Oct. 27, 2018 — Oregon sits uniquely in the Pacific Northwest as a state without a sales tax. When struggling Oregon families plot out their food expenditures, they can rely on their supermarkets’ price tags without any surprises at the cash register.
Still, in September this year, more than 620,000 Oregonians received help from the Supplemental Nutritional Assistance Program (SNAP), according to the Department of Human Services. With hundreds of thousands of households living on thin margins, many can ill afford price hikes in basic necessities.
A measure on the Oregon ballot this year will challenge a perceived threat to these necessities.
Measure 103 would amend the Oregon Constitution by adding a 16th section to Article IX. It proposes to prohibit taxes and fees based on the transactions of groceries, which would extend to sellers and distributors such as supermarkets, restaurants, farmers markets and food banks.
The bill defines groceries as “any raw or processed food or beverage intended for human consumption,” but does not include alcohol, marijuana or tobacco products.
The proposed amendment has drawn strong support from food and beverage distributors, but finds dissent among a wide range of critics concerned about the bill’s sprawling definitions and lack of necessity.
Oregon does not currently have a statewide sales tax on any items — including groceries — although two Oregon cities, Ashland and Yachats, do have a five percent tax on prepared food and non-alcoholic drinks, which essentially apply to restaurants.
Both were voter-approved.
Ashland first approved its local tax in 1990 to help fund costs associated with the construction of a wastewater treatment plant and to purchase land for parks. In 2009, voters chose to renew it.
Yachats first started collecting its food and beverage tax in 2007, also to pay for a new wastewater treatment facility, and modeled their tax policy on Ashland’s, letting businesses keep five percent of any sales tax they collect to offset accounting costs.
“It has, by and large, been a positive effect on the community,” said Yachats Mayor Gerald Stanley.
Outside of Yachats and Ashland, Oregon does not tax food and beverages, although such a tax was proposed in Grants Pass in 2006 and residents turned it down. This year in Jacksonville, an effort was made to bring a similar tax to ballot, but failed to garner the required signatures.
As these local negotiations have taken place, however, bigger stakes are on the table in the state legislature.
In support of Measure 103, campaign contributions are currently around $4.2 million, compared to the opposition’s roughly $2.8 million.
The American Beverage Association has poured more than $1 million into the support campaign and other major donors include Albertsons, Safeway, Kroger, Costco and the Northwest Grocery Association.
When the initiative received enough signatures this spring to be placed on the Nov. 6 General Election ballot, Joe Gilliam, president of the Northwest Grocery Association, hailed the moment as a “major milestone.”
A leading proponent of the bill, he said, “Since statehood, Oregon has never taxed groceries, yet politicians in Oregon continue to push for a tax on grocery sales. This initiative will end these efforts and other future efforts by proactively prohibiting the taxing of groceries from farm-to-fork.”
The Grocery Tax ‘Push’
Gilliam’s claim that Oregon politicians have continuously sought to impose grocery taxes echoes similar claims made by the Yes on 103 campaign and its supporters — that Oregon politicians have tried several times over the years to institute a grocery tax.
Evidence for this, however, is sparse.
On the Yes on 103 campaign’s website, an advertisement cites specific political moves as proof of such attempts.
First among them is House Bill 2830 from 2017. This bill proposed to increase the state’s corporate income tax; however, there is no mention specifically of food or beverage.
The advertisement also refers to Oregon’s Measure 97, which failed to receive a majority vote in the General Election in 2016. The measure would have removed the cap on the corporate gross sales tax — again, however, with no specific language targeting food or groceries.
Also listed as an attempt at a grocery tax is Senate Joint Resolution 18 in 2015, but government records show that this resolution proposed to amend the Oregon Constitution in relation to an education support fund, wholly unrelated to food or beverage.
House Bill 2330 from 2017 is also found among proponents’ examples of grocery tax proposals, but this bill was “relating to charges for electricity delivered to the public for electrically powered motor vehicles,” according to state documents.
