WORK SESSION

HB 2574, 2332, 2046

PUBLIC HEARING 3440,3455

BILL INTRODUCTION

INFORMATIONAL MEETING

 

TAPES 127 A-B,128 A

 

HOUSE REVENUE COMMITTEE

APRIL 26, 2005   1:00 PM   STATE CAPITOL BUILDING

 

Members Present:                      Tom Butler, Chair

                                                Rep. Vicki Berger, Vice-Chair

                                                Rep. Mark Hass, Vice-Chair

                                                Rep. Brian Boquist

                                                Rep. Sal Esquivel

                                                Rep. Larry Galizio

                                                Rep. Betty Komp

                                                Rep. Andy Olson

                                                Rep. Chuck Riley

                       

Witnesses Present:                      Rep. Mike Schaufler, District 48

                                                Bob Shiprack, Oregon Building Trades Council

                                                John Ledger, Associated Oregon Industries (AOI)

                                                Mark Nelson, Oregon Metals

                                                Mike Grainey, Director, Dept. of Energy

                                                Matt Blevins, Oregon Environmental Council

 

Staff Present:                          Paul Warner, Legislative Revenue Officer

                                                Lizbeth Martin-Mahar, Economist

                                                Kristi Bowman, Committee Assistant

                                               

 

TAPE 127, SIDE A

002

Chair Butler

Calls meeting to order at 1:11 p.m.

 

 

 

OPENS WORK SESSION FOR HOUSE BILL 2574

 

 

 

CLOSES WORK SESSION FOR HOUSE BILL 2574

 

 

 

OPENS WORK SESSION FOR HOUSE BILL 2332

 

020

Lizbeth Martin-Mahar

HB 2332 reduces the rate of tax on capital gains of personal and corporate income. Comments on the five amendments:

  • ·         HB 2332-1
  • ·         HB 2332-2
  • ·         HB 2332-3
  • ·         HB 2332-4
  • ·         HB 2332-5

and submits revenue impact statements with portfolio and dynamic feedback effects for each amendment (Exhibits 1-5). Discusses definitions and impacts of portfolio and dynamic feedback effects. Refers to the handout of the Oregon Tax Incidence Model (OTIM) (Exhibit 6).

056

Chair Butler

MOTION: MOVES THE ADOPTION OF THE HB 2332-4 AMENDMENT. Asks if there are any objections.

 

 

 

060

Rep. Hass

Asks Martin-Mahar to summarize the amendment HB 2332-4.

 

 

 

062

Martin-Mahar

The HB 2332-4 amendment creates a phase-in of the personal capital gains subtraction. The amendment is a tax subtraction, not a tax rate reduction. The tax subtraction begins in tax year 2007. Discusses the corporate subtraction rate.

 

 

 

091

Rep. Hass

Asks if this amendment adds a corporate excise tax subtraction.

 

 

 

093

Martin-Mahar

Responds that the original bill includes a reduction for corporate and personal capital gains.

 

 

 

101

Rep. Hass

Asks Chair Butler why the subtraction method is preferable to a straight rate cut.

 

 

 

103

Chair Butler

Discusses the complex process of calculating rate cuts on federal tax returns. To develop the additional state forms and capture numbers off various federal forms, the Dept. of Revenue determined there would be a significant fiscal impact to implement the federal method.

 

 

 

141

Rep. Galizio

What impact would the HB 2332-4 amendment have on the HB 2332-1, HB 2332-2, and HB 2332-3 amendments?

 

 

 

149

Martin-Mahar

Responds that the amendments could be taken together. Discusses the different implementation dates of each of the amendments.

 

 

 

160

Rep. Galizio

Asks about the distinction between the HB 2332-4 amendment and the HB 2332-5 amendment.

 

 

 

162

Martin-Mahar

Responds that the HB 2332-5 amendment and HB 2332-4 amendment are the same, only the implementation year is different. Full implementation of the 50% tax reduction would be realized in 2009 for the HB 2332-5 amendment and would be realized in 2011 for the HB 2332-4 amendment.

