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V
TEN The Gazette-Times, Heppner, Oregon, Thursday March 8, 1979
Salem Scene
By
Jack Zimmerman
The Senate on Feb. 12
passed without opposition a
measure that may become the
final chapter in a portion of
this state's 135-year history of
taxation.
It also points up the way
Oregon's property tax system
has evolved through the years
and complexity of that evolu
tion. The measure is Senate Bill
170, introduced at the request
of the Department of Reve
nue. Known in legislative
parlance as a housekeeping
bill, SB 170's major purpose is
to remove references to inven
tory taxes from Oregon tax
law.
It was prompted by House
Bill 1214, enacted by the 55th
Assembly in 1969. And that
measure climaxed efforts
over nearly 20 years to phase
out what was and still is
described as one of the most
unfair, discriminatory types
of taxation ever levied.
From a philosophical stand
point, even many opponents of
the inventory tax phaseout in
1969 agreed that tax miserably
failed the equity test law
makers diligently seek to
apply to all taxes levied in this
state.
HB 1214 became effective
Aug. 22, 1969 and called for a
gradual phaseout of the inven
tory tax. It specified 5 per cent
reductions in 1969-70 through
1972-73 and 10 per cent annual
reductions until the phaseout
is complete on Jan. 1, 1980. Its
passage capped a concerted
effort throughout the Sixties
. for repeal of inventory taxes
by the Oregon Retail Council
division of Associated Oregon
Industries and others. And one
,viight trace the movement
amiost to the day in 1844 when
members of Oregon's provis
ional government levied its
first tax. Intended to be paid
voluntarily by earlier settlers,
it levied a one-eighth of one
per cent ad valorem tax on all
improvements on town lots,
mules, cattle, hogs, horses
clocks, watches and merch
andise for sale.
At that particular time, the
targets of the tax obviously
represented existine vt dm.
" ' '"' on ot equity was
to intensify through the years.
Aggravating the issue were a
continuing series of exempt
ions that tended to heap an
increasing burden on steadily
shrinking segment of the
business community name
ly, those businesses that by
their nature were forced to
maintain a sizeable inventory
of goods on hand in order to do
business. Documentation fur
ther proved it was the only tax
directly causing unemploy
ment. By the 1960s the inventory
tax was recognized as an
inequitable burden seriously
hindering the economy at
almost every level of en
deavor. While most lawmakers rec
ognized its inequities, they
were reluctant to give up a
source of revenue that went
largely to fund schools and
other local government ser
vices. The House of Repre
sentatives in 1963 did approve
a modified inventory tax
phaseout bill but it failed to
reach the Senate floor for a
vote before that session ad
journed. In 1965 another
version was approved by both
Houses and signed into law by
then-Gov. Mark Hatfield.
That measure provided for a
partial phaseout of inventory
taxes and the exemption was
funded by a General Fund
appropriation aimed at taking
up whatever slack might
result for local governments.
The appropriation was ap
proved in 1965 but was
reduced below prescribed
levels in the regular '67
session and slashed irrepar
ably during a special session
later that year as the state
suffered dwindling income tax
revenue.
Phaseout proponents were
forced to try again during the
'69 session and their logic
prevailed to the extent both
Houses approved HB 1214
without attempting to fund the
exemption through the Gener
al Fund.
How could this obvious
source of revenue be re-
Senate bill writes final chcptefou 'unfair tux
placed? More simply than one
might suppose. Oregon's in
ventory tax was a serious
deterrent to the establishment
of new business and expansion
of existing business and in
dustry. The situation became
even more critical as neigh
boring states reduced or
eliminated similar taxes.
Most eastern industrialized
states had long-since recog
nized the problem and erased
taxes on inventory. Each new
repeal in other areas tended to
blunt the competitive edge of
Oregon's economy.
Eliminating the tax here has
been a major contributor to
business expansion, industrial
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diversification and attracting
new business to the state,
according to John Groupe,
Director of the Department of
Economic Development.
Regional warehouse and dist
ribution centers have become
established in Portland, Uma
tilla and Medford areas. The
combined activity has expand
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ed payrolls and produced
significantly more income tax
revenue for the General Fund.
Lawmakers subsequently
have been able to help local
governments and ease the
impact on other taxpayers by
boosting corporate income
taxes, greatly increasing
basic school support, provid
ing city-county revenue
sharing and establishing'
homeowner and renter tax
relief.
Although the years immedi
ately following passage of HB
1214 saw repeated attempts to
freeze the inventory tax
phaseout or repeal it altogeth
er, it appears unlikely current
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lawmakers will interrupt its
total demise 10 months hence.
,The fact the phaseout was
enacted in 1969 when the
budgetary ending balance
(surplus) was only $34 million
and it stands at $273 million
today reduces the likelihood of
anyone resurrecting inventory
taxes as a revenue source, ,
Pres. Jason Boe was primary
sponsor of HB 1214 back in
1969 while serving as Minority
Leader of the House. And Gov.
Victor Atiyeh was a leading
proponent of the phaseout
throughout his long career in
both House and Senate. .
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