Oregon residents and businesses can get tax credits for installing solar panels, conducting research or planting new trees in commercial forestland.
SALEM — Oregon residents and businesses can get tax credits for installing solar panels, conducting research or planting new trees in commercial forestland.
Those credits and more than a dozen others will expire in 2012 unless lawmakers decide to continue them, the first of about 50 tax credits that the Legislature will evaluate over the next six years.
In 2009, Democrats in control of the House and Senate set nearly all of Oregon's tax credits to expire. Lawmakers meet for up to five months beginning on Tuesday.
The 19 up for review this year are credits for business, environment and economic development initiatives.
"It may well be that we conclude that it's working well and we should continue doing it," said Rep. Tobias Read, D-Beaverton. "But we feel very strongly that that's a responsible thing to do, to find out whether a tax credit is having its intended effect."
The debate is sure to spark intense interest from taxpayers who save money from tax credits and the lobbyists who work for them.
For decades, Oregon lawmakers have created credits as an incentive for taxpayers to make certain investments, like installing solar panels on a home or filming a movie here. Some are designed to prop up budding industries, while others are meant to help people with low incomes pay for health and child care.
Supporters say that well-designed credits have successfully boosted job creation, or that they keep money with taxpayers instead of the government.
"The truth of the matter is, there is very little that government can do directly to stimulate economic activity from the private sector," said Rep. Vicki Berger, a Salem Republican who is co-chairing the tax credit review committee. But tax credits serve as "a carrot to encourage certain private sector activity."
The challenge, lawmakers say, is measuring their success. Have they spawned the desired behavior? Would people have made the same decisions even without the tax credit? Is the outcome significant enough to justify the lost revenue?
Critics on the left say tax credits deprive the government of money. On the right, free-market advocates say tax credits give a lifeline to initiatives that wouldn't survive without government intervention. A homeowner can get a tax credit for installing solar panels, for example, but not for making another home improvement that he might deem more important, said Steve Buckstein, founder and senior policy analyst at the libertarian Cascade Policy Institute in Portland.
"It's the government substituting their judgment for yours and in effect bribing you," Buckstein said.
Democrats complain that eliminating tax credits requires a 60 percent supermajority because it raises revenue, but creating incentives requires only a simple majority. The mandatory review was created when Democrats controlled supermajorities in both chambers of the Legislature.
The least expensive tax credits to be reviewed this year are projected to cost next to nothing in relation to the total budget — less than $100,000 over the next six years. Those programs include credits for buying devices that prevent fish from entering irrigation canals or for hiring new workers to build ships.
Others are more expensive, like the film production credit at $37 million or one encouraging the production and collection of biomass at $66 million over the same period.
But by far the most expensive credit is the Business Energy Tax Credit at $310 million in lost revenue through 2017. The cost of the program is heavily weighted to later years. It jumps from $11 million in the next two-year budget to $229 million in the 2015 budget. The projected cost in lost revenue from BETC alone is nearly half of all projected tax credit concessions that year.
This year, lawmakers will review the credit's renewable energy generation and conservation programs this year, leaving the manufacturing provisions for review in 2013.
For most credits, the bar will be high to keep them in place, requiring five successful votes and the governor's signature. Most successful tax credits will have to pass policy committees in the House and Senate, along with a joint tax-credit review committee and the full chambers before going to Democratic Gov. John Kitzhaber.
That means there are plenty of places for them to be tripped up — even more than a typical bill. And a tie in the House between Republicans and Democrats means only tax credits with bipartisan support will be continued.
Extending a tax credit will be calculated as an increase in the deficit at a time when Oregon is more than $2 billion short of continuing state services at their current levels.