The Democratic majority in the Oregon House pulled a strange switcheroo Monday with the gross receipts business tax proposal they’d been working on in the Joint Tax Reform Committee all session.

In the morning, they considered yet another iteration of what they’d been working with one whopping concession for Republicans: They would drop plans to repeal a special personal income tax rate for business people and professionals that the Republicans won in a 2013 grand bargain brokered by former Gov. John Kitzhaber.

In the morning light, it looked like a concession sturdy enough to build a compromise on as lawmakers try to plug a projected $1.4 billion shortfall in the state’s 2017-19 budget. Much of the money they’re looking for would go to public education.

By the afternoon, Democrats returned to the committee with a proposal that dropped the whole idea of a gross receipts tax, bumped up the “standard fare” corporate income tax rate and pared way back on the special personal income tax rate that Republicans cherish — and then they adjourned for the day.

“We’ll remain in pause mode for a while,” said committee Co-Chairman Sen. Mark Hass, D-Beaverton.

Afterward, Hass said the newest plan didn’t necessarily mean the Legislature has given up on the gross receipts tax or any of its seven permutations that preceded the day’s dramatic departure. “We haven’t chosen one yet,” he said.

That special personal income tax rate, worth about $100 million a year, was at the center of the debate Monday.


Hass calls it the “suits and scrubs” tax break because it mainly benefits high-earning professionals who conduct their business by means of S-corps, limited liability companies and partnerships.

The tax liability largely “passes through” each business entity and instead counts on the personal income taxes of the professionals. The special rate allowed them to pay…