Out of Touch Oregon Governor Kate Brown Proposes Bevy of Tax Hikes in Her First Budget

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Posted by Paul Blair on Wednesday, December 21st, 2016, 8:30 AM PERMALINK

In her first-ever proposed budget, Oregon Governor Kate Brown has called for hundreds of millions of dollars in higher taxes and spending over the next two years. This comes on the heels of the announcement that the state faces a $1.7 billion overspending problem and a rejection by voters of a union-pushed ballot measure in November that would have raised taxes by $3 billion per year on Oregon businesses.

Brown’s tax hikes include:

  • Elimination of “Partnership Pass-through,” which allows for lower tax rates for S-corps as well as the IC-DISC dividend subtraction. This is personal income tax hike of more than $183 million.
  • Restructuring the Hospital Assessment tax. Currently, hospitals pay the state a portion of patient revenue to garnet matching federal dollars and get the money back after the money comes in from D.C. Turning the assessment into a higher “true tax” would raise taxes by $379 million (and game the system further).
  • Reinstating the recently expired insurance and managed care tax: $151 million;
  • Increase in cigarette tax of 85 cents per pack from $1.33 per pack to $2.18 per pack: $21.5 million;
  • Other Tobacco Products tax hikes across the board (from 65% to 75%) and specifically on products like cigars (+0.50/cigar) and moist snuff (+$0.89/oz): $13.7 million;
  • Liquor tax hike of 50 cents per bottle and a 100% increase in liquor licensing fees: $39 million;


Oregon taxpayers have an important protection from politicians like Gov. Kate Brown, with a supermajority requirement in the legislature to raise taxes. Three-fifths of legislators in both chambers must vote to raise taxes for passage, meaning Brown will need the support of both Democrats and Republicans to get her way.

Republican leadership seems to be hesitant to take her approach. In a statement, House GOP leader Mike McLane said:

“Until we are willing to … address the root of our budget problems, we will continue to experience the same kind of budget challenges we are facing today.”

The root cause? Overspending.

Oregon’s general fund and lottery revenues are expected to increase by more than $1.3 billion over the next two years. But even that isn’t enough to keep up with the out of control rate of spending in the state. What are among the main drivers of spending growth over the next two years, according to the Governor herself?

  • Obamacare’s misguided Medicaid expansion: nearly $1 billion;
  • Increased public education spending: $781 million;
  • Public pension payments: $354 million.


Each of these cost-drivers are best addressed through reforms that have been implemented successfully elsewhere, as opposed to the “Oregon Way” of throwing money at everything and hoping no one asks questions about outcomes. This budget represents a 9 percent increase in spending, more than three times population growth and inflation. 

The failure of labor unions in November to convince voters to approve a 2.5 percent gross receipts tax on Oregon businesses, which would have made it the most burdensome and highest tax in the nation, has forced an important debate in the state. Without the billions of dollars Measure 97 would have taken from consumers and businesses alike, the state must now address the underlying problem in Salem: overspending.

Gov. Brown, who supported the Measure 97 tax hike, clearly didn't get the November memo that taxpayers aren't interested in raising taxes; they prefer spending restraint instead. The legislature should heed the will of voters though, buy rejecting Gov. Brown's tax hikes when they return for session next year. 

Photo Credit: Oregon Department of Transportation

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