This story was produced by the Oregon Journalism Project, a nonprofit newsroom covering the state.

One of the most contentious issues in the current legislative session revolves around an issue called “bonus depreciation.”

It’s a tax break that business groups hope could spur purchases of everything from tractors and commercial fishing boats to high-tech machinery and new housing. To progressive groups, it’s a giveaway to businesses that were going to make such investments anyway, at the expense of schools and social services.

The issue is also timely, as Gov. Tina Kotek builds her reelection campaign around a new focus on Oregon’s business climate.

Last week, Kotek’s Prosperity Council held its second meeting, this one in Redmond, where the panel toured BASX Solutions, which makes cooling systems for data centers, along with HVAC systems for everyday structures.

Kotek cited BASX as the kind of family-wage employer the state must nurture and seek to attract. “Oregon’s prosperity is not a given. We have to act with intention to be more competitive,” the governor said. “That’s exactly what the Prosperity Council has been charged to do, and today’s meeting helps us to understand the perspectives of Central Oregon.”

But just a week removed from the Redmond gathering, one member of Kotek’s Prosperity Council, real estate investor Jordan Schnitzer, expressed frustration with the governor’s actions, which he says are contradictory to the charge Kotek gave the panel: “to recommend actionable steps to accelerate Oregon’s economy, create good paying jobs, and recruit and grow Oregon’s businesses.”

Schnitzer, whose firm owns or operates 31 million square feet of real estate across 200 properties in six Western states, says Kotek’s position on Senate Bill 1507A, which would disconnect Oregon from certain tax cuts in President Donald Trump’s so-called One Big Beautiful Bill Act, is inconsistent with her prosperity message.

States have the option to follow federal tax cuts in Trump’s bill or to “disconnect” from some or all of the changes. Oregon typically applies changes in the federal tax code to state taxes, but this year has decided not to in the form of SB 1507A.

Legislative number-crunchers calculated that remaining fully connected to the Trump tax cuts would cost Oregon nearly $900 million in tax revenue over the next two years. That estimate came at a time when looming cuts to Medicaid and food stamps already threatened the state’s 2025–27 budget.

In legislative testimony, advocates, such as the Oregon Education Association and the Oregon Center for Public Policy, argued that the state should fully disconnect from the Trump tax cuts because Oregon schools and social service programs need the money. Business groups, such as Oregon Business & Industry and the Oregon Farm Bureau, argued that bonus depreciation provided a valuable incentive for their members to make new investments and create jobs in Oregon.

Democratic lawmakers are taking a piecemeal approach with SB 1507A. The bill retains Trump’s tax cuts on tips and overtime income but disconnects from bonus depreciation. That change eliminates a tax cut for businesses worth $267 million over a two-year period.

Typically, businesses depreciate new capital investments—such as equipment, buildings and machinery—over a period of years. That allows them to deduct a portion of their capital investment from current income, reducing their taxes. Bonus depreciation (a tool previous presidential administrations have also used to stimulate the economy) allows the entire investment to be written off in the first year. Democrats say that creates an unacceptable hit to tax revenues; Republicans and businesses say it would help Oregon’s economy, which has stagnated.

Democrats hold supermajorities in both legislative chambers, of course, and the bill passed the Senate and then the House on Feb. 25, on party line votes. As the bill moved, some in the business community expressed their concerns directly to Kotek, who announced her support for the bill earlier this week.

In a widely circulated Feb. 24 letter, Portland developer Bob Ball, part of a group Kotek and Portland Mayor Keith Wilson convened last year to brainstorm ideas to increase housing supply, cautioned Kotek that killing bonus depreciation is “putting another nail in our coffin.”

“I encourage you to exempt multifamily properties from SB 1507A,” Ball wrote. “I don’t think Oregon should decouple for any of the depreciation categories if we want to stay competitive in every industry, but the one industry I can say definitively will be hurt is housing production.”

Schnitzer told OJP he sent a similar message to Kotek on Feb. 25 via text.

“The only way to get out of the economic doom loop we are facing is by people coming and opening more businesses that pay good wages and paying their fair share of taxes,” Schnitzer says he told Kotek. “This bill creates a disincentive for businesses to invest in this wonderful state. Why would we do that?”

Schnitzer says other members of the Prosperity Council—he declined to say which ones—are also not happy with the governor’s position on bonus depreciation. Kotek did not immediately respond to his text message.

A Kotek spokesman says the governor believes the Legislature took necessary steps to preserve some of the tax revenue Trump’s tax bill would otherwise have cut, without putting Oregon at a competitive disadvantage.

“In disconnecting Oregon’s state taxes from the bonus depreciation and deciding to allow businesses to depreciate their investments over the life of the investment rather than all at once up front, Oregon would align with more than 20 other states including Idaho,” says Kevin Glenn.

SB 1507A now heads to Kotek’s desk for her signature.