The Oregon Legislature gave final approval Wednesday evening to Democrats’ plan to remove three new Trump administration tax breaks from state tax code and increase a separate tax credit for low-income working families.
The plan is designed to net $312 million for the current state budget to help stave off cuts to programs and services following what would have been a nearly $900 million hit from President Donald Trump’s sprawling tax and budget cutting bill.
But a Republican lawmaker announced he will seek a voter veto of that plan.
Republicans in both the state Senate and House uniformly decried the plan as anti-business. They particularly criticized Democrats’ move to end accelerated depreciation on machinery and equipment purchases by corporations or business owners that do business in Oregon. Continuing to mirror the 2025 federal law, which allows businesses to deduct 100% of the cost of equipment from their tax bills in the year they buy it rather than over the life of the equipment, would spur investment and hiring, they argued.
They were outvoted by the Democratic supermajorities in both chambers. Democrats argued the plan was well-tailored to send more money to 200,000-plus working class families and protect schools, health care, child care and other services essential to economic development and community wellbeing. Much of the benefit of the Trump tax breaks they voted to undo would go to big national corporations and ultrawealthy individuals, they said.
Both the Senate and the House approved Senate Bill 1507 on party line or near party line votes, with Sen. Mark Meek of Oregon City the lone Democrat who voted no. The bill now heads to Gov. Tina Kotek for her signature.
But Republican Rep. Ed Diehl of Scio injected new energy Wednesday into his party’s drive to kill the bill. He announced on the House floor that he will try to gather enough signatures to put the question before voters in November.
His effort to secure 78,000 valid signatures faces strong headwinds, given a narrow window of time to do so and average voters’ unfamiliarity with technicalities of tax code such as bonus depreciation and exemptions from capital gains on sales of a narrow category of stocks.
Diehl said he plans to gather signatures to maintain those two tax breaks plus a third for interest payments on the purchase of model 2026 cars or newer. He won’t ask voters to block the increased tax credit for working-class families, he said.
Historic political calculus in Oregon would suggest he couldn’t possibly get enough signatures by the deadline. But Diehl is fresh off a big success leading Republicans’ drive to put Democrats’ gas and transportation tax hikes, approved in a 2025 special session, before voters.
Diehl’s largely volunteer driven campaign generated more than 163,000 valid signatures in a matter of weeks. And Democratic lawmakers concede voters will almost certainly side with Republicans and kill the increase in the gas tax and other driving related fees that Kotek and Democratic lawmakers pushed through last year to bolster state and local efforts to maintain and repair roads and highways.
If Diehl is also successful in getting the tax break proposal on the ballot and voters side with his position, it would force legislators to make an additional $350 million or so in cuts to the current state budget.
During floor debates, most Republican lawmakers praised or did not discuss the bill’s provision to increase the size of families’ state Earned Income Tax Credit by as much as 55%. That increase is expected to help roughly 230,000 households living paycheck to paycheck afford the rising costs of food, rent and utilities.
The bill also preserves the new federal tax breaks for tips and overtime income, provisions that drew praise from lawmakers in both parties.
House Revenue Chair Nancy Nathanson, a Eugene Democrat, was one of two key architects of the bill, along with Senate Revenue Chair Anthony Broadman, a Bend Democrat.
Nathanson noted that it is routine for states, whether dominated by Democrats or Republicans, to disconnect from some provisions of federal tax code to benefit their state.
“Just last week, Idaho, an overwhelmingly red state, chose to disconnect from bonus depreciation, as an example,” she said.
“Senate Bill 1507 is about Oregon taking some control … It’s focused on making Oregon’s economy work for the people who live and work here,” she added.
Several Republican House members noted that disallowing bonus depreciation would be particularly harmful to farmers, who need expensive equipment and whose cash flows during tough years of commodity pricing or weather effects can be crushing.
Meek, the Democratic senator who voted no on the bill, did not respond to a question from The Oregonian/OregonLive that day about why he opposed it.
Note: This story was updated at 8:30 a.m. Feb. 26 to reflect that Sen. Mark Meek of Oregon City voted no on the bill.
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