Democratic leaders in the Oregon Legislature have unveiled a sweeping tax proposal they say is designed to shift relief toward working families and small businesses while closing what they describe as corporate tax loopholes. The plan, introduced as a replacement amendment to Senate Bill 1507, would expand existing tax credits, create a new incentive for job growth, and eliminate several deductions that lawmakers argue disproportionately benefit large corporations and wealthy taxpayers.
At the center of the proposal is a significant expansion of the state’s Earned Income Tax Credit, a program that reduces income tax liability for low- to moderate-income workers. If approved, the credit would increase from 9 percent to 14 percent for individual filers and from 12 percent to 17 percent for filers with a child under age three. Legislative leaders describe the increase as the largest expansion of the credit in Oregon’s history and estimate that more than 200,000 taxpayers would see lower tax bills as a result.
Senator Anthony Broadman, a Democrat from Bend and chair of the Senate Revenue Committee, said the proposal focuses on affordability and economic stability. “Now is the time to lean into investing in working Oregonians and Oregon jobs,” Broadman said. “Our plan improves affordability for working Oregonians, helps small businesses expand, makes sure big corporations pay their fair share, and protects funding for schools, public safety, and healthcare.”
In addition to expanding the Earned Income Tax Credit, the measure would establish a new $25 million Oregon Jobs Tax Credit. The credit would be available to businesses in any industry, provided they demonstrate net job growth within the state. Lawmakers say the goal is to reward companies that create family-supporting jobs in Oregon rather than shifting operations elsewhere. Businesses would only qualify if they show an increase in employment, tying the tax benefit directly to measurable job creation.
Representative Nancy Nathanson, a Democrat from Eugene and chair of the House Revenue Committee, said the proposal responds to recent federal tax changes that have affected Oregon’s fiscal outlook. “As the Trump administration imposes sweeping federal tax changes on Oregon, the expanded Earned Income Tax Credit and the Jobs Tax Credit will keep more money in Oregonians’ pockets,” Nathanson said. “Just as importantly, they ensure that taxpayer dollars are invested in growing Oregon’s small businesses and creating family-supporting jobs.”
According to legislative leaders, federal tax changes enacted last summer created a projected $900 million gap in Oregon’s budget. Because the state Constitution requires a balanced budget, lawmakers must either identify new revenue sources, reduce spending, or draw from reserve funds to close the shortfall. The proposal aims to preserve approximately $291 million in funding for essential services, including education, health care, and public safety.
To offset the cost of expanding credits and maintaining service levels, the plan would eliminate several tax deductions currently allowed under Oregon law. Among the targeted provisions are deductions for auto loan interest on new vehicles, profits derived from corporate equity sales, and bonus depreciation for machinery and equipment. Supporters argue these deductions have not effectively driven job growth in Oregon and instead provide disproportionate benefits to corporations and higher-income taxpayers.
The proposal also reiterates that tips and overtime pay would remain exempt from state taxation under the revised structure, a provision lawmakers say is intended to protect service workers and hourly employees.
As the measure moves through the legislative process, it is expected to generate debate over tax fairness, economic competitiveness, and the best strategy for maintaining essential public services. Supporters frame the plan as a recalibration of the state’s tax code in favor of working families and locally rooted businesses. Critics are likely to scrutinize the removal of business-related deductions and question potential impacts on investment and growth.
For now, the proposal represents one of the most comprehensive tax policy discussions of the session, reflecting broader questions about how Oregon balances economic development, fiscal responsibility, and support for its workforce in a changing federal and economic landscape.