Oregon faces a nearly $375 million budget shortfall going into the new year and rather than cutting social services, some experts are calling for a change to the tax code which could generate millions for the state.
Daniel Hauser, deputy director of the Oregon Center for Public Policy, pointed to the Qualified Small Business Stock Exclusion, a federal tax break estimated to cost the country $80 billion over the next decade. He believes it largely benefits venture capitalists rather than small businesses.
He pointed out Oregon lawmakers could prevent the state from implementing the policy.
“Lawmakers are gonna have to figure out what to do,” Hauser asserted. “Do we disconnect from things like QSBS and other regressive, poorly-designed tax policies? Or are we gonna cut services that help people access unemployment insurance, or that help people pay for child care, or that directly employ workers all across our state?”
Proponents said the tax break is needed to encourage risky startup investments. However, Hauser noted Oregon does not necessarily benefit, as the tax break can go to instate investors for out-of-state companies, which may create no local jobs or economic value.
Hauser pointed out Oregon is one of the states with a tax code directly linked to the federal code, meaning dozens of the federal tax policies passed in House Resolution 1 in July will change the state’s tax code too. He emphasized venture capitalists in Oregon investing in a tech startup in California will now get both a federal and state tax break.
“The state estimates that the current QSBS costs around $75 million to $80 million each budget period here in Oregon,” Hauser reported. “These are really significant tax breaks that are flowing out to these large investors.”
The Oregon House of Representatives passed a bill to divorce the state’s tax code from the federal code during this year’s session but the Oregon Senate did not take a vote on the bill. A similar bill will likely be pushed by state Democrats in 2026.