Oregon Lawmakers Clash Over Plan to Roll Back Trump Inspired Tax Cuts and Raise State Revenue
Oregon Democrats advanced SB 5107, a proposal seeking to raise more than $300 million for the state budget by eliminating three tax breaks modeled after President Donald Trump’s 2025 federal tax law.
The plan, passed along party lines last week, also introduces two new state tax credits.
Oregon Democrats’ Tax Plan
Oregon Democrats introduced a plan to raise revenue. But Oregon’s legislative lawyers determined it does not qualify as a “bill to raise revenue” under the state constitution. Because it expands the tax base rather than increasing tax rates, it avoids the requirement for a three-fifths supermajority vote, making passage easier for Democrats, who already hold a supermajority.
Primarily, the proposal would raise a net $312 million to cover what is expected to be significant hits to services due to Trump’s bill.
Source: Oregon Legislative Revenue Office section contents / revenue impact tables for SB 1507 amendments (Feb 2026), 2025 to 2027 biennium figures shown in millions
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Corporations would have to pay $267 million more in Oregon taxes by June 2027 if lawmakers approve Senate Bill 5107, as the bill eliminates the upfront accelerated deduction for businesses buying large amounts of machinery and equipment.
The depreciation over the equipment’s lifespan can still be claimed, but over the period, rather than as an upfront injection. The key provisions of SB 5107 are:
- EITC Expansion: The credit would increase by up to 55%, benefiting about 230,000 households.
- Preserved Tax Breaks: Exemptions for tips and overtime income, and two complex corporate tax policies related to offshoring income remain intact.
- A deduction of up to $10,000 in car loan interest.
- Tax break on capital gains from selling specific startup stocks.
| Provision | What Oregon changes | Key detail in the draft | Starts |
|---|---|---|---|
| Bonus depreciation | Adds back the federal bonus depreciation difference, then allows subtraction over time | References IRC 168(k) and Oregon tie date language | Tax year 2026 |
| Vehicle loan interest deduction | Adds back the new federal vehicle loan interest deduction amount | References IRC 163(h)(4) | Tax year 2026 |
| Startup stock capital gains break | Adds back gains excluded under the federal qualified small business stock rule | References IRC 1202 | Tax year 2026 |
| Oregon EITC expansion | Increases the credit as a share of the federal EITC | In the amendment text: 9% to 14% and 12% to 17% for a child under 3 | Tax year 2026 |
| New jobs tax credit | Creates an employer credit for net new jobs | $1,000 per net new job / statewide certification cap $12.5M per year | Tax years 2026 to 2031 |
In addition, two new tax credits are proposed: Expanded Earned Income Tax Credit (EITC) for low- and moderate-income households and a $1,000-per-worker credit for employers who create up to 10 new well-paying jobs in Oregon.
Supporters praised the bill for generating funds to offset potential funding losses caused by Trump’s tax changes. Opponents, particularly business groups, criticized the plan, arguing it would discourage investment and harm Oregon’s business climate.
Proposal Would End Oregon’s Upfront Accelerated Depreciation Tax Credits
Cuts to Accelerated Depreciation have proven to be the most controversial aspect of the Democrats’ proposal.
Source: US Senate release summary citing Joint Committee on Taxation bonus depreciation claims by corporate income group, 2018 to 2022
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Elizabeth Warren, the Democratic United States Senator for Massachusetts, recently released a finding that over 80% of bonus depreciation claimed by corporations from 2018 to 2022 went to those making over $1 billion annually. Oregon lawmakers say decoupling from the federal break would keep about $267 million in the state budget.
In a recent article, OPB shared that, if approved, the bill’s authors indicated it would recapture $342 million that Oregon currently stands to lose because of HR 1, the so-called ‘big, beautiful bill.’
Should the proposal succeed, Oregon would disconnect from the rule that lets businesses, including those making over $1 billion a year, more immediately claim tax deductions for machinery and equipment they purchase.