 

 

 

169

Chair Butler

Asks Rep. Hass about the reasoning behind speeding up the implementation of the rate reduction [to 2009] in amendment HB 2332-5.

 

 

 

170

Rep. Hass

Responds that if [the reduction] is a good idea, it should be paid for now instead of binding future legislators. If the state cannot afford it now, then the state should wait until the next session and pay for it now.

 

 

 

184

Chair Butler

Expresses concern that a full capital gains cut could not be implemented in the current biennium. He perceives that delaying the implementation of the full 50% reduction would “entice capital to stay in the state of Oregon and bring capital investments back into the state of Oregon.”

 

 

 

201

Rep. Hass

Discussion with Chair Butler about different methods of capital gains reductions and projections of anticipated revenues.

 

 

 

235

Rep. Hass

Asks Martin-Mahar about the top tiers of income levels who would benefit from a capital gains reduction.

 

 

 

241

Martin-Mahar

Responds that the information provided is from the latest data available (2003), and it represents the distributional breakdown of the top income groups who would be receiving most of the capital gains tax.

 

 

 

249

Chair Butler

Asks for roll-call vote.

 

 

 

257

Chair Butler

MOTION PASSES 5-4-0. VOTING AYE: BOQUIST, ESQUIVEL, OLSON, BERGER, BUTLER. VOTING NO: GALIZIO, KOMP, RILEY, HASS.

 

 

 

259

Chair Butler

Asks for further discussion.

 

 

 

260

Rep. Berger

MOTION: MOVES HB 2332 AS AMENDED BY THE -4 AMENDMENT TO THE HOUSE FLOOR WITH A DO-PASS RECOMMENDATION. Adds that she “would retain my right to vote against when it gets there“[to the House floor].

 

 

 

272

Rep. Berger

Comments that this is a discussion that needs to take place in a much broader context than just the House Revenue Committee who originally supported a capital gains change that included a revenue-neutral component.

 

 

 

286

Rep. Galizio

MOTION: MOVES THE ADOPTION OF THE HB 2332-1 AMENDMENT.

 

 

 

288

Chair Butler

DOES NOT ACCEPT MOTION because there is a motion on the floor currently. Rep. Galizio’s motion would be out of order.

 

 

 

289

Chair Butler

Asks for further discussion.

 

 

 

290

Chair Butler

Calls for roll-call vote.

 

 

 

293

Rep. Hass

Asks to discuss the motion to move the bill to the House floor. Comments about the staff reductions that various school districts are experiencing while the legislature is contemplating tax cuts for people making over $100,000. Expresses concern about future legislators who will have to balance the budget based on “what we did before they got here.”

 

 

 

 

320

Chair Butler

Comments that he is sorry that some of the schools, especially in the Portland area, have “failed to react to the signs of the economy and the downsizing of the number of students.” Adds that schools in rural Oregon have been experiencing closing schools and cutting back classrooms for a long time.

 

 

 

327

Chair Butler

Asks for further discussion.

 

 

 

328

Rep. Galizio

Asks where the $300 M tax cut fits into the budget that has been agreed upon for this biennium. 

 

 

 

343

Chair Butler

Responds that the amendment HB 2332-4 does not begin until 2007 and is a small percentage of tax subtraction. If the 2007 legislature decides that they cannot “assimilate” an increase of more than ½ of 1%, then they can “say it is too much” and change it. Adds that if the revenue projections fail to materialize, then that legislature has the ability to cut back the percentage.  There is no revenue or fiscal impact for this biennium.

 

 

 

361

Rep. Galizio

Asks if he will have an opportunity to introduce the HB 2332-1, HB 2332-2, and HB 2332-3 amendments, “or is that being squelched.”

 

 

 

369

Rep. Butler

Calls the committee AT EASE at 1:35 p.m.

 

 

 

371

Rep. Butler

Calls meeting back to order at 1:37 p.m. Restates motion to move HB 2332 as amended by the -4 amendment to the floor with a do-pass recommendation.