Other cited attempts at the local level are Ontario’s failed Measure 23-58, a broad sales tax, and St. Helen City Council’s unanimous rejection of a proposed sweetened-beverage tax earlier this year.
The lack of proposals to specifically target groceries and the thematic thread of general sales taxes cited among objectionable proposals leave the impression that the bill’s backers are concerned mainly with an overall sales tax — not grocery tax.
Still, in a KTVZ television interview, Yes on 103 campaign spokesman Dan Floyd said that the measure would prevent lawmakers from imposing a burden on the people most affected by grocery costs.
“I think that (the opposition is) in full support of taxing your food and beverage,” he said. “They believe state and local government need the money. And we understand that revenue is important, but we don’t think it should be a regressive tax on the people who can afford to pay it the least, and it shouldn’t be on your food and beverages.”
Regressive as it might be, little evidence suggests that any state politicians are in favor of a grocery tax or that the needy live under its perpetual threat.
Others believe the real threat lies in a subsection of the bill referring to the “corporate minimum tax.”
Corporations vs. Local Control
When Oregon businesses pay taxes, they must pay the greater between two options: (1) roughly 0.1 percent of sales, known as the corporate minimum tax; or (2) 6.6 percent on taxable income up to $1 million or 7.6 percent over $1 million. The minimum tax on sales is capped at $100,000.
A subsection of Measure 103 addresses the corporate minimum tax specifically, stating that the prohibition against imposing taxes applies to this tax as well, effectively protecting the corporate minimum tax from future increases.
The Yes on 103 campaign flatly rejects that the bill is a corporate tax break on its website’s FAQ.
However, in a December 2017 petition to place this initiative on the ballot, the Oregon Attorney General’s office considered an objection raised by the chief petitioners of the bill.
In drafting the “yes” and “no” vote result summaries for the measure, proponents of the bill petitioned unsuccessfully to remove the “corporate minimum tax” reference from the “no” vote summary, positing that it was beyond the scope of the measure. The attorney general’s office disagreed and retained the reference in the summary.
The office explained that, “inclusion of a reference to the corporate minimum tax advances voters (sic) knowledge about the measure,” and that “we believe that a significant effect of the measure is that the corporate minimum tax could not be amended as it applies to sellers and distributors of groceries.”
The attempt to extract a reference to the corporate minimum tax points to an issue seldom brought to attention by the bill’s proponents — namely, that corporations which sell or distribute groceries would benefit from having a certain portion of their revenue immune to changes in state tax policy.
This effective freeze on corporate minimum taxes has drawn attention from opponents of the bill, who argue that it would place grocery sellers, such as supermarkets, in a protected category apart from other businesses.
In an op-ed for the Statesman Journal, Salem Mayor Chuck Bennett wrote, “This dangerous constitutional amendment would take away local control from communities, all so special interests can claim a huge tax carveout.
“What is right for one community can be dead wrong for another, and it should be up to those communities — not special interests — to make those decisions.”
Decisions by the citizens of Ashland and Yachats stand as examples of how local control can extinguish specific challenges to communities.
In Yachats, construction of an updated sewage system was mandated by the state at the time of the local measure and the $8 million project left the small town with few options in terms of revenue. The five-percent tax was met with mild resistance, Stanley said, but has become an accepted feature of the town.
“It’s helped us meet a tremendous challenge,” he said.
In all, arguments for the measure are largely based on its proactive effects — protecting struggling families, small businesses and farmers from a grocery tax which would put such communities and sectors in financial peril. These concerns, however, are mainly referenced by attempts to impose general sales taxes which, local and state, have found contention only within the broader public negotiation of where and when taxes should apply.
Statewide, no taxes specific to groceries have been brought to the Oregon Legislature. Locally, taxes on prepared food and beverage have been limited in scale and respectively approved or voted against in cities such as Ashland, Yachats, Grants Pass and Jacksonville.
The threat of a statewide grocery tax looms somewhat as an apparition in light of this, leaving voters to consider whether their local governments should retain control of such decisions or change the constitution to enact a tax prohibition across the state.