With Measure 118, a new business tax proposal is scrambling old battle lines

Eight years ago, a proposal to raise Oregon taxes on large businesses had corporations and public sector unions at each other’s throats.

The tax hike proposed in 2016′s Measure 97 led to the most expensive ballot measure fight in state history, with the two sides spending more than $42 million combined. In the end, corporate interests won out: The measure went down in defeat.

This year, Oregon voters will consider a similar taxing idea in the form of Measure 118, one with the added promise of putting money back in their own pockets. But business and labor are no longer split.

Instead, many of the state’s most active political groups — and a growing number of politicians on both sides of the aisle — have come out against Measure 118.

This week the board of United Food and Commercial Workers Local 555, which represents tens of thousands of grocery employees around the state, voted to oppose the idea. It joins Service Employees International Union Local 503 and the Oregon Education Association, whose boards both registered opposition earlier this month over concerns the measure could blow a hole in the state budget.

Meanwhile, business interests from around the country have poured nearly $6 million into a campaign committee that is fighting the measure.

In most races, that kind of pushback would go a long way toward dooming a ballot proposal. But it might not be so simple with Measure 118, known as “The Oregon Rebate.”

The measure would levy a 3% tax on any business’s Oregon sales above $25 million, then divvy up the money raised among Oregon’s more than 4 million residents, no matter their age. A recent analysis by state revenue officials suggested the policy would reap more than $6.5 billion a year in additional corporate taxes, and send around $1,600 a year to every resident of the state beginning in 2026 — either via tax credits or direct payments.

That number is far from certain, but it’s likely to be a strong selling point for Measure 118 boosters. The proposal is a pared-back version of “universal basic income,” the idea of alleviating poverty by sending no-strings-attached payments to citizens. It would put Oregon in league with Alaska, which issues a yearly “dividend” to residents based on revenue from oil production in the state.

Measure 118′s backers might have a lot of money to spread their message of easing Oregonians’ financial worries.

Josh Jones, a Southern California billionaire who, in the words of his LinkedIn profile, “likes Universal Basic Income,” has contributed $480,000 to the measure to date. Two more donors listing California addresses, financier Alexander Tamas and Gisele Huff, president of the Gerald Huff Fund for Humanity, have donated a combined $123,000.

Nearly all of that money was spent collecting signatures to land Measure 118 on the ballot, but the suggestion is clear: Donors with serious money and a desire to explore the promise of no-strings-attached payments to better people’s lives are taking an interest in Oregon.

“We’re playing to win,” said Antonio Gisbert, a Portland resident and chief petitioner behind the ballot proposal. “At the end of the day we think that Oregon voters are going to see the value in Measure 118. It’s one thing for giant corporations to be telling you that this rebate’s going to be bad for you. I’m not sure that people are going to believe that.”

In fact, the rebate proposal’s origins lie partly in the fight over Measure 97. That’s apparent from the taxing mechanism itself: Measure 97 would have slapped a tax of 2.5% on business’s Oregon sales above $25 million, whereas this year’s proposal increases it to 3%.

Back in 2016, Gisbert was an organizer with Oregon AFSCME, a union representing government employees. The core idea of Measure 97 — taxing large corporations that Gisbert says too often pay a laughably low amount of state taxes in order to pour around $3 billion a year into bolstering services like education and health care — appealed to him.

So when the measure failed by nearly 20 percentage points, Gisbert and some friends started reimagining how to sell a corporate tax hike to voters. He reasoned that Oregonians were put off by the notion of handing billions to a state government they didn’t trust to spend wisely.

“We looked around and said, ‘Well, what can we build on? Let’s not reinvent the wheel and come up with a new tax completely,’” Gisbert said. “Then, of course, our big spin on it was: Okay, let’s use this money to get every Oregonian a cash rebate.”

The Measure 118 campaign is hoping to sell Oregonians their vision of fairly taxing big business in order to increase prosperity, including slashing childhood poverty and virtually ending state taxes for lower-income Oregonians.

