Legislature repeals unitary tax
By Mike Sims
Of the Emerald
SALEM — The Oregon Legislature voted to repeal
the state’s unitary tax on national and international cor
porations in just 13 hours Monday, making use of what
Gov. Vic Atiyeh termed “a time-perishable
opportunity.”
Lawmakers, convened in special session at the
governor’s request, approved repeal by a 53-6 vote in
the House of Representatives and a 27-3 margin in the
Senate.
Under the new tax policy approved by the
Legislature, only income earned in the United States by
multinational corporations will be used by the state
Department of Revenue in detei mining corporate tax
rates.
Current tax laws state that a corporation’s entire
worldwide income will be used as the basis for assess
Grattan Kerans
ing corporate income taxes. Many domestic and foreign
corporations that refuse to locate in states employing
the unitary tax had joined Atiyeh in urging its repeal.
Atiyeh hailed the action as a high point in
Oregon’s economic history, a major victory for himself
personally and for all Oregonians. He also said that the
state could expect “some good... immediate
response” from corporations wishing to locate in the
state.
“Corporations would not be lobbying Oregon to
repeal unitary if we had not convinced corporations
Oregon is an otherwise attractive state in which to in
vest,” Atiyeh said in a written pre-session statement
delivered to legislators Monday morning.
The governor had originally planned to deliver the
message in an address to both chambers, but scrapped
the idea in hope of expediting the special session. The
session was adjourned just after 10 p.m.
Speaker Grattan Kerans, D-Eugene, spoke in favor
of repeal from the House floor— a rare move for
presiding legislative officers. Kerans boiled down
arguments favoring repeal into simple terms.
“We're not about to bring on the economic
millenium,” Kerans declaimed. “What we’re talking
about are jobs, jobs for our people.”
“We want to tell those who are unemployed (that)
we did our best. We want to tell those who left to come
home. . . to find a job here, to find a life here once
again.”
Kerans’ remarks were in reference to the 123,000
Oregonians who, he said, will stand in an unemploy
ment line this week and to the 65,000 people who have
left the state in search of jobs.
Repeal of the unitary tax will mean an annual $15 »
million tax cut for multinational corporations that do
business in Oregon, and some legislators decried this
perceived “giveaway.” Among them was Rep. Larry
Hill, D-Springfield.
“I’m ashamed to be here,” Hill said. “This bill
represents the biggest giveaway the Legislature has
considered during my time here.
“We make cuts in higher education and public
school budgets, we can’t afford to keep our roads
repaired; yet we can find $15 million a year in tax cuts
for large corporations,” said Hill, one of six House
members voting against repeal.
Rep. Carl Hosticka, D-Eugene, acknowledged that
both factions in the repeal debate had presented valid
arguments— “This is not a black-and-white issue.”
However, Hosticka said that expectations of repealing
the unitary tax had been raised so high, both in Oregon
and abroad, that failure to do so would have “negative
consequences” for the state's economic development
efforts.
Senators voting against the bill, both in the
Revenue Committee and on the Senate floor, were
Margie Hendriksen, D-Eugene; John Kitzhaber, D
Roseburg; and Rod Monroe, D-Portland. All three said
that the Legislature should not have rushed such a ma
jor policy decision through a one-day session.
Monroe was worried about the possible negative
fiscal impact repeal would carry if a property tax
referendum (Ballot Measure 2) is approved by voters in
November. He attempted in committee to attach an
amendment that would kill repeal and raise taxes, in
cluding personal income taxes, if the ballot measure is
passed.
Monroe’s motion was defeated by a 4-3 committee
vote. The bill was sent unamended to the full Senate,
where Revenue Committee chair Ruth McFarland, D
Bonneville, urged colleagues to “hold your nose, kick
your desk, and vote for it.”
Oregon is the first of 12 states using the unitary tax
to repeal it. The new “water’s edge” approach to cor
porate taxation approved Monday will take effect Jan.
1, 1986. Thus, the Legislature has an opportunity to
reconsider its action when it convenes in regular ses
sion in January.
Border tax truce
restores harmony
By Mike Sims
Of the Emerald
After what House Speaker Grattan Kerans, D
Eugene, called a bit of “shuttle diplomacy” bet
ween Oregon and Washington, the Oregon
Legislature voted Monday to call a one year
“truce” in a tax war with Oregon’s northern
neighbor.
The Legislature agreed to suspend for one
year a law it passed in 1983 requiring that out-of
state residents who work in Oregon pay Oregon
income taxes based on total household income,
rather than the portion of that income earned in
Oregon. The votes were 53-6 in the House of
Representatives. 18-12 in the Senate.
Gov. Vic Atiyeh said in a prepared statement
to lawmakers that repeal of the tax would “restore
harmony to our common borders."
Washington lawmakers had retaliated
against Oregon’s border tax law by enacting a
“commuter tax” law aimed at Oregonians work
ing in Washington. That law is scheduled to take
effect in July 1985. After negotiations between
legislators from the two states, however, two
Washington solons pledged that their legislature
would change several sections of Washington’s
tax code that discriminate against Oregonians
working in that state.
If Washington’s legislature does not live up
to that promise by the time the new commuter tax
takes effect, the 1985 Oregon Legislature will re
enact the border tax.
Gov. Vic Atiyeh had asked Oregon legislators
to repeal the border tax outright. But Kerans and
Rep. Bruce Hugo, D-Scappoose, met with
Washington House Majority Leader Dennis Heck,
D*Vancouver and Sen. Alan Thompson, D-Castle
Rock and after a series of discussions hammered
out a compromise.
The result was a “Kerans-Hugo Amend
ment” calling for the one-year moratorium on
Oregon’s border tax in exchange for
Washington's repeal of its commuter tax.
Kerans asserted on the House floor Monday
that the Legislature had no “malice
aforethought” when it approved the border tax in
1983. “We didn’t set out to beat up on our col
leagues in Olympia or our neighbors in the state
of Washington,” Kerans said.
Lack of rancor aside, the 1983 legislation
angered many Washingtonians, particularly
those living in counties bordering Oregon: Clark
and Cowlitz counties (containing the cities of
Vancouver and Longview respectively) were
centers of fulmination against the Oregon tax,
and in favor of retaliation by Washington
legislators.
Repeal of the Oregon border tax will cost the
state an estimated $2.6 million a year. Legislation
mandating the tax war truce passed both
chambers of the Legislature Monday with
relatively little debate.
See related story Page 5
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