 

 

 

376

Rep. Riley

Asks Chair Butler about his comment that if the legislature passes this bill now, then the next legislature can remove or reduce it as they feel is necessary. Comments that it would take a super-majority vote to do that.

 

 

 

384

Chair Butler

Responds that he doesn’t believe that is correct because “it wouldn’t have taken effect at that particular point.”

 

 

 

386

Martin-Mahar

Clarifies that whenever taxes are raised, which would happen if this bill becomes law. In order to repeal it would take a 3/5 vote.

 

 

 

390

Chair Butler

Responds that he stands corrected regarding the 3/5 vote necessary to repeal the tax.

 

 

 

391

Rep. Riley

Comments that it goes against the grain to pass on this “debt” to the next session and have them deal with it in that manner.

 

 

 

402

Chair Butler

Asks for roll-call vote.

 

 

 

418

Chair Butler

MOTION PASSES 5-4-0. VOTING AYE: BOQUIST, ESQUIVEL, OLSON, BERGER, BUTLER. VOTING NO: GALIZIO, KOMP, RILEY, HASS.

420

Chair Butler

States for the record that Rep. Hass serves notice of a possible minority report.

 

 

 

CLOSES WORK SESSION FOR HOUSE BILL 2332

 

 

 

OPENS WORK SESSION FOR HOUSE BILL 2046

 

 

 

423

Martin-Mahar

Refers to HB 2046-1 amendment (see Exhibit 1 from 04/20/05). It phases in an increase in the percentage of the federal earned income tax credit for Oregon’s earned income tax credit (EITC).  It changes the EITC to a refundable tax credit. Refers to revenue impact statement (see Exhibit 3 from 04/20/05).

 

 

 

443

Rep. Hass

MOTION: MOVES THE ADOPTION OF THE HB 2046-1 AMENDMENT.

 

 

 

453

Rep. Hass

Discusses the amendment that makes the EITC refundable beginning in 2007.

 

 

 

471

Rep. Komp

Comments that 20% of her constituents are eligible for the EITC refund, and she fully supports this bill.

 

 

 

497

Chair Butler

ORDER: THERE BEING NO OBJECTION, THE CHAIR SO ORDERS. MOTION PASSES 8-0-1. VOTING AYE: BOQUIST, GALIZIO, KOMP, OLSON, RILEY, BERGER, HASS, BUTLER.  EXCUSED: REP. ESQUIVEL.

 

 

 

TAPE 128, SIDE A

038

Rep. Hass

MOTION: MOVES HB 2046 AS AMENDED TO THE HOUSE FLOOR WITH A DO-PASS RECOMMENDATION.

 

 

 

042

Rep. Hass

Comments that there are two reasons for cutting taxes: equity and economic stimulus. This bill is an effort toward equity for low-income taxpayers. He supports the bill but expresses concern that it doesn’t start until tax year 2007. If it is such a good idea, it should start immediately.

 

 

 

072

Chair Butler

ORDER: THERE BEING NO OBJECTION, THE CHAIR SO ORDERS. MOTION PASSES 8-0-1. VOTING AYE: BOQUIST, GALIZIO, KOMP, OLSON, RILEY, BERGER, HASS, BUTLER. EXCUSED: REP. ESQUIVEL.

 

 

 

CLOSES WORK SESSION FOR HOUSE BILL 2046

 

 

 

OPENS PUBLIC HEARING FOR HOUSE BILL 3440

 

 

 

092

Martin-Mahar

Gives overview of HB 3440 (Exhibit 7). The bill exempts unemployment compensation benefits from federal taxable income for low-income taxpayers. It gives a bigger tax bracket for a tax deduction to single persons and heads-of-households. Refers to revenue impact statement (Exhibit 8) and the handout: Unemployment Compensation Income (Exhibit 9).  

 

 

 

 

 

 

146

Rep. Mike Schaufler

Testifies in support of HB 3440 because it helps the working poor of Oregon. Rep. Schaufler is the sponsor of the bill. Submits handout packet (Exhibit 10).

