A stack of papers representing testimony against a Democratic bill to move a referendum on transportation taxes and fees from November to May rests on the desk of Sen. Christine Drazan, R-Canby. A new referendum effort aimed at the state’s replication of federal tax policy could prove more difficult to sell to voters. (Photo by Julia Shumway/Oregon Capital Chronicle)
Oregon Republicans have developed something of a familiar strategy when they seek to block revenue-raising measures they failed to derail in Salem: Taking legislative Democrats’ decision to the voters.
Their most recent success? More than 250,000 Oregonians signed onto their petition for a referendum blocking last year’s signature gas and transportation tax hikes, well above the nearly 80,000 verified signatures necessary for the Oregon secretary of state to certify their ballot initiative. The potential revenue streams from those tax increases went on hold, and lawmakers in February turned to a solution Republicans had been proposing for months: Pass an emergency fix using existing funding for the agency’s looming budget hole.
“They humbled me to a significant degree,” said John Horvick, senior vice president with the Portland-based polling firm DHM Research. “The ability to organize that many people and to collect signatures that quickly was a real sign of, well, political success.”
But now a new tax referendum proposal that deals with Oregon’s automatic replication of federal tax policy in state statute will test the political might of grassroots Republican activists and their allies in Salem. Republican Reps. Ed Diehl of Scio and Dwayne Yunker of Grants Pass are teaming up with the Oregon Freedom Coalition with the goal of collecting enough signatures in the next three weeks, according to Nick Stark, executive director of the coalition.
“Our main motivator behind this is ‘let’s actually do something to protect small businesses for once’, building on the momentum from the gas tax fight last fall,” Stark told the Capital Chronicle. “We think we can use that to defend taxpayers once again.”
This time, the “No Tax Clawback” campaign is hoping to undo two key parts of Senate Bill 1507, which disconnected the state from some of the tax cuts passed under the GOP’s 2025 summer tax and spending law. But some political experts say the new petition effort could be difficult for voters to grasp and is inextricably tied to President Donald Trump.
An April survey from the Democratic-aligned pollster Navigator Research found that 49% of Americans view the GOP’s 2025 tax and spending law unfavorably in comparison to 36% who view it positively. Activists and GOP lawmakers are seeking to reinstate tax deductions on auto loan interest for brand new American-made cars and another allowing businesses to immediately deduct from their taxes 100% of the cost of “depreciating assets,” such as real estate and equipment.
“This decoupling bill unavoidably taps into public attitudes about President Trump because it is specifically and directly about trying to minimize the effects of the federal spending bill on Oregon revenues,” said Chris Shortell, a professor of political science at Portland State University. “It’s just not as clean or easy of a story to tell, and politically, there are opportunities to tie this into a sort of resistance to the Trump administration that I think changes the political dynamics.”
Supporters of the referendum effort acknowledged that they are facing a more difficult battle, with Diehl telling the Capital Chronicle that it is “a little more challenging” because gas taxes elicit a “visceral response.” And while the gas tax measure has no organized support, a coalition of progressive groups has formed in order to oppose the disconnect referendum effort, backed by a long list of powerful left-leaning unions and lobbying organizations in Salem.
But should it be successful and land on the November ballot, the disconnect referral could prove beneficial to Diehl or another gubernatorial candidate seeking to unseat Gov. Tina Kotek in the upcoming 2026 election. Oregon Democrats already ended up moving the gas tax referendum to May, allowing them to avoid the potential political fallout of appearing next to an unpopular tax hike measure while seeking reelection.
“We’re bringing the disconnect bill to the voters as well. That one’s going to stay in November,” Diehl said at a GOP debate for the 2026 governor’s race last week. “They’re not going to be able to move that.”
Oregon has disconnected before
Oregon automatically ties its state tax code to the federal tax code when it changes, rather than selectively connecting to changes later. Following the passage of Trump’s 2017 Tax Cuts and Jobs Act, Oregon lawmakers voted to disconnect the state’s tax law from some of the newly enacted federal changes to save the state from losing more than $258 million in revenue. This year, Oregon Democrats snubbed some progressive unions, selectively disconnecting from some tax cuts instead of heeding calls to abandon the practice of automatic replication entirely.
The new Republican referendum, meanwhile, could reduce an estimated $300 million in revenue for the state that Democratic lawmakers had hoped to shore up by undoing some of the tax cuts passed by Congress and signed into law by Trump. That could force lawmakers to call a special session or find emergency funding measures ahead of the 2027 legislative session should the ballot measure qualify and the revenue from those disconnect provisions be paused.
“Oregonians showed up in Salem to support this bill because we believe in a system where everyone has access to food, healthcare, housing, and economic mobility,” the progressive “Fight For Our Oregon” coalition said in a statement to the Capital Chronicle. “We will continue to educate Oregonians on the real harm of tying our state’s future to a hostile Trump administration that puts tax breaks for wealthy corporations ahead of everyday people.”
In the meantime, political analysts also question whether the tax breaks Republicans want to preserve make a significant impact on enough Oregonians to serve as a drag on Democratic legislators or Kotek’s reelection. The auto loan tax exemption, for instance, has received less demand than expected amid confusion over its rules. About 1.1 million Americans have taken advantage of the provision as of early April.
And while the bonus depreciation deduction has long been a boon for agricultural businesses and farmers needing to purchase heavy machinery and equipment, the provision has also historically generated tens of billions of dollars in savings for large corporations like Google and Intel, according to the left-leaning D.C-based Institute on Taxation and Economic Policy.
“I’ve been in a lot of focus groups over the years. People bring up the cost of gasoline and frustrations of taxes, or gas taxes,” Horvick said. “I don’t think I’ve ever been in a focus group where people talk about bonus depreciation or interest on car loans.”
Kotek, on the other hand, has asserted that the disconnect proposal as passed by Democrats in Salem “could affect Oregon’s economic competitiveness” and have a “unique impact on small businesses and start-ups companies.”
In particular, she has raised concern with Oregon severing its connection with the bonus depreciation provision and another exemption allowing non-corporate investors to exempt their small business stock sales from capital gains tax. She plans to work with her economic development advisers to introduce legislation for next year’s legislative session.
“These federal tax changes are in large part paid for by draconian cuts to Medicaid and other federal programs that lower-and middle-income Oregonians should have access to,” she wrote in a letter signing the disconnect legislation. “Having Oregon magnify that damage by automatically copying every new tax break in H.R. 1 is neither fair nor responsible.”
The “No Tax Clawback” ballot campaign has until June 4 to collect the 78,116 signatures needed to qualify for the November ballot.
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