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A sausage made of roadkill.

Byline: The Register-Guard

It may be no coincidence that the Oregon Legislature legalized roadkill cuisine shortly before the House passed a bill restricting a business tax break last week. Laws and sausages, Otto von Bismarck said, are two things people should not see being made, and the tax break sausage could not have been made without a couple of pieces of political roadkill. The legislation shows how desperate Democrats have become to find new revenue to fill a $1.4 billion budget shortfall, and how faded hopes for bipartisan cooperation in Salem have become.

The tax break was initially created as part of a more palatable exercise in political sausage-making in 2013. In a special session that year, Republicans agreed to a corporate tax increase sought by Democrats, and Democrats agreed to limits on public pensions sought by Republicans. It was called the "grand bargain" at the time, and featured several other elements - including a tax break to soften the impact of the corporate tax increase. The tax break allows some types of small businesses with at least one employee to pay state taxes at the 7 percent corporate rate, rather than at the personal income tax rate that can be as high as 9.9 percent.

House Democrats voted last week to allow only businesses with 10 or more employees to claim the tax break, and only those engaged in agriculture, mining, manufacturing and a half-dozen other industries. The change would block professionals such as doctors and lawyers from tasking advantage of the tax break. The House-approved changes would bring the state an additional $282 million in revenue during the 2017-19 biennium.

Republicans felt betrayed, and for good reason: The bill to limit the tax break passed by a 31-28 vote, with all Republicans and three Democrats voting no. Democrats thereby reneged on the deal agreed to four years ago, making roadkill of the grand bargain.

The vote also made roadkill of the three-fifths supermajority required for approval of tax increases. Democrats, relying on a fresh legal interpretation, argued that limiting a tax break is not the same as increasing a tax. That argument is likely to be tested in court. Republicans say that a bill that increases the taxes some businesses pay is a tax increase. Even if Democrats are on solid legal ground, they appear to be committing the logical fallacy of ambiguity: A curbside sign that says "Fine for parking" doesn't mean it's just fine and dandy to park there.

The tax break may well need revision. It was approved as a means of encouraging job creation, but there's little evidence it has had that effect. The Legislative Revenue Office estimated that 75 percent of the benefit from the tax break goes to people with yearly incomes of $200,000 or more. The cost to the state is higher than expected and climbing steeply - the price tag will grow to nearly $400 million in 2021-23. Democrats had nowhere else to turn for additional revenue after efforts to win Republican support for a corporate tax increase failed. The change would be defensible if it had been approved by a bipartisan supermajority.

Instead, Democrats will pay a high price for the added revenue. Republicans will no longer trust them to uphold their part of a bargain, and that trust will be indispensable the next time Democrats need more than members of their own caucus to pass legislation. It is unpersuasive to claim that lawmakers in 2017 can't be bound by promises made by predecessors, or that the grand bargain of 2013 means nothing today because the courts invalidated most its pension reforms.

A deal is a deal, and Democrats would be saying the same if the parties' political roles were reversed - as someday they may be.
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Title Annotation:Editorial
Publication:The Register-Guard (Eugene, OR)
Date:Jun 28, 2017
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