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Commercial, labor taxes proposed to fund education in Oregon

Oregon Gov. Kate Brown wants to raise nearly $2 billion for education in the 2019-21 biennium.

Posted: Mar 28, 2019 1:34 PM

SALEM, Ore. (AP) — Lawmakers are moving forward with discussions on three potential tax options that would create hundreds of millions of dollars in additional revenue specifically for Oregon’s schools.

Oregon Gov. Kate Brown wants to raise nearly $2 billion for education in the 2019-21 biennium and she’s tasked the Joint Committee on Student Success with making it happen.

The Statesman Journal reports that the committee, comprised of 14 senators and representatives from both sides of the aisle, has been meeting since January 2018 to study the most critical issues in schools — including disruptive behaviors in class and a lack of mental health counselors — then brainstorm ways to make the proposed solutions reality.

A subcommittee on revenue has begun hearing logistics from the Legislative Revenue Office on certain ideas. They heard three possible tax options at their meeting Tuesday evening, each of which includes a reduction in personal income tax rates.

The first option considered Tuesday is a commercial activities tax, known as CAT, which would tax company products.

It’s based on a similar tax structure in Ohio and would only grant tax exemptions to petroleum and medical providers due to constitutional limitations and previous tax agreements, respectively.

This is one of the safest options, officials said, since it causes little damage to companies. It also could help increase employment, but that could mean companies offer slightly lower wages.

This would only bring in an estimated $667 million per year, which won’t equate to the $1.9 billion in revenue the subcommittee is tasked to find for 2019-21.

The second option is a valued added tax, known as VAT, which is more of a tax on labor.

The VAT generally would bring in more money for education, totaling around $981 million annually.

Legislators also asked the revenue office to dream up a third possibility — something of CAT/VAT hybrid — that would, ideally, bring in more money, while keeping the financial impact on companies and consumers low.

The modified commercial activities tax, known as the MCAT, would raise $1 billion annually and offer more flexibility to businesses to decide their tax rate and whether it would be subtracted from business inputs — AKA products — or from their labor costs.

The subcommittee plans to continue meeting in the coming weeks to discuss revenue options. Education advocates are demanding more money in order to not only improve but simply keep afloat the state’s K-12 and higher education systems.

Some educators across the state are planning a possible walkout in May should the Legislature fail to find additional funding.

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