Tax Bill: agency can hike taxes w/out legislature

Democrats' draft transportation tax hike bill empowers state agency to adjust fuel taxes and trucker fees based on studies, most recent of which state admits was flawed

Provision from Section 12 of Oregon Democrats’ draft transportation tax bill

Tomorrow, the newly reconstituted Joint Interim Committee on Transportation will hold its sole scheduled hearing on Democrats’ $5.7 billion tax and fee hike bill, which includes a provision requiring the Department of Administrative Services (DAS) to adjust fuel tax rates as it deems necessary to achieve an equitable allocation of highway maintenance costs between private vehicles, which pay the fuel tax, and commercial trucks, which pay a weight-mile fee. Current law requires the legislature to vote to raise or, theoretically, reduce the fuel tax rate.

The full legislature is expected to take up the bill in a special Labor Day weekend session, called by Governor Tina Kotek, that begins Friday. State Rep. Ed Diehl (R-Stayton) wrote in a post on X, formerly known as Twitter, the bill giving DAS, the head of which is unelected and appointed by the Governor, power to adjust tax rates constitutes “unelected bureaucrats adjusting your tax rates if the Legislature fails to act.”

Diehl’s right. Here’s how it would work.

The Oregon Constitution requires the cost of maintaining state highways be shared equitably between truckers and private vehicle drivers, based on the impact those classes of drivers have on highways. Current law requires DAS to conduct a study every two years to determine whether truckers and private vehicle drivers are paying their proportionate share of highway maintenance, the findings of which DAS reports to the legislature.

For a long time, the DAS studies have found that truckers pay more than their proportionate share of maintenance costs. This spring, a DAS consultant projected truckers would, under current tax rates, overpay their share of maintenance costs by 26%, while private vehicle drivers would underpay by 11%, according to The Oregonian. The Spring 2025 consultant report corrected errors in the previous DAS study, which had found a larger overpayment by truckers and underpayment by private vehicle drivers.

According to The Oregonian,

Officials said the errors occurred because the analysis included some projects that should not have been taken into consideration, such as federally funded transit projects that don’t qualify for state highway funding, and because they treated costs that will be paid over years, due to bonding, as if they would all be paid in a smaller time frame.

DAS provides the results of its studies to the legislature, which is supposed to adjust fuel tax and weight mile fees to achieve proportionate responsibility for maintenance costs. The legislature has not done that, in part because raising fuel taxes is politically challenging.

Fixing the highway maintenance funding disparity has long been a priority of Oregon truckers. The Democrats’ bill seeks to address the disparity in part by empowering DAS to do what the legislature has failed to do, which could include increases to fuel taxes without a vote by elected legislators.

The bill retains the DAS study requirement despite the state-acknowledged errors in its past studies, and directs DAS to adjust by agency rulemaking the tax and fee rates to achieve proportionality if the legislature fails to do it. If the bill had been law earlier this year, the faulty DAS study would have led the agency to increase fuel taxes by more than the corrected study deems appropriate. The bill requires that any adjustment of fuel tax rates or weight-mile fees be revenue neutral, meaning any agency increase in one rate would require a reduction in the other.

The Oregon Constitution, via a 1996 amendment intended to ensure broad statewide consensus for tax hikes, requires a vote of three-fifths of legislators to raise taxes. The bill would delegate the legislature’s supermajority tax hiking authority to DAS. Article IV, Section 1 of the Oregon Constitution provides, “The legislative power of the state, except for the initiative and referendum powers reserved to the people, is vested in the Legislative Assembly.” The legislature may be constitutionally prohibited from delegating its tax-hiking authority to DAS.

The proportionality provisions in the bill is central to the high-stakes politics heading into the special session. Kotek and Democratic legislative leaders included the language in the bill to win the support of the Oregon Truckers Association, which is often allied with Republicans.

Moderate and swing district Democrats, who continue to harbor unspecified concerns about the bill according to The Oregonian, probably want Republican votes for the bill to blunt the electoral blowback for raising taxes just over a year prior to the 2026 election. Kotek may believe she can deliver those GOP votes by addressing the funding disparity.

The committee hearing on the tax bill is scheduled for 3 pm tomorrow, Monday, with the full legislature scheduled to convene Friday.