PASS AS AMENDED RECOMMENDATION.

 

 

 

072

Sen. Deckert

ORDER: ROLL CALL VOTE: MOTION PASSES: 6-0-0.

SENATORS ANSWERING AYE: CORCORAN, HANNON, RINGO, STARR, FERRIOLI, DECKERT.

Sen. Ferrioli will carry the bill on the Senate Floor.

 

OPENS WORK SESSION ON HB 2043 A

 

080

Martin-Mahar

Explains HB 2043 which allows credit against corporate excise or income tax for corporations that provide motor vehicle insurance issued under mile-based or time-based rating plan. Discusses revenue impact.

 

 

 

090

Sen. Starr

MOTION: MOVES HB 2043 TO THE SENATE FLOOR WITH A DO PASS RECOMMENDATION.

 

 

 

093

Sen. Hannon

States that he is going to be voting no on this bill because in a time where the legislature is trying to raise money, they should not be giving it away.

 

 

 

100

Sen. Ferrioli

States that he believes that pay-as-you go insurance does not equally benefit rural citizens and that in lowering one population’s premiums, costs will be shifted to another. Wants someone to explain where the costs are going to be shifted.

 

 

 

120

Matt Blevins

Responds that for every 10 percent reduction in mileage, there is a corresponding reduction of 14-18 percent in accident rate, so savings are from a decrease in accidents.

 

 

 

130

Sen. Ferrioli

Asks how he could cut down on mileage when he lives a great distance from anything.  

 

 

 

140

Blevins

Responds that the goal is not to benefit everyone in the state, but it is not a penalty either.

 

 

 

145

Sen. Ferrioli

Asks who the costs will be shifted to.

 

 

 

148

Blevins

Responds that in an insurance pool the savings are from fewer accidents.

 

Discussion follows.

 

 

 

160

Sen. Ferrioli

States that if you push the cost down for one person, you are going to raise it for another and that his fear is that it will create a cost-shifting to rural areas.

 

 

 

167

Sen. Ringo

States that people that live in urban areas pay higher insurance premiums because there are higher risks and that he doesn’t believe costs will be shifted to rural insurance holders.  

 

 

 

182

Sen. Corcoran

States that he will give the bill a courtesy vote but that he doesn’t agree that it is fair to rural areas.

 

 

 

205

Sen. Deckert

ORDER: ROLL CALL VOTE: MOTION PASSES: 4-2-0.

SENATORS ANSWERING AYE: CORCORAN, RINGO, STARR, DECKERT.

SENATORS ANSWERING NO: HANNON, FERRIOLI.

Sen. Ringo will carry the bill on the Senate Floor.

 

OPENS PUBLIC HEARING ON HB 2747 B

 

210

Paul Warner

Discusses the major points and revenue impact from the –B8 amendment (Exhibit 4). Refer to Tax Reform Package summary (Exhibit 8).

 

 

 

272

Sen. Schrader

States that Oregon needs less reliance on the income tax and his plan is to lower the income tax and create a business activity tax that is dedicated to school funding. Discusses why the state is in this situation and what his plan does to fix those problems. Refer to written testimony (Exhibit 9).

 

TAPE 146, SIDE A

 

005

Sen. Schrader

Explains the –B8 amendments which would lower the income tax burden for everybody, cut capital gains in half, and eliminate the corporate income tax.

 

 

 

050

Sen. Corcoran

Expresses concern with the proposed income tax reduction because it gives the wealthiest tax payers the biggest tax break.

 

 

 

078

Sen. Schrader

Responds that the percentage reduction in personal income tax is 10 percent at the highest level and 20 percent at the lowest level and that people in the higher brackets will end up paying more because they are the ones that will be paying the business activity tax.

 

 

 

098

Sen. Ringo

States that this plan has an advantage over the sales tax because it is deductible from the federal tax return and asks if there are any other advantages.

 

 

 

106

Sen. Schrader

Responds that it does have advantages because it is geared toward economic development because it eliminates corporate income tax and reduces capital gains taxes.

 

 

 

118

Sen. Ferrioli

States that there are thousands of small businesses that are marginal and would end up paying more because under the BAT tax, the companies’ profitability does not matter.

 

 

 

135

Sen. Schrader

Responds affirmatively.

 

 

 

137

Sen. Ferrioli

Asks if start-ups would pay this tax.

 

 

 

141

Sen. Schrader

Responds that he doesn’t think so because the majority of small businesses won’t have to pay this tax because they don’t make over $100,000.

 

 

 

150

Sen. Ferrioli

Asks how the amount of the tax correlates with the ability to pay.

 

 

 

155

Sen. Schrader

Responds that it won’t go into affect until January 05 and that the economy will hopefully be doing better and businesses will be able to increase profits and not have to pay more taxes which is a plus for businesses starting up and trying to get moving.

 

 

 

197

Sen. Ferrioli

States that even the smallest businesses are probably going to end up paying the business activity tax. Asks if the message this sends to businesses is to stop growing and not invest because it will increase their business activity tax.

 

 

 

241

Sen. Schrader

Disagrees with Sen. Ferrioli and states that it encourages businesses to be successful because they are not taxed on their profit.

 

Discussion follows.

 

 

 

262

Sen. Starr

Asks if Schrader is concerned about who gets hit with this tax as it relates to industry sector

 

 

 

270

Sen. Schrader

Responds that he is concerned about agriculture which is why that sector is exempted.

 

 

 

308

Ralph Groener

Testifies in support of looking at tax reform and states that this is a reasonable plan and is definitive and deductible. Suggests looking at tax expenditures.

