SALEM — State economists said Wednesday that the recent federal tax overhaul could have negative effects on Oregon’s revenues in the short term, but could boost annual state revenues in the next decade.
However, they also cautioned that the full picture of the impact is not yet clear. President Donald Trump signed the Tax Cuts and Jobs Act, which contains sweeping changes to federal personal and business taxes, into law Dec. 22.
Acting Legislative Revenue Officer Chris Allanach said the state’s tax collections in 2018 are now projected to be $100 million lower than expected.
In the next decade, though, net tax revenues are now largely expected to exceed previous projections.
State economists say personal income tax collections could be lower than previously expected through 2025 due to the Tax Cuts and Jobs Act.
But they also say they now expect business tax collections to exceed projections from 2020 to 2027, and by more than $200 million in the years 2020-2023.
Certain provisions of the legislation are scheduled to expire in 2027.
Economists from the state Office of Economic Analysis told lawmakers on Wednesday they expect the reforms to contribute to modest economic growth.
However, the state’s projections are not yet complete. More information should be available by Feb. 16, when state economists are scheduled to publish the next state revenue forecast.
For example, it’s not yet clear how Oregon will be affected by provisions in the new federal law that allows U.S. companies to repatriate their overseas earnings at a reduced tax rate.
While the law has reduced the federal corporate income tax rate from 35 percent to 21 percent, it’s possible that the repatriation provision could bring more revenue into the state in 2018 because companies have been holding cash overseas.
“I didn’t provide a number, because I’m not in any place to make an estimate on that yet,” Allanach, the legislative revenue officer, told lawmakers on Wednesday.
The chair of the Oregon House Revenue Committee also says he needs more information about the federal law’s effects before attempting to change state law.
Rep. Phil Barnhart, D-Eugene, said he and State Sen. Mark Hass, D-Beaverton, are hoping to convene a small work group to work on the issue.
“But of course, we do need as good data as we can get before we have any idea of what we might like to do, let alone what is prudent to do,” Barnhart said.
The uncertainty around taxes lingers as state legislators are also waiting on the results of key health care funding ballot measure that could also pose significant challenges for the state’s two-year budget.
If voters reject the measure in a special election Jan. 23, that could result in a shortfall in the state’s Medicaid budget.
Although the state legislature passes the state’s budget in odd-numbered years, legislators convene for short, up-to-35-day sessions in even-numbered years in part to reconcile any changes in the state’s budget. Lawmakers are convening in Salem for three days this week in advance of the short session, which begins Feb. 5.