Panel hears proposals on revenue, tax cuts to end budget impasse

Panel hears proposals on revenue, tax cuts to end budget impasse
This Feb. 1, 2012, photo shows the Oregon Pioneer statue atop the Oregon State Capitol, in Salem, Ore. (AP Photo/Rick Bowmer)

SALEM, Ore. (AP) - An Oregon Senate committee heard public testimony Thursday on proposals to increase state revenue and cut taxes for certain business owners, a move that signals potential progress toward a budget compromise that could end weeks of stalemate.

Republicans and Democrats have been deeply divided over how to shape the next two-year state budget, and Thursday's proposals could pave the way to a grand bargain that would include further cuts to the public-pension system.

A bipartisan group of senators hashed out a combination of proposals unveiled Thursday that would raise between $202 million and $226 million in new state revenue.

Republicans proposed $150 million in tax breaks for people who own certain businesses where taxes are paid in the owner's name rather than the firm's.

Democrats suggested limiting tax deductions for high-income taxpayers, cutting back on a tax deduction for seniors' medical expenses and raising cigarette taxes.

Finance and Revenue Committee Chair Ginny Burdick, D-Portland, said the ideas discussed Thursday along with steeper cuts to public-employee benefits could form the basis for a compromise.

She added that none of the proposals is final. And even if the Senate reaches a deal, it's likely to face an uphill climb in the House, where Democratic leaders have been far more skeptical of pension-cutting proposals.

Senate Republicans told the committee that their tax proposal would incentivize small businesses, creating more jobs and spurring investment.

"I believe it can help create an economic renaissance in Oregon, a period of investment, job growth and prosperity," said Sen. Brian Boquist, R-Dallas.

Chuck Sheketoff, executive director of the left-leaning Oregon Center for Public Policy, said the plan helps the wealthy and that he's skeptical the tax break would create more jobs.

"The tax code isn't the solution for all of society's ills and it's certainly not the job creator," he said.

Lobbyists for business groups said they would support a proposal only if it was coupled with a plan to make deep cuts to the state's Public Employees Retirement System.

"We wouldn't have designed it ... exactly this way," D.J. Vogt of Oregon Business Association told lawmakers. "However, we realize the constraints that you have and we are eminently OK with the revenue package that gets us a huge deal."

Several speakers were noncommittal with their position on the proposals, saying they hadn't had enough time to assess the impact.

The Legislature already passed a PERS package that would save hundreds of millions of dollars for state and local governments that were facing steep increases in their pension contributions. Republicans, however, said the plan didn't go far enough.

The Senate committee introduced a placeholder bill that could serve as a vehicle for a proposal that would extract deeper PERS cuts.

Copyright 2013 The Associated Press.