It’s official. Governor Kate Brown has proclaimed a special session of the legislature on May 21. She hopes lawmakers will extend Oregon’s tax loophole benefiting owners of pass-through businesses to sole proprietors, who are currently excluded.
The current pass-through tax scheme reeks of unfairness. It is a tax cut heavily skewed in favor of the rich, a fact that extending it to sole proprietors doesn’t change. It takes hundreds of millions of dollars away from schools and services that protect the most vulnerable Oregonians. And it is a tax scheme stacked against those who work for a paycheck. The best thing for lawmakers to do during the special session would be to eliminate the tax loophole.
But short of full repeal, the legislature can at least make this policy better.
One common-sense proposal comes from Representative Alissa Keny-Guyer. In a post on her Facebook page, the representative set out a two-part proposal. First, changes to the tax provision should be revenue neutral, meaning that extending it to sole proprietors should be paid for by eliminating the tax benefits flowing to the richest business owners. Second, the tax loophole should contain an expiration date, otherwise known as a “sunset.”
Such a proposal ought to please those who want to ensure that sole proprietors are treated fairly. It would even the playing field, treating sole proprietors the same as other pass-through business owners. And it would do so without taking more funds away from schools and essential services.
Rep. Keny-Guyer’s call for a sunset is one that hasn’t gotten much attention so far, but it is a proposal that makes a lot of sense. Sunsets are a tried-and-true policy. Expiration dates force lawmakers to periodically scrutinize tax subsidies and loopholes. Having weighed the evidence, lawmakers can renew the tax program if it’s working well, reform it if necessary, or simply let it expire if it’s shown to be ineffective public policy.
In the upcoming special session, lawmakers should put a sunset on the tax loophole for pass-through business owners. The tax break has already been in effect since 2015, so the sunset should be short, say December 31, 2019. This would encourage lawmakers to take a hard look at the tax scheme during the 2019 legislative session.
A repeal of the tax break would make the upcoming session truly special. Short of that, a revenue-neutral bill with a short sunset would still make the session shine.