---
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source_pdf: oregon-prosperity-council-report-june-2026.pdf
fingerprint: 8ac9aef8ca1b
page_range: [18, 20]
breadcrumb: ["Full Report", "Chapter 2: Taxes", "Priority Recommendations"]
source_links:
  pdf: "https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=18"
  raw_pages:
    - "../../../.extracted/pages/page-0018.txt"
    - "../../../.extracted/pages/page-0019.txt"
    - "../../../.extracted/pages/page-0020.txt"
---

# Priority Recommendations

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## TL;DR  *(generated · confidence: high)*

Oregon's tax system is overly reliant on personal income tax. The Council recommends modernizing the R&D tax credit, reforming the estate and corporate activity taxes to support small businesses, and reconnecting QSBS to federal code for 2027. By 2029, a nonpartisan working group should develop comprehensive tax reform addressing income tax over-reliance, property tax regulation, and tax progressivity before federal SALT provisions expire.

**Key points** *(each cites a PDF page)*:

- Oregon operates under a "one-and-a-half-legged stool" model relying heavily on personal income tax and constrained property tax revenues. ([p. 18](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=18))
- Modernize R&D tax credit to offer 15% credit for company-led research and 20% credit for projects conducted with Oregon universities, applied to more industries and companies paying above median county wages. ([p. 19](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=19))
- Update Estate Tax to introduce targeted deductions for small businesses and raise exemption threshold to $3-5 million, following Minnesota model of $2 million deduction for businesses with <$10 million annual sales. ([p. 19](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=19))
- Reform CAT by increasing filing and taxability threshold from $1 million to $2 million and moving to subtractive method allowing complete deduction of input costs. ([p. 19](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=19))
- Reconnect QSBS policies to federal tax code to help Oregon retain and grow emerging small businesses. ([p. 19](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=19))
- Governor should convene nonpartisan tax reform working group to develop comprehensive reform proposal by 2029, in advance of federal SALT provisions expiration. ([p. 19](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=19))
- Tax reform working group should address CAT reform, property tax regulation improvements, personal income tax rebalancing, and support for progressivity benefiting low and middle-income households. ([p. 20](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=20))
- Two Council members dissented, expressing concerns about the necessity of proposed tax changes and broader business incentives' long-term impacts, preferring workforce and existing program investments. ([p. 20](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=20))

Amounts: $3-5 million · $2 million · $10 million · $1 million · 15% · 20% · Dates/FTE: 2027 · 2029 · 2008 · 2010 · Programs: R&D tax credit · Estate Tax · CAT · QSBS · SALT · Parties: Governor · Oregon Legislature · Oregon Prosperity Council · Minnesota

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> **Source:** PDF [pp. 18-20](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=18) · raw: [18](../../../.extracted/pages/page-0018.txt) · [19](../../../.extracted/pages/page-0019.txt) · [20](../../../.extracted/pages/page-0020.txt)

