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On the last business day to make a decision, Gov. Kate Brown this afternoon said she'll sign Senate Bill 1528, which will have the effect of depriving hundreds of thousands of Oregon small businesses of more than $1 billion over the next six years.
Brown was in a no-win situation.
If she vetoed the bill, she'd anger advocates for education, healthcare social services and public safety and the powerful public employees who work in those industries.
Now that she's going to sign the bill, she'll anger small businesses owners across the state.
"It was a tough decision," Brown told reporters this afternoon at a press conference in Portland. In the end, Brown said, she wanted to "have the ability to preserve funding for special services."
SB 1528 disconnects Oregon from part of the federal tax code. The sweeping tax bill Congress passed allows certain small businesses—so called "pass-through entities" including S corporations, limited liability companies and partnerships—to deduct 20 percent of qualified business income. That's a big carrot for such businesses, but those in Oregon now will not get it.
Brown noted that the Oregon businesses will still get the benefit of the new deduction on their federal tax returns but she says they already got a big break on state taxes in "Grand Bargain" lawmakers reached to balance the budget in 2013. That exiting state tax break, the governor said, is sufficient.
"They don't get a third benefit," Brown said.
But the governor, who is seeking re-election this year, announced a plan to mitigate the howls of pain sure to sound across the state: She will call lawmakers into special session before the end of June to address what she says is unfairness in the tax break that was part of the Grand Bargain.
That agreement offered nothing to businesses organized as sole proprietorships. It was a big oversight: In 2016, state figure showed there were 264,000 such businesses in Oregon.
Brown wants lawmakers to offer those sole proprietors the same deal that S corporations, partnerships and limited liability companies received in the Grand Bargain.
The governor said she didn't know the cost of providing sole proprietors a tax cut except that it will be far less than the more than $1 billion SB 1528 is expected to raise over the next six years.
Republicans panned Brown's pivot.
"Today Governor Brown in one breath claimed the need of the state government to take hundreds of millions of dollars away from small businesses," said House Minority Leader Mike McLane (R-Powell Butte) in a statement. "Then, in next breath, announced a special session to champion small businesses. I guess this is the kind of political theater we can expect in an election year."
But Brown compared her new plan to the 2012 special session which her predecessor, former Gov. John Kitzhaber, called to provide Nike and Intel with 30-year tax benefits.
"If we can use special sessions for large businesses," Brown said, "We can use them for small businesses."