Oregon's proposed new tax plan
Last Friday, Governor John Kitzhaber called a special
session of the Oregon Legislative Assembly to enact a
single new law.
House Bill 4200 authorizes our Governor to enact a
contract with an Oregon company that assures the company
that its current single sales tax factor will not be
changed for thirty years. The bill does not change
current tax law. It only protects the chosen company
against any future change in that taxing methodology.
In exchange, that company agrees to invest at least $150
million in Oregon business expansion that will create at
least 500 new family wage jobs. The expansion is
expected to add $2.5 million in Oregon property tax and
at least $30 million in income tax to Oregon revenue
What could be better for Oregon?
Unfortunately, like so many proposed new laws, the
problems appear to be in the details of the bill. The
plain language of HB 4200 appears to create at least two
significant constitutional challenges. Further, it
authorizes the Governor to pick and choose which
companies may receive the preferential tax treatment and
which companies will not.
One of the oldest established doctrines of legislative
procedure is that “today’s legislative assembly” cannot
limit, restrain or bind the action allowed to be taken
by “future legislatures”. The authority to levy taxes is
one of the core functions of legislative assemblies. In
fact, the authority to levy state taxes is exclusive to
HB 4200 authorizes the Governor to sign a contract on
behalf of the Oregon Legislative Assembly that forbids
future legislatures from amending the tax code as it
applies to a single Oregon company selected by the
Governor. That prohibition extends for thirty years, a
time period that is equal to the next fifteen
Section five, subsection four (b) of HB 4200 states that
the obligations of the State of Oregon pursuant to that
contract “May not be abridged, impaired, limited or
modified by any subsequent law”. We know that one
legislature cannot limit the sovereign decision making
authority of a future legislative assembly. The question
here appears to be “can the Oregon Legislature empower
the Governor to negotiate a contract on behalf of the
Legislative Assembly that limits the taxing authority of
The question of legislative sovereignty has been asked
of the Oregon Supreme Court in the past including in
their 1988 Eccles v. State of Oregon contracts decision.
In my opinion, enacting this bill will virtually insure
that the Court will revisit that decision.
Another potential constitutional challenge relates to
the Oregon constitutional requirements ensuring that
taxation is uniform and equitable. Article I, Section 32
of the Oregon Constitution states in relevant part: ....
“all taxation shall be uniform on the same class of
subjects within the territorial limits of the authority
levying the tax”. Article IX, Section 1 further states
in relevant part: “All taxes shall be levied and
collected under general laws operating uniformly
throughout the State”.
I believe that HB 4200 has only one purpose related to
taxation. That purpose is to carve out a unique tax
assurance that the single sales factor methodology that
currently applies to all Oregon C-corporations will not
be altered for a single Oregon company for the next
This question too has been previously asked of the
Oregon Supreme Court including in their 1991 Mathias v.
Department of Revenue decision. In that ruling the Court
reiterated that valuation methods and tax rates must be
uniform within the same class of subjects of ad valorem
taxation throughout the taxing authority.
Another question here is food for thought. The
Legislature appears to have provided preferential tax
status to one Oregon company by enacting HB 4200. In the
event that the constitutionality of this law is upheld,
what prevents the Legislature from levying a tax on one
I am confident that these two constitutional challenges
will be raised and ultimately will be decided by the
Oregon Supreme Court.
Certainty in Oregon taxation and regulation is essential
to a healthy and growing business environment. In fact,
I strongly believe that uncertainty is a major reason
why so many companies do not choose to invest their
capital in Oregon.
However, the very first action required of every Oregon
Legislator is to swear or affirm to uphold the Oregon
Constitution. A number of Oregon’s top jurists and
constitutional scholars have expressed deep concern over
the constitutional challenges found in HB 4200. I cannot
in good conscious vote to enact a law that I have strong
reason to believe is unconstitutional.
Further, I cannot vote to enact a law that authorizes
the Governor to choose which companies will receive
preferential tax treatment and which will not. In my
opinion, HB 4200 should have applied to all Oregon
C-corporations that fit a specific set of criteria such
as agreeing to expand and create jobs. The numbers
should have been established to allow smaller
C-corporations to qualify. Qualification should be
limited to meeting the established criteria rather than
by both meeting the criteria and being selected by the
Governor. These changes would have both made the law
uniform and limited the ability of the Governor to
potentially choose only favored companies.
For those reasons I voted no on HB 4200. I look forward
to working with both Democrats and Republicans during
the upcoming legislative session to broaden the scope of
HB 4200 and to establish language that will allow the
bill to pass constitutional muster.
Please remember, if we do not stand up for rural Oregon
no one will.