Two key Oregon Democrats on Monday unveiled a plan to increase state revenue by dropping several state tax breaks copied from President Donald Trump’s sprawling tax-and-spending law passed last year.

The plan, put forward by Sen. Anthony Broadman of Bend and Rep. Nancy Nathanson of Eugene, would bring in $342 million in the current biennium by disconnecting Oregon from three tax breaks in Trump’s signature One Big Beautiful Bill Act. The proposal comes as lawmakers prepare to face significant declines in state tax revenue in the coming years, along with higher administrative costs, due to policies in the federal law.

The three tax breaks Nathanson and Broadman want to cancel, out of more than 100 in the federal law, apply to interest on some car loans, profits from certain stock sales and upfront write-offs for business machinery and equipment, known as bonus depreciation.

Because Oregon generally duplicates federal tax law, including by creating state versions of federal tax breaks, the tax cuts contained in Trump’s tax law are expected to cost Oregon nearly $900 million in tax revenue during the current biennium, according to state estimates. Nathanson and Broadman’s proposal would preserve a fraction of that amount in state tax revenue this biennium, because it would leave in place most state tax breaks copied from the federal law.

To offset some of the potential harm to businesses and Oregonians who are struggling financially, Broadman and Nathanson have also proposed funding $25 million in tax breaks for businesses that grow jobs in Oregon and $26 million to substantially increase the size of the state’s earned income tax credit for low-income workers.

In total, the bill would net the state an estimated $291 million in the current biennium, Nathanson and Broadman said.

The additional tax revenue the state would collect by cancelling the three new state tax breaks would be used “to protect programs and services for Oregonians and to directly help Oregonians, whether it’s individuals or businesses creating jobs,” Nathanson said Monday morning during a press briefing.

Nathanson chairs the House Revenue Committee while Broadman chairs its Senate counterpart.

For months, lawmakers have been preparing to address an expected budget deficit by developing plans to decouple from some federal tax provisions, trim agency budgets and potentially dip into the state’s reserves. The state’s projected two-year budget deficit shrank from $370 million to $63 million in the November revenue forecast. Lawmakers will receive an updated forecast on Wednesday.

Broadman and Nathanson’s bill could generate more revenue for the state in the next five years, in which the state is expected to lose billions of dollars in federal funding, mostly for food assistance programs and Medicaid. The two lawmakers said their proposal would bring in $308 million in the two-year budget period that begins in summer 2027 and $123 million in the following biennium, not including costs of the two expanded tax credits. The state’s current two-year general fund budget is $37.3 billion.

Broadman and Nathanson said they crafted the plan with the intention of closing tax loopholes for businesses that don’t directly benefit Oregonians. Disconnecting from the bonus depreciation provision alone would bring the state $267 million in the current biennium, the Democrats said — far more than disconnecting from the other two tax breaks might.

They pointed out that businesses will still be eligible for the federal bonus depreciation tax benefit and a similar federal provision that allows businesses to deduct a certain amount of the upfront value of purchased assets.

Broadman and Nathanson said they plan to keep Oregon’s version of the research and experimental expenses tax break in Trump’s bill, one of the largest hits to the state’s revenue according to economists, to ensure that Oregon can remain attractive to businesses interested in operating in the state.

Ending the capital gains tax cut for investors in qualified small business stocks would yield an estimated $39 million in income tax revenue for the state this biennium, Nathanson and Broadman said. Killing the state auto loan interest deduction would yield $36 million, they said.

Both Broadman and Nathanson said they are optimistic that the plan could even receive support from Republicans and business groups, who have generally been opposed to Oregon disconnecting from the federal tax law because of the extra administrative burden and because it could impose higher taxes on businesses.

“The business community sees what we are facing with the federal government essentially taking a billion dollars out of the budget,” Broadman said. “I’m optimistic that they’re going to understand that this is necessary to continue to invest in health care, education and public safety.”

However, the group Oregon Business & Industry vowed on Monday afternoon to “vigorously oppose” Democrats’ plan, introduced to the Legislature as Senate Bill 1507.

“We’ve been asking leaders to ‘do no more harm,’ and this would certainly dig our economic hole deeper,” the group’s president and CEO Angela Wilhelms said in a statement. She said lawmakers in particular should not cancel the state’s new business tax break “that would help businesses — especially small to midsized manufacturers — invest more now in their companies and employees.”

Nathanson and Broadman noted that they plan to keep Oregon’s version of the new federal tax break on tips and overtime. Both those are considered politically popular, even though they affect relatively few households and will deliver mostly quite small financial windfalls.

About 213,000 Oregon households received a state earned income tax credit in 2023, the most recent year for which figures are available. That represents about 10% of households that filed state tax returns. The credits, which are refundable, averaged $222 that year. Broadman and Nathanson are proposing to increase the size of the credits, which deliver the biggest benefit to families earning $20,000 to $35,000 a year, by about 45%.