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 *House Bill 2157: The $96 Million Tax Increase*

Oregon Senator Doug Whitsett Newsletter 2/13/09

The sheer audacity of HB 2157 [ http://www.leg.state.or.us/09reg/measpdf/hb2100.dir/hb2157.en.pdf ] is remarkable.

While Congress is racing to pass the American Recovery and Reinvestment Tax Act to help address the economic free fall that our nation is experiencing, your Oregon legislature raced to pass legislation that unilaterally prohibits Oregonians from benefiting from that stimulus package. While President Obama and our Democrat led Congress is working to extend tax benefits to small businesses and the unemployed, your Democrat led legislature rushed to pass HB
2157 to insure that Oregonians are denied those benefits. The bill was pushed through both the House and the Senate on party line votes with only with Senator Metsger (D - Welches) joining the Republicans in dissent.

HB 2157 will disconnect Oregon from the current federal tax code, resulting in the loss of at least $96 million in tax benefits for Oregon small businesses and Oregon's unemployed workers.

According to our Legislative Revenue Office, HB 2157 will disconnect Oregon small businesses from $81 million in accelerated depreciation and same year expensing tax benefits that are extended to all US businesses in the federal stimulus package. This federal benefit is designed to allow small businesses to deduct from their taxes the expense of investment in business equipment and certain other investments that will stimulate job growth. The depreciation deduction is up to 50 percent of certain property placed into service in 2009 in addition to the amount they could already claim. The federal stimulus package also doubles the amount of the investments that the business can expense during the year the expense is incurred. HB 2157 eliminates those benefits for Oregon small businesses from the Oregon tax code.

The federal stimulus package also exempts the first $2,400 in unemployment benefits from federal taxes. HB 2157 eliminates that tax exemption for Oregon unemployed workers from the Oregon tax code. Its only effect is to raise taxes on the unemployed by increasing the taxes levied on their unemployment benefits.

The alleged need for fast-tracking this bill through the legislative process was nothing short of a shell game. According to Legislative Counsel, *"under current federal law "*HB 2157 would not raise taxes and would therefore only require a majority vote to pass. According to the Legislative Revenue Office, passage of HB 2157 *"under the federal law that will exist"* after President Obama signs the American Recovery and Reinvestment Act would raise taxes on Oregonians by at least $96 million and require a three fifths majority vote to pass. Because of this reality, the Democrats had to race to pass the bill to deny Oregonians the benefits of the stimulus package by affixing Kulongoski's signature to HB 2157 before the federal law is changed by President Obama's signature.

The Democrats claimed repeatedly in the Senate floor debate that HB 2157 is a state's rights issue allowing Oregonians to determine what taxes Oregonians will pay. The only state right that is being preserved by HB 2157 is the right of the state government to tax its people in any manner that the Democrats see fit.

No matter how the tale is spun, the end result is a tax increase on Oregon's small businesses and Oregon's unemployed workers totaling nearly $100 million. This bill's only purpose is to raise taxes to pay for more state government. As I stated during the Senate floor debate, this measure is simply unconscionable.

*Rural Caucus*

The new Senate rural caucus has met each Tuesday morning for the last three weeks. It is a bipartisan caucus, and somewhat bicameral, in that we have also had Representatives attending from both the Democrat and Republican parties. To date, our 7 A.M. meetings have been attended by between 15 and 18 legislators. It is extremely gratifying that we have more moderate legislators attending each week to participate in discussions that are decidedly non-partisan.

We are dedicating an hour each week to discussing bills that have positive and negative affects on the more rural areas of our state. We have had numerous presenters accept Co-chair Alan Bates (D - Ashland) and my requests to share their expertise on the agenda issues. So far the caucus is working just as envisioned and intended - discussing issues in depth without partisan rancor.

For the past two weeks we have focused on the relative benefits and detriments of the proposed Klamath River Dam removal. Next week we will continue to discuss the liability and sediment issues that are so critical to the debate with Attorney General John Kroger's staff and other learned attorneys.

Regardless of party affiliation, I think that we all realize that the rural areas of our state will always be underrepresented until we learn to agree and promote those issues where there is general concurrence and learn to agree to disagree on the other issues. The caucus is a work in progress but so far I am greatly encouraged and impressed by the participation.

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