Breadcrumb: Full Report > Chapter 2: Taxes > Priority Recommendations

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Priority Recommendations
The most important step the Governor and Legislators can take to address Oregon’s uneven tax structure is to
support moving Oregon beyond its current “one-and-a-half-legged stool” model, which relies heavily on personal
income tax and constrained property tax revenues. Reform should aim to strengthen long-term revenue
stability, diversify the tax base, reduce volatility, and increase contributions from nonresidents. Achieving
a more balanced and competitive tax system may require broader-based revenue tools that can be more regressive
in isolation. But when paired with targeted investments in education, housing, healthcare, early childhood programs,
and other essential services, they can support more equitable long-term outcomes for Oregonians. Over time,
revenue growth and the elimination of ineffective programs and tax expenditures can help fund these investments
while improving Oregon’s competitiveness for business, talent, and investment.
2027 Legislative Session: Strengthen Oregon’s Economic Competitiveness
While the Council agrees that more comprehensive reforms are ultimately needed, the following recommendations
move the state closer to a balanced tax system in the near term, help businesses of all sizes innovate and
employ more people, and make Oregon a more competitive place to do business. At this critical time when
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2 . TA X E S
Oregon must both respond to immediate economic pressures and prepare for its future, these policies support
businesses and workers together to build a stronger and more resilient statewide economy. The Governor
should also reject proposals that increase personal or business taxes and fees unless there is meaningful
support from Oregon’s employers of all sizes.
Modernize economic incentives, including the Research & Development tax credit to better support
innovation and help smaller businesses working to grow, add employees, and stay in Oregon.
Oregon’s incentive structure often favors capital-intensive investments while providing more limited support for
research development, talent, and operating expenditures that drive innovation and long-term competitiveness.
Oregon should continue to support and expand programs that incentivize beyond capital expenditures, as well
as modernizing the Research & Development tax credit to apply to more industries and include companies that
pay above median county wages. To encourage innovation and strengthen connections between industry and
higher education, Oregon could offer a 15% tax credit for company-led research and development and a 20%
credit for projects conducted with Oregon universities.
Update the Estate Tax to support family businesses, so they can transition successfully from one generation
to the next. Oregon should introduce targeted deductions for small businesses, following a best practice from
Minnesota, and explore raising the threshold of the exemption to $3-5 million to achieve competitiveness with
West Coast states. Minnesota defines a small business as having sales of less than $10 million annually and
allows for a $2 million deduction, in addition to the exemption limit.
Reform the Corporate Activity Tax (CAT) so that small and medium-sized businesses, particularly those
operating on thin margins, do not face extraordinary administrative burdens and costs. The current structure
increases costs at every stage of production and sales, while the standard deduction disproportionately
disadvantages smaller businesses with higher input costs. Oregon should consider increasing the filing and
taxability threshold from $1 million to $2 million to reduce burdens on small business, while also moving to
a subtractive method that allows a complete deduction of input costs while preserving the administrative
structure. Any reforms should maintain revenue neutrality and ensure continued funding for essential public
services, including K-12 education.
Reconnect the Qualified Small Business Stock (QSBS) policies to the federal tax code because they
are critical to helping Oregon retain and grow emerging small businesses at a time when founders, investors,
and growing companies are increasingly being recruited to other states. Keeping support for long-term
investment in Oregon businesses can prevent the loss of jobs, capital, and future business growth to more
business-friendly states.
Develop a Holistic Proposal to Be Implemented by 2029
Council members agree that our existing tax structure, with its over-reliance on income taxes and limitations
on property taxes, is a barrier to needed investments in the education, healthcare, infrastructure, and climate
resilience programs that our communities deserve. The Council recommends that the Governor convene a
nonpartisan tax reform working group to develop a long-term reform proposal that can be implemented
by 2029 in advance of the expiration of federal State and Local Tax (SALT) provisions. The group should be
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OREGON PROSPERITY COUNCIL | RECOMMENDATIONS FOR OREGON’S LONG-TERM COMPETITIVENESS AND PROSPERITY | JUNE 2026

2 . TA X E S
chartered to develop principles for reform, evaluate trade-offs in reform scenarios, develop recommendations
for specific tax changes, and develop a pathway for implementing those changes though the Legislature
and voters.
This group should be chartered to create a more balanced tax system that reduces the state’s over-reliance on
income taxes to fund essential public services. Topics the group should consider include:
Reforming the Corporate Activity Tax as part of a comprehensive rebalancing.
Enabling local governments to increase funding stability with common sense property tax
regulations that sufficiently fund core programs without needing a complex array of local voter-approved
funding sources.
Rebalancing personal income tax structure to maintain progressivity and reduce effective rates for all
income brackets.
Supporting ongoing progressivity in the system through reforms that support low- and middle-income
households.
BEST PRACTICES
Indiana’s approach to comprehensive property tax reform offers useful lessons in how to develop durable,
system-wide change through bundled reforms and stakeholder alignment. In 2008, the state enacted a
bipartisan legislative package that paired property tax caps with shifts in state and local responsibilities, later
reinforced through a 2010 constitutional amendment.
Dissenting perspective: Nearly all Council members agreed with this section, however two members disagreed
with the need for many of the proposed tax changes and expressed concerns about the necessity of broader
business incentives and their long-term impacts to the state. They agree that Oregon must strengthen its long-
term competitiveness, but believe increasing investments in workforce and existing programs is more critical
than increasing investments in business tax expenditures. Additionally, while further fiscal analysis would occur
before implementation, these two Council members believe that the impacts of individual recommendations or their
combined effects should be better understood before recommendations advance.
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OREGON PROSPERITY COUNCIL | RECOMMENDATIONS FOR OREGON’S LONG-TERM COMPETITIVENESS AND PROSPERITY | JUNE 2026

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Parent: [Chapter 2: Taxes](./INDEX.md) · PDF: [pp. 18-20](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=18)