OR: Tax hikes in proposed Oregon transportation package would eventually raise more than $2 billion per year, new report says

A massive transportation funding package put forward this week by Oregon lawmakers would eventually generate more than $2 billion per year from new and increased taxes and fees, according to a draft legislative report finalized Thursday.

The new revenue would come from more than a dozen tax and fee hikes that top Democrats outlined in a bill released Monday. Those increases include a 15 cent increase to the state’s gas tax, a tripling of the state’s 0.1% payroll tax, increases to vehicle title and registration fees and a new charge that electric vehicle users would pay per mile driven.

According to a draft report from the Legislative Revenue Office obtained by The Oregonian/OregonLive, those tax increases would generate nearly $1 billion a year by 2028 and eventually bring in $2 billion per year after 2033.

Several of the tax hikes proposed in House Bill 2025 would be phased in over time or slowly expand to more users over the next decade. For example, the state’s 40 cent gas tax would jump to 50 cents in 2026 and to 55 cents two years later, and its magnitude would later be tied to inflation rates.

The bill would also implement a new 1% transfer tax on used vehicles and a 2% tax on new cars. Combined, those taxes would raise about $280 million per year after 2029.

Most of the new revenue would go to the State Highway Fund, about half of which goes to the Oregon Department of Transportation to help pay for basic operations and road maintenance. Counties also receive about 30% of the fund for transportation-related services, and cities receive about one-fifth of the money.

A small portion of the State Highway Fund, about $280 million per year, would help the state pay for unfinished megaprojects, programs to reduce car collisions with wild animals and programs focused on pedestrian and cyclist infrastructure and safety.

Public transit and railroad services across Oregon would also benefit significantly from the tax increases proposed in the bill. Slowly increasing the state’s payroll tax, which funds transit services, to 0.3% by 2030 would raise an additional $456 million for public transit statewide, according to the report.

House Bill 2025 also includes a provision to require many electric vehicle users to eventually pay a fee per mile driven. According to the revenue report, that program would eventually bring in more than $170 million per year but would cost the state nearly $15 million to launch and about $4 million annually to operate.

The state transportation agency and many cities and counties have urged lawmakers to direct more funding this year to basic maintenance of roads and bridges. Without additional funding, many local officials have warned they would have to lay off workers and reduce services.

“Small cities and rural communities across Oregon will benefit from an increase in their annual state transportation revenue,” said Jessica Engelke, mayor of North Bend and president of the League of Oregon cities, in a Friday press release.

“For communities like mine, where resources are limited, the State Highway Fund is critical for funding our transportation maintenance and operations,” she said. “Our street conditions will improve, and so will safety in our community.”

The proposed tax increases would also fix the cost-burden imbalance between truckers and car drivers, which Democrats and Republicans have both said is a top priority this year. Once the tax increases are fully implemented, truckers would no longer be paying more than their fair share of taxes to maintain Oregon’s roads and bridges, according to the report.

This bill and its expected revenue are far from final. Lawmakers are continuing to negotiate the details of the package and listened to hours of public testimony this week across four committee meetings. By law, the legislative session must end by June 29.

With their three-fifths supermajorities in both chambers, Democrats could theoretically increase taxes with no Republican support if every Democrat voted yes. But it’s unclear if Democratic leaders are willing to pass the package with zero Republican support, or if they will have enough votes to do so, particularly in the House where one Democrat has been absent while undergoing cancer treatment.

Republicans, meanwhile, have mostly signaled strong opposition to any potential tax hikes. On Monday, Sen. Bruce Starr of Dundee, one of four Republicans who participated in weeks of private negotiations with Democrats on the package, said he did not support the bill and its many tax increases.

Republican Rep. Shelly Boshart Davis of Albany, a member of the legislative transportation committee and vocal opponent to any tax increases this year, sharply criticized the Democratic-backed bill on Friday in response to the new report.

“I have no words. This is egregious,” she said in a statement. The state transportation agency “should have to prove they are responsible stewards of hardworking Oregonians’ money, and this bill is a slap in their face.”

Rep. Susan McLain of Forest Grove, one of the Democratic co-chairs of the transportation committee, told The Oregonian/OregonLive Friday that lawmakers are mulling over more than 15 proposed changes to the initial bill and called the report “one piece of the puzzle.”

In a move that could pressure Democrats to change their strategy, several car dealership companies recently poured $186,000 into a newly-formed political action committee, “No Gas Hikes,” launched by former Republican Sen. Brian Boquist and John Swanson, a Republican campaign consultant and chief of staff to Starr. Boquist told OPB he plans to raise “much more” money to try to refer the transportation bill to the 2026 ballot if lawmakers pass it. Doing so would require collecting a high threshold of 78,000 signatures.

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