Opponents of a new tax on Oregon businesses have abandoned an effort to refer the tax to voters, arguing lawmakers stacked the deck against them.
In an email with the subject line, “How lawmakers made referral of the hidden sales tax virtually impossible,” the group Oregon Manufacturers & Commerce laid out a litany of bills it believes would make its bid to defeat House Bill 3427 difficult. It concluded the message with an understated announcement: That it was discontinuing the effort altogether.
HB 3427, known as the “Student Success Act,” created a new “commercial activities tax” on Oregon businesses with more than $1 million in Oregon sales. The tax is expected to raise $1 billion a year for the state’s K-12 schools and preschool services, and has been heralded as Democrats’ signature accomplishment of the 2019 session.
The manufacturers group and other opponents, meanwhile, have criticized it as a “hidden sales tax" that would raise prices on consumers. They vowed to refer the matter to voters, who have rejected taxes on business’ sales in the past.
Now, it appears such a referral is off the table.
“We’re extremely disappointed that lawmakers went to such great lengths to hamstring our referral efforts, but the reality is that they have rigged the system so far in their favor that our chances of success at this point are very remote,” Oregon Manufacturers & Commerce wrote. “Though we will not be moving forward with the referral effort, we will continue to explore opportunities to minimize the negative impacts of this new tax on Oregonians by any means possible.”
A spokesman for the group would not offer additional comment.
The "great lengths" the business group cited include a bill that would ensure any vote on the tax occur in January 2020 instead of November of next year. The same bill allowed lawmakers who support the tax to craft ballot language.
Another law that would curb the use of electronic petition sheets would make it "significantly more difficult to gather the required number of signatures," the group said. And a bill that contained "technical fixes" to the tax, House Bill 2164, might also have needed to be referred to the ballot in order for the tax to be defeated, the statement said.
“But here’s the kicker: the referral of HB 2164 would appear on the November 2020 ballot while the referral of HB 3427 would appear on the January 2020 ballot, meaning we would have to run two successful campaigns in the same year to overturn the gross receipts tax,” the statement said.
The announcement didn’t come as a surprise to Sen. Mark Hass, D-Beaverton, a key architect of the business tax. Hass learned Tuesday afternoon that the referral campaign was dead from lobbyist Shaun Jillions, who directs Oregon Manufacturers & Commerce.
State Sen. Mark Hass, D-Beaverton, in the Oregon Senate on Monday, Jan. 14, 2019, in Salem, Ore.
Bradley W. Parks / OPB
“I was very confident when we walked out of the session that there would not be a referral campaign,” Hass said. “If there was, it would be weak. When you have a good piece of policy, you can easily defend it.”
Hass called the news “a great day for Oregon education,” a sentiment backed by Oregon School Boards Association executive director Jim Green.
"This announcement moves us one step closer to ensuring that this vital investment in our young people will become a reality," Green said in a statement. "We will remain vigilant in planning for a possible referendum, but most of our attention is being focused on preparing districts for implementation of the Student Success Act."
Other groups and supportive lawmakers piled on as news of the decision spread.
"Educators and public school families now will have the certainty they need and students deserve," John Larson, president of the Oregon Education Association, said in a statement. "This is very good news for Oregon.”
House Majority Leader Barbara Smith Warner, D-Portland, another key champion of the tax, tweeted: "While we must remain vigilant, ready to stand against the cynical attacks of out-of-touch special interest groups, the removal of this hurdle is an important step forward."
The new tax was one of the more contentious pieces of policy lawmakers debated in Salem this year. Senate Republicans even staged a walkout — the first of two — in May to delay passage of the measure.
The tax imposes a 0.57% levy on sales by businesses with revenue of more than $1 million a year, though it allows companies to deduct certain expenses for labor or capital.
Oregon Manufacturers and Commerce had demonstrated it could attract sizable financial support for a referral when it landed a $1 million donation from Rob Freres Jr., an Oregon timber company owner. That money appeared to make it likely the group would be able to collect the nearly 75,000 signatures necessary to land the tax on the ballot.
But the group was also marginalized. Oregon Business and Industry, the state's largest business group, had agreed to remain neutral in a referral campaign, in a deal worked out with lawmakers during the session. Nike and other businesses had supported the commercial activities tax during the legislative session, and were preparing to defend the law.
"Most Oregon businesses support education," Hass said. "The vast majority of them do not want to mount a nasty fight against schools."
