GOP's budget proposal would raise state taxes.

Byline: David Steves The Register-Guard

SALEM - In a bid to offset education and human-services cuts and end one of the longest legislative sessions ever, House Speaker Karen Minnis and her fellow Republicans have called for nearly a half-billion dollars in higher taxes on individuals and businesses.

The proposal, which Democrats planned to respond to today, would not impose a general tax increase, but calls for $487 million in increased revenue by reducing or eliminating income-tax deductions and credits, closing or narrowing corporate tax loopholes, and raising taxes on beer and wine.

Corporations would have to pay a minimum tax of $200 to $1,000, rather than the $10 minimum that's been on the books since 1929. The state income-tax exemption credit of $145 per household member would be reduced by $15. And the voter-approved tax break on federal income taxes would be frozen without taking full effect.

The state would also add 2 cents to the tax on a glass of beer, increase wine taxes by 25 percent, and raise lottery proceeds, most likely by allowing slot machine-style gambling on video terminals and by reducing commissions paid to bar and tavern owners.

Along with one-time fund shifts, borrowing and increased federal aid, the plan would add $1.17 billion to the $10.4 billion the state's expected to collect for the 2003-05 general fund. The plan provided only broad outlines for how the dollars would be divided among the main areas of the fund: education, human services and public safety.

Even with the infusion of additional tax dollars, the proposed $11.5 billion budget would fall several hundred million dollars short of what legislative Democrats have sought - and could leave students, the frail elderly, the poor and uninsured, and the mentally ill facing additional program cuts.

Still, the GOP-backed proposal falls within $400 million of a similar plan created by a bipartisan workgroup of representatives and senators. And it gave lawmakers a sliver of hope that they could close in on a budget deal.

"This is a huge step forward. It really is," said Senate Democratic Leader Kate Brown, D-Portland.

Minnis, R-Wood Village, had spent much of last week lining up support from fellow Republicans, who hold 35 of the House's 60 seats. At the end of the day Friday, she provided a draft to top Democrats, who share power with Republicans in the Senate with 15 seats apiece, and who represent a minority in the House, with 25 seats.

Minnis declined to release the plan or discuss it with reporters, spokesman Chuck Deister said. He characterized it as a combination of the emerging position of House Republicans on revenues and spending levels, as well as something of an offer to legislative Democrats.

Although Republican leaders were reluctant to talk publicly about the plan while it was being negotiated, Oregon Republican Party Chairman Kevin Mannix said he was worried that it could rile up conservative voters who'd counted on a Republican-controlled House to hold the line on taxes.

"I will have to do a lot of explaining to solid Republicans," said Mannix, a former legislator and last year's GOP nominee for the governorship. "We need to be understanding that they are trying to be responsible about coming to closure in an atmosphere where the Democrats want to spend twice as much."

The Legislature enters its 190th day in session today and will tie the record for the third-longest session by Saturday. If legislators remain in session past Aug. 7, they will set a new record for duration.

The House proposal is particularly significant because the Oregon Constitution requires that all revenue-raising measures begin in the House, and it imposes a three-fifths supermajority for approval of such legislation.

That means Democrats would have to provide some support to help clear the supermajority to pass revenue-raising measures in the House.

Democrats from both chambers spent several hours in closed-door discussions of the proposal. House Democratic Leader Deborah Kafoury of Portland told Minnis Monday she wanted to have more time to study the plan's details and would probably get back to the Republicans today, said both Deister and House Democratic spokesman Lonn Hocklin.

Kafoury said that while the proposal represented movement from the Republicans, she was especially concerned that it would leave vital educational and public service budgets short.

"We still have a lot of questions about what's in the budget," Kafoury said.

For the public schools budget, for instance, Democrats and Gov. Kulongoski have generally agreed they want at least $5.3 billion. The House Republican plan would provide $5.05 billion and would allow an additional $250 million to flow to schools only if the economy, and resulting revenue collections, outperform projections.

RAISING REVENUE

Here are the sources of $487 million in higher tax revenue proposed by House Speaker Karen Minnis, R-Wood Village, and her fellow House Republicans:

Removing income tax deduction for medical expenses for well-off seniors: $36 million.

Offset a federal income-tax deduction for purchasers of SUVs for business: $1.2 million.

Freeze the Measure 88 tax cut for middle- and upper-income households: $70 million.

Reduce the personal exemption on income taxes by $15 per household member: $94 million.

Freeze certain income-tax credits that are normally adjusted for inflation: $58 million.

Reduce the discount for early property-tax payments: $80 million.

Increase the beer tax by 2 cents per drink: $25 million.

Raise the wine tax by 25 percent: $3 million.

Increase the minimum tax for corporations: $56 million.

Eliminate tax shelter for export-related income: $18 million.

Reduce corporate income-tax credits proportional to the reduction in personal income tax breaks: $19 million.

Raise the securities and corporate filing fees: $27 million.