Oregon, prepare for a food fight.
Of all the uncertainties that still surround the ballot voters will receive in November, one thing seems assured: We’ll be talking about groceries.
The campaign behind Initiative Petition 37 — dubbed the "Yes! Keep Our Groceries Tax Free!" petition — is the first to turn in enough signatures to potentially qualify for the ballot. It's been buoyed by nearly $2 million from mammoth grocery chains and small stores alike.
And perhaps most importantly, it comes with a message likely to appeal to many Oregonians: The state shouldn’t slap taxes on what’s in your shopping cart.
"The initiative permanently ensures Oregon groceries will never be taxed, and that helps every family in Oregon, every student," retired teacher Joe Nunn says in one of the campaign's sunny video spots, replete with leafy greens and happy children. "Join me and teachers across Oregon and say, 'Yes, keep our groceries tax free.'"
But behind those cheery ads is something deeper — a long fight between organized labor and business groups over how corporations in Oregon should be taxed. That's a fight that might take center stage in 2019, when the Oregon Legislature is expected to consider new taxes.
Shoppers stock up on supplies at New Seasons in Southeast Portland's Sellwood neighborhood, Feb. 20, 2018 as a snowstorm moves into the city.
John Rosman / OPB
Now, the labor group preparing to oppose IP 37 thinks it’s got a winning message of its own: that the supposed grocery-tax ban could have far murkier implications.
"We certainly plan to talk to voters about all of the many, many unintended consequences this measure would have," said Katherine Driessen, a spokeswoman for the union-backed group Our Oregon. "We think it's very important that folks know that it's incredibly misleading."
The consequences Driessen mentioned are laid out in a five-page memo that Our Oregon had drafted by its lawyer, Steven Berman.
It’s just one attorney’s opinion, but if Berman is right, the measure would extend far beyond the grocery aisles into restaurant booths, theater seats and Oregon’s can and bottle redemption centers. It would affect an assessment on hospital revenues voters enshrined in January and could even impact how much the state can collect to repair roads and highways.
Not surprisingly, the grocery industry group behind IP 37 takes issue with this analysis.
"The owners of the memo support taxing Oregonians' groceries and are trying to distort our simple measure that keeps Oregonians' groceries tax free," said Joe Gilliam, president of the Lake Oswego-based Northwest Grocery Association.
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IP 37 is a response to a failed attempt to raise taxes on business, 2016's Measure 97. That proposal, pushed by Our Oregon, would have ratcheted up taxes on corporations with more than $25 million in annual Oregon sales. Voters soundly rejected it, with prodding from grocery industry, which argued Oregonians would see far higher food prices if the measure passed.
Following that campaign, “we decided that we can’t continue to play defense on this, that we should ask the public what they think about taxing groceries,” Gilliam said.
With dozens of items proposed for November's ballot — touching on issues ranging from gun control to birth control to Oregon's sanctuary law — IP 37 is furthest along. The campaign submitted signatures to qualify for the ballot on May 23, well ahead of the July 6 deadline. It has yet to receive formal approval from state officials.
At its most basic level, IP 37 would alter the Oregon Constitution to prohibit local and state governments from taxing the sales or distribution of groceries. And it would make that ban retroactive to Oct. 1, 2017, meaning any tax passed since that date would be invalidated.
Supporters of the petition have been clear it would preempt taxes on sugary drinks, which some groups have pushed for in Oregon. Alcohol, cannabis, tobacco and items not intended for human consumption are not included in the proposal.
But the simple-sounding measure gets cloudier when you look into how it might play out. Given the proposal’s definition of “groceries” and “sale or distribution,” state officials have said the proposal would have widespread effects — roping in operations throughout the grocery supply chain, from farm to table.
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The attorney general's office has said it would wind up prohibiting new taxes on restaurants, food banks and farm stands. Gilliam, with the grocers group, believes the state is wrong about restaurants being subject to the change, arguing that there's a loophole exempting the vast majority of eateries.
The AG’s office also notes the measure would wall off entities that deal in “groceries” from any increase or decrease to Oregon’s oft-criticized corporate minimum tax, one of the state’s primary means of taxing businesses.
“The state corporate minimum tax … potentially applies to all corporations that sell, distribute, purchase, or receive groceries throughout the state,” the office wrote in December. The measure would have no impact on Oregon’s business income tax, which some companies must pay in lieu of the minimum tax.
Berman’s memo to Our Oregon suggests the effects would go further.
For instance, he writes the proposal could affect implementation of Measure 101, which Oregon voters passed in January. That measure approved a tax on hospitals that was crucial for closing a hole in the state budget. But Berman argues that any money hospitals receive from selling food would be shielded from those taxes under IP 37.
“That means that to the extent the hospital assessment approved in Measure 101 includes assessments on food, meals or ‘groceries’ provided at hospitals, those funds might have to be returned,” Berman wrote.
He makes a similar argument about a $5.3 billion transportation package Oregon lawmakers passed last year. The bill included increases to the state's fuel tax that Berman said might wind up being unenforceable for vehicles that transport groceries.
And if Oregon ever wanted to alter its so-called Bottle Bill, which slaps a 10-cent deposit on many beverages, it would be prohibited under IP 37, Berman writes.
Gilliam, with the grocery association, declined to respond to many of the points raised in Berman’s memo, saying the entire thing lacked “validity.” He noted that many of Berman’s contentions didn’t emerge when friends and foes of the petition were haggling over proposed ballot language.
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“Their memo is not a legal analysis, but rather a campaign piece with unfounded claims meant to muddy the waters,” Gilliam said. “Had any of the issues included in the memo had any legal validity they would have been presented to the Supreme Court during the ballot title process.”
It’s true that it’s difficult to know how many of the consequences Berman predicted would come to pass, should voters ultimately approve a ballot measure. State revenue officials have yet to dig into the matter in any depth, and some of the effects might ultimately be decided by the courts well into the future.
But Our Oregon says it’ll press the issue as November approaches.
“Assuming that this qualifies, we absolutely intend to have a robust response to it,” said Driessen. “It’s really important to get this out to voters.”
The union-backed group may have its work cut out for it. Voters rejected Measure 97 at least partly because of worries their food prices would spike. No similar tax proposals are currently on the table, but it’s certainly possible Oregonians’ views haven’t changed in the last two years.
“Without seeing any polling, I’m guessing like anybody else,” said John Horvick, of Portland polling firm DHM Research. “But my working assumption is similar to yours: This would poll well and be in a strong position, both on the issue and the money/organization behind it.”
