PORTLAND, Ore. (AP) - The Oregon Tax Court has sided with Democratic lawmakers on a lawsuit filed last year by a Republican state senator hoping to overturn a controversial tax law.
The Oregonian/OregonLive reports that if Sen. Brian Boquist, R-Dallas, had prevailed, the state could have been left with a quarter-billion dollars less in tax revenue in the current two-year budget of $22.5 billion.
But the court backed the state in a March 21 ruling, finding that the law that denies an additional tax break for certain business owners complies with the Oregon Constitution. Boquist said Thursday that he does not plan to appeal.
Senate Bill 1528 repealed a tax break for people who earn income from certain businesses, such as partnerships and S corporations, and pay taxes on their personal tax returns.
President Donald Trump’s 2017 federal tax law included the same deduction, and Oregon was on track to replicate it because the state automatically copies federal tax code.
Democrats in the Legislature argued that those types of companies, known as pass-through businesses, did not deserve another tax break because they already pay lower income tax rates than wage earners under a 2013 Oregon law.
Although the legislation to prevent the tax break was somewhat convoluted, it was a hot topic in 2018 as Gov. Kate Brown ran for re-election. The governor publicly debated for weeks over whether to sign the bill into law, inviting proponents of keeping or killing the tax break to lobby her.
With two weeks left to use her veto on any bill passed by the Legislature this year, Gov. Kate Brown is still deciding whether to kill a corporate tax plan that would net the state a quarter-billion dollars.
Boquist said in the lawsuit that the bill’s purpose was to raise taxes, which meant it was subject to constitutional requirements to originate in the Oregon House and pass both chambers on a three-fifths supermajority vote. Fellow Republican Sen. Herman Baertschiger, R-Grants Pass, joined the lawsuit with Boquist after it was filed. The two senators argued that through their businesses, they might be eligible for the new tax break.
The court disagreed.
“It is clear to the court that SB 1528 is a tax base bill and therefore does not have the essential features of a bill levying a tax,” the court wrote.
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