According to the state’s Legislative Revenue Office, the measure would “significantly reduce or eliminate personal income tax liability” for Oregonians who make less than $40,000 a year. Collectively, those people would go from paying $458 million a year in state taxes to receiving a refund of $550 million under the rebate policy, the office said.

All of those outcomes seem in step with the aims of the state’s big labor unions, which tirelessly preach policies that can lift up lower-income people. But Gisbert’s most powerful allies in the Measure 97 fight are preparing to oppose him.

Three of the state’s four largest unions have already come out against Measure 118. The remaining holdout — Oregon AFSCME, where Gisbert once worked — just hasn’t held a vote yet.

“There are so many questions about how it’s written and how it’s going to be interpreted,” Joe Baessler, Oregon AFSCME’s executive director, said in a recent interview with OPB. “That just makes us super nervous.”

It’s not that unions are suddenly opposed to increasing taxes on corporations. They’re chiefly concerned with recent findings that Measure 118 could wind up unintentionally hobbling the state’s general fund budget, money their members rely on.

The reason centers around the way Oregon taxes businesses. Under the tax code, many large corporations either have to pay taxes as a percentage of their taxable income, or pay a “corporate minimum tax” that is based on their Oregon sales, whichever is larger.

Measure 118 would increase the amount big companies owe under the minimum tax, and would result in more businesses paying far more tax via that route, an estimated $13.6 billion in the 2025-27 budget cycle.

But, according to legislative attorneys, the measure would also mean the state receives less money via the other part of its business tax code, the one based on taxable income. And according to legislative attorneys, nothing in the measure gives the state the ability to recoup that loss.

Under this reading of the law, the state would rebate around $13.6 billion in 2025-27, all of it raised via the new tax, but at the same time, lose out on more than $1 billion in business taxes that would have normally flowed into the state’s general fund.

The specter of a budget cut has become a major concern for labor groups and politicians. The Legislature’s four most powerful Democrats issued a joint statement last week, laying out their objections.

“In these tough times, we all want working families to get every break they can, but Measure 118 is not the answer,” the Democrats said. “We have grave concerns it will slow job growth and cause cuts to critical services like road maintenance, fire fighting, and addiction recovery.”

In total, nearly 50 state lawmakers oppose the measure, according to the No on 118 campaign. Two members of Congress, Gov. Tina Kotek and Treasurer Tobias Read have also come out against it.

Gisbert said his campaign disagrees with the legal analysis that suggests his measure would have budget repercussions. But if that reading ultimately prevails, he is open to helping lawmakers tweak the language of the measure after it passes to ensure it is revenue-neutral. (That could reduce the amount Oregonians can expect as a yearly rebate to $1,400 or less.)

“We can all sit down and implement this thing correctly and justly as intended,” Gisbert said. “Our goal is to keep the state whole.”

That won’t placate many opponents. Oregon Business & Industry, the state’s largest business group, has so far marshaled the most forceful campaign attacking Measure 118.

A website set up by the group argues higher business costs would increase the prices of goods and services, a conclusion shared by state analysts, who found it could result in a 1.3% price increase by 2030.

“It’s a tax on sales — not profits,” the website says. “That means Oregon businesses would be forced to pay this new $6.8 billion tax regardless of whether they make a large profit, make a small profit, or are losing money.”

Whether labor unions jump in with their own opposition campaign remains to be seen, said Melissa Unger, executive director of SEIU Local 503. If they do, their arguments are likely to differ from those coming from business.

“This is a bunch of outside folks trying to play with Oregon to try to see what’s possible nationally,” Unger said. “We’re not just a ballot measure playground.”

Gisbert, facing opposition from his old allies, says he doesn’t take it personally.

“We can still be friends,” he said. “At the end of the day, I would not be doing this work if I didn’t believe that The Oregon Rebate is going to be good for every person in Oregon. Whether you’re a union member or not, you’re going to get those 1,600 bucks.”