In our final post on the 2023 Oregon legislative session, we recap the policy mistakes made by lawmakers. In case you missed it, earlier we discussed the wins of the session and the missed opportunities.
Lawmakers whittle away at the estate tax, to the benefit of the wealthiest families
As part of the negotiations to end the longest walkout in Oregon history by the Senate Republicans, legislative leaders agreed to pass Senate Bill 498. This legislation creates a new tax break for natural resource properties —farm, fish, and forest assets — that meet modest requirements. Don’t confuse this new tax break with Oregon’s existing estate tax Natural Resource Credit. This is an entirely new, duplicative, tax break that is more generous and easier to access.
This legislation will worsen wealth inequality in Oregon since only certain families among the wealthiest 5 percent stand to benefit. Significantly, SB 498 is also likely to worsen racial inequality since these wealthy families are also predominantly white, further entrenching the disparities resulting from historical exclusion and ongoing discrimination.
SB 498 is expected to cost the state $7 to $8 million in lost tax revenue each year. These funds could have permitted additional investments in schools, housing, childcare, healthcare, public safety, and more, but will instead just help some of Oregon’s very richest households. Unlike most tax expenditures, this provision also has no sunset, so this tax break will continue until lawmakers act to end it.
Weakening the estate tax, Oregon’s only meaningful tax on extreme wealth is the exact opposite of what the current moment of vast economic inequality demands.
Lawmakers shower semiconductor corporations with wasteful subsidies
In the 2023 legislative session, lawmakers worked hard and early to shower subsidies and tax breaks on profitable semiconductor corporations in an attempt to lure investment into Oregon. The allure of federal CHIPS Act funding proved too enticing for lawmakers to stop themselves from following the corporate lobby’s direction in resuscitating a previously discarded research and development (R&D) tax credit, even though federal guidance discouraged such subsidies.
The equitable and efficient path to encourage investment in semiconductors in Oregon is to focus on people and place — investing in education, workforce development, and community infrastructure. Instead, lawmakers put more than $200 million into direct corporate subsidies that will be handed out with only modest assurances.
This would have been problematic on its own, but legislators made it worse by creating a new R&D tax credit for semiconductor companies. Oregon’s past experience with the R&D tax credit made it clear such a subsidy is unnecessary. After the old credit sunsetted, R&D investment continued growing. Even without an R&D credit, Oregon moved up to fourth among states for research investment as a share of the state’s private-sector economy.
Although this new tax credit HB 2009 is smaller and more focused than earlier versions, the state is expected to lose more than $140 million to this corporate tax break before it’s due to sunset. Hopefully, lawmakers will see the mistake before it becomes too costly and put it to an early retirement.
We are grateful for the important successes of the session, but had lawmakers seized the missed opportunities, and avoided these mistakes, it would have been a truly historic accomplishment for Oregonians.