 

 

 

153

Rep. Riley

Asks why Rep. Schaufler didn’t give the full double-credit for couples filing jointly. For example, for a single person, the deduction in the bill is $20,000; for a married couple it normally would be $40,000.

 

 

 

158

Rep. Schaufler

Responds that the $30,000 stated in the bill was chosen randomly, and it would limit the amount of revenue the state would lose. He would have preferred to eliminate all taxation on unemployment benefits, but that would have meant a $95 M revenue reduction.

 

 

 

160

Martin-Mahar

Clarifies that the table that Rep. Schaufler submitted with his handout (Exhibit 10) differs from her table (Exhibit 9) because different income amounts were used.

 

 

 

163

Bob Shiprack

Testifies in support of HB 3440 because it is not fair for Oregon to tax unemployment benefits. Relates a personal anecdote about a family member who is unemployed and owes personal income tax.

 

 

 

216

Chair Butler

Comments that there are 12 states with personal income tax that do not tax unemployment benefits, including California. There are five other states without personal income tax that do not tax unemployment benefits. Asks if there is a fiscal impact on the Dept. of Revenue to implement this program.

 

 

 

226

Shiprack

Responds that the Dept. of Revenue said that it would be the “standard” $50,000 to develop more tax forms.

 

 

 

232

Rep. Galizio

Asks Rep. Schaufler what the legislature has done for the middle class who will “shoulder” the [financial] burden of legislation passed for low and high-income taxpayers.

 

 

 

249

Rep. Schaufler

Responds that there will probably be nothing done immediately and expresses concern about relief for the middle class. The state should take advantage of the natural resources available, generate more power, and give people a chance to invest in Oregon. Comments that nothing happens if companies and individuals do not invest in Oregon. Investment includes a strong education system, health care for everyone, and safe streets.

 

 

 

290

Rep. Komp

Asks Chair Butler to clarify who pays unemployment taxes.

 

 

 

 

 

292

Chair Butler

Responds that the employer pays unemployment taxes and the funds are matched under the federal system of State Unemployment Insurance Fund (SUI).

 

 

 

 

 

303

 

 

Rep. Hass

Responds to Rep. Schaufler’s comments about the business climate in Oregon. The National Tax Foundation says that OR has the tenth best business climate of all 50 states. Regarding HB 3440, taxing unemployment insurance could be a federal reconnect issue.

 

 

 

CLOSES PUBLIC HEARING FOR HOUSE BILL 3440

 

 

 

OPENS PUBLIC HEARING FOR HOUSE BILL 3455

 

 

 

348

Martin-Mahar

Gives overview of HB 3455 (Exhibit 11). This bill modifies the definition of a pollution control facility and increases the percentage of facility costs that are eligible for income tax credit. This bill is identical to HB 2652 which was previously heard in the 2003 regular session. It passed in the House but was not heard in the Senate. The revenue impact (Exhibit 12) is based on data from HB 2652.

 

 

 

TAPE 127, SIDE B

016

John Ledger

Discusses the background of the pollution control tax credit. Suggests that the Revenue Committee consider a better bill from the Environment Committee that pertains to biofuels because it has had more work on it. HB 3455 has some administrative problems according to the Dept. of Environmental Quality (DEQ).

 

 

 

040

Mark Nelson

Concurs with Ledger’s testimony and recommends the biofuels bill from the Environment Committee.

 

 

 

052

Mike Grainey

Testifies in support of the energy provisions of HB 3455. Business renewal tax credit. Submits correspondence between the Governor and the Dept. of Energy regarding rule changes (Exhibits 13 and 14). Comments that a statutory change that would clarify the eligibility of the manufacturing facilities for renewable resource components would be helpful. Provisions on solar energy are also in SB 33 that the Governor has endorsed. Additional correspondence from the Governor and DEQ are submitted (Exhibit 15 and 16). Supports a tax credit for small hydro facilities.

 

 

 

082

Matt Blevins

Testifies in opposition to HB 3455 because of concerns about the tax credit in this bill.  Submits handout from the Oregon Revenue Coalition (Exhibit 17).

