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Tax Credit Abuses


Summary:

Tax credits are often abused by special interests whose activities are subsidized by the state of Oregon at the expense of the common good.

The worst uses of taxpayer dollars are often tax credits, ways we spend money before it ever arrives at the Oregon Department of Revenue. Part of the problem is that these benefits are often crafted by individuals and business groups who have their own interests at heart, not the common good. In Oregon law, it takes convincing 51% of legislators that something is a good idea. But once a mistake is placed in tax law, it takes 60% of the members of each House to make even minor adjustments. Further, many of these tax credits are decades old and have never had a proper review.

Abuses often benefit the wealthy and businesses in the name of good public policy. Tax credits decrease the money available for the state’s primary responsibilities: education, public safety, courts, health care, and human services - where 93% of state funds are spent. We look carefully at these lost revenues, as they can impede educational and economic opportunity, destroy financial and medical security and even cause homelessness.

Tax Credit Reforms:


Tax Fairness Oregon fights to stop abuses and to increase rational tax policy through legislative advocacy and public education, with particular focus at this time on the following areas:

• Business Energy Tax Credits pay for up to 50% of some “green” projects, without a clear relationship to how much energy is saved or how many long term jobs are generated.

• 529 College Savings Tax Credits decrease the money available for funding education for all, while benefitting mostly those families with incomes of more than $154,000.

• The Oregon Tax Credit Review is a massive legislative effort to review all state tax credits by 2016.

Recent Victories:


BUSINESS ENERGY TAX CREDITS: Tax Fairness Oregon helped put the overly generous Business Energy Tax Credits (BETC) on the media’s radar. We started raising the issue in 2008

Prior to 2007, the maximum BETC tax credit was $3.85 million. The 2007 legislature raised the maximum to as much as $22 million. The cost to the General Fund has been explosive, rising from $20 million in 2005-07 to an anticipated $230 million in 2011-13.

We worked long and hard to shepherd HB 2742 through the 2009 legislature, a bill to tighten the BETC’s application and reduce excesses in the BETC. Unfortunately the Governor vetoed this bill. Hopefully the legislature will override that veto in the February 2010 session.

We’ve begun pointing out additional problems with Oregon’s approach to stimulating the energy and conservation sectors.

TAX CREDIT REVIEW: The worst tax expenditure abuses give tax breaks without realizing any significant current public benefit. In the 2009 legislative session a commendable bill passed that ends this lack of legislative oversight.

Because of HB 2067, every state tax credit will die between 2012 and 2016. Each will then be reviewed. If the concept is of merit, it might be revised and continued. There will be a vote to continue it. During this crucial review process, we don’t want beneficiaries of tax breaks to be the only voices speaking to legislators. Tax Fairness Oregon’s citizen volunteers will be reviewing each tax credit and presenting our analysis.
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Tax Fairness Volunteers specializing in Tax Credit Abuses:
Jody Wiser, Chair of Tax Fairness Oregon, policy advocate/lobbyist
Peggy Woolsey, lobbyist
Steve Wright, researcher/technical writer
Patrick Story, policy advocate/writer