 

 

 

393

Laurie Wimmer

Whelan

Testifies in support of HB 2747-B8 amendments because Oregon needs tax reform and a dedicated source for education funding. Suggests amendments to make it not as regressive and to ensure that a referendum couldn’t affect the entire bill and suggests offering a companion bill in order to solve the immediate budget crisis. Refer to written testimony (Exhibit 11).

 

TAPE 145, SIDE B

 

046

Mike Roach

Testifies in support of the bill and adds that as a retail shop owner he supports that it includes the whole economy and not just retail businesses like a sales tax does.

 

 

 

074

Sen. Ringo

Asks for particulars from the business community on why this would not work.

 

 

 

082

Sen. Deckert

Asks if anyone has ever done an opinion poll on a business activity tax and decrease in income tax.

 

 

 

085

Wimmer Whelan

Responds that there has been some polling done on those kinds of questions but she does not have the information with her.

 

 

 

090

Sen. Corcoran

States that he has seen some results from a gross receipts poll and that it can come in with fairly high support to begin with, but when it begins to be tagged as a sales tax it goes down.

 

 

 

104

Tim Nesbitt

Expresses appreciation for the discussion on tax reform but questions whether Oregon needs a third tax. States that there are more options in creating a third tax, which is the advantage to the business activity tax. Suggests giving credits for taxes paid on social security for both employers and employees because it would create a greater incentive to create jobs. States that he would love to be part of workgroup on the bill.

 

 

 

160

Sen. Deckert

Asks if Oregon is too dependent on the income tax.

 

 

 

163

Nesbitt

Responds that without a rainy day fund it is.

 

Discussion follows. 

 

 

 

172

David Williams

Testifies in support of the –B8 amendments because Oregon needs tax reform. Refer to written testimony (Exhibit 12).

 

 

 

215

Kappy Eaton

Discusses the need for new revenue and a dedicated funding source for education, which the business activity tax creates. Offers support for tax reform.

 

 

 

271

Sen. Corcoran

Asks what Nesbitt thinks the public opinion on sales tax versus increasing income taxes is.

 

 

 

298

Nesbitt

Responds that a sales tax by itself is probably doomed and if it is a part of the package it is still an uphill battle. States that the income tax is the least hated and the sales tax is the most hated.

 

 

 

344

Ellen Lowe

Expresses gratitude for beginning discussion on tax reform and testifies in support of the –B8 amendments with a refundable earned income tax credit.

 

TAPE 146, SIDE B

 

002

Marcia Kelley

Testifies in support of HB 2747 –B8 amendments because Oregon needs tax reform. Suggests looking at tax credits and a refundable earned income tax credit. Discusses increases in tax expenditures over the last few years.

 

 

 

034

Joe Schweinhart

Testifies against HB 2747 –B8 because it would have damaging effects on the Oregon economy and would essentially be passed on to consumers as a sales tax. States that an operating tax regardless of profits will hurt businesses during the hard economic times and negatively impact international business. Declares that Oregon is already business unfriendly and needs to make it more attractive in order to create jobs. 

 

 

 

078

Sen. Corcoran

States that he doesn’t understand because Oregon has the lowest corporate tax burden in the Western United States and asks what Schweinhart idea on tax reform is.

 

 

 

095

Schweinhart

Questions whether Oregon has the lowest corporate tax burden because of property and income taxes.

 

Discussion follows.

 

 

 

109

Sen. Ferrioli

States that he is interested to see what is catalyzed by the dialogue. Expresses concern that this model would not include the opportunity of tax avoidance through business investment.

 

 

 

150

Schweinhart

Agrees with Sen. Ferrioli and states that getting companies to grow through tax avoidance will employ more people and pay more taxes.

 

 

 

156

Sen. Ferrioli

Explains how the opportunity for tax avoidance through investments encourages small businesses to grow.

 

 

 

172

Sen. Ringo

States that he would rather have a tax structure not effect the business decisions. Asks if AOI accepts the study that Oregon has the lowest corporate tax burden in the Western states.

 

 

 

186

Schweinhart

States that he has not seen the study but they would probably not agree.

 

Discussion follows.

 

 

 

203

Michael Slater

Testifies in favor of tax reform and the –B8 amendments because it is a split between a straight sales tax and a straight business tax. Suggests reducing tax expenditures.

 

 

 

253

Debra Buchanan

Testifies that the Department of Revenue would be able to administer the business activity tax. Discusses technical problems with the amendment as written.

 

 

 

284

Sen. Ferrioli

Asks if Sen. Schrader knows about the anomalies and administrative costs.

 

 

 

286

Buchanan

Responds affirmatively.

 

Discussion follows.

 

 

 

299

Sen. Ferrioli

Adjourns meeting at 3:04 pm.

 

 

 

Tape Log Submitted by,

 

 

 

Tara Lantz, Committee Assistant

 

Exhibit Summary:

  1. HB 2166, Lizbeth Martin-Mahar, Proposed HB 2166-B5 Amendments, 5pp.
  2. HB 2166, Lizbeth Martin-Mahar, Staff Measure Summary, 1p.
  3. HB 2166, Lizbeth Martin-Mahar, Revenue Impact Statement, 1p.
  4. HB 2747, Sen. Schrader, Proposed HB 2747-B8 Amendments, 26pp.
  5. HB 2747, Richard Yates, Staff Measure Summary, 1p.
  6. HB 2747, Richard Yates, Revenue Impact Statement, 1p.
  7. HB 2747, Paul Warner, Oregon Tax Incidence Model, 6pp.
  8. HB 2747, Paul Warner, Tax Reform Package, 10pp.
  9. HB 2747, Sen. Schrader, Written Testimony, 3pp.
  10. HB 2747, Bob Ekstrom, Written Testimony, 1p.
  11. HB 2747, Laurie Wimmer Whelan, Written Testimony, 1p.
  12. HB 2747, David Williams, Written Testimony, 1p.