 

 

 

CLOSES PUBLIC HEARING FOR HOUSE BILL 3455

 

 

 

OPENS WORK SESSION FOR BILL INTRODUCTION

 

 

 

106

Paul Warner

Discusses Legislative Concept (LC) 3575 and LC 3576. LC 3575 (Exhibit 18) is a constitutional amendment patterned after language in HB 3460 incorporating the House Speaker’s proposal on school finance. There are significant language differences in how the proposal would relate to the Stabilization Fund. LC 3576 (Exhibit 19)

is a House Memorial to the U.S. Congress asking that Congress permanently eliminate the federal estate tax.

 

 

 

126

Chair Butler

MOTION: MOVES THAT LC 3575 AND LC 3576 BE INTRODUCED AS HOUSE REVENUE COMMITTEE BILLS.

 

 

 

132

Rep. Hass

Asks where the LCs originated.

 

 

 

133

Chair Butler

Responds that they originated in the Speaker’s office. Warner concurs.

 

 

 

136

Chair Butler

ORDER: THERE BEING NO OBJECTION, THE CHAIR SO ORDERS. MOTION PASSES 9-0-0. VOTING AYE: BERGER, HASS, BOQUIST, ESQUIVEL, GALIZIO, KOMP, OLSON, RILEY, BUTLER.

 

 

 

CLOSES WORK SESSION FOR BILL INTRODUCTION

 

 

 

OPENS INFORMATIONAL MEETING

 

 

 

143

Warner

Comments that HB 3460 will be heard in the House Revenue Committee.

 

 

 

144

Chair Butler

General comments about upcoming workgroup meetings for informational purposes regarding HB 3460.

 

 

 

162

Chair Butler

Adjourns meeting at 2:20 p.m.

 

 

Tape Log Submitted by:

Reviewed by:

 

 

 

Kristi Bowman, Committee Assistant

Kim Taylor James, Committee Coordinator

 

Exhibit Summary:

  • 1.      HB 2332, Revenue Impact Statement HB 2332-1, Martin-Mahar, 1 pg., 04/26/05
  • 2.      HB 2332, Revenue Impact Statement HB 2332-2, Martin-Mahar, 1 pg., 04/26/05
  • 3.      HB 2332, Revenue Impact Statement HB 2332-3, Martin-Mahar, 1 pg., 04/26/05
  • 4.      HB 2332, Revenue Impact Statement HB 2332-4, Martin-Mahar, 1 pg., 04/26/05
  • 5.      HB 2332, Revenue Impact Statement HB 2332-5, Martin-Mahar, 1 pg., 04/26/05
  • 6.      HB 2332, Handout: OTIM Table, Martin-Mahar, 1 pg., 04/26/05
  • 7.      HB 3440, Staff Measure Summary, Martin-Mahar, 1 pg., 04/25/05
  • 8.      HB 3440, Revenue Impact Statement, Martin-Mahar, 1 pg., 04/25/05
  • 9.      HB 3440, Table: Unemployment Compensation, Martin-Mahar, 1 pg., 04/25/05
  • 10.  HB 3440, Handout: HB 3440 packet, Rep. Schaufler, 6 pp., 04/01/05
  • 11.  HB 3455, Staff Measure Summary, Martin-Mahar, 1 pg., 04/26/05
  • 12.  HB 3455, Revenue Impact Statement, Martin-Mahar, 1 pg., 04/26/05
  • 13.  HB 3455, Handout: Letter from Governor, Grainey, 1 pg.,  09/22/03
  • 14.  HB 3455, Handout: Letter from Governor, Grainey, 2 pp., 01/26/04
  • 15.  HB 3455, Handout: Letter from Governor, Grainey, 2 pp., 04/12/05
  • 16.  HB 3455, Testimony from Dept. of Environmental Quality,  Grainey, 2 pp., 04/26/05
  • 17.  HB 3455, Handout: HB 3455, Blevins, 1 pg., 04/26/05
  • 18.  LC 3575, Legislative Counsel, 4 pp., 04/22/05
  • 19.  LC 3576, Legislative Counsel, 2 pp., 04/19/05