The Legislature has passed Oregon Senate Bill 1507 forcing taxpayers to add back and pay state income tax on federal deductions and exclusions — including bonus depreciation, qualified small business stock gains, and personal auto loan interest — that were previously allowed under federal law. Today the house passed the bill and it’s on its way to the Governor’s desk.
And if the Governor signs it?
According to State Representative and gubernatorial candidate Ed Diehl, the referendum clock starts ticking immediately.
This isn’t idle talk. It’s already in writing.
From his February 25 press release:
“This bill is not technical reform; it is a massive tax hike that removes tools families and employers rely on to afford vehicles, grow businesses, and create jobs.”
And more pointedly:
“To ensure voters have the final say, Diehl will pursue a statewide referral of the bill’s tax-increasing sections…”
He’s not vague about it. If SB 1507 is signed, he intends to put it on the ballot.
What’s Actually in SB 1507
The bill updates Oregon’s connection date to federal tax law and then deliberately disconnects from several federal provisions . Specifically, it:
- Adds back personal auto loan interest deducted federally (Section 2).
- Adds back excluded gains from qualified small business stock (Section 1202).
- Adds back bonus depreciation differences under Section 168(k).
- Applies beginning January 1, 2026.
Read that again, we are two months into 2026, and in this bill Oregon claws back federal deductions and exclusions many taxpayers have already relied upon.
As Diehl put it:
“People made financial decisions based on current law. Changing the deal midstream is not stability — it is moving the goalposts.”
Now Democrats don’t just want to raise taxes in the future, they want to raise them in the past. Has this been done before? Can we pass laws to force you to pay a tax for something you purchased before it was taxed?
The Affordability Party — Or the Add-Back Party?
Oregon already ranks among the highest income-tax states in the country. Housing remains unaffordable. Business investment lags competitors. Outmigration is no longer a conspiracy theory, it’s census data and U-Haul has the receipts.
And yet, during a short session that was supposed to be about modest fixes, lawmakers prioritized decoupling from federal tax relief.
You can’t campaign on “affordability” while quietly expanding state tax liability through technical adjustments and backdating the contract.
The Federal Factor
Under federal law in recent years, taxpayers could:
- Deduct certain vehicle loan interest.
- Exclude gains on qualified small business stock.
- Accelerate depreciation through bonus provisions.
Whether you supported those reforms or not, they became part of the economic landscape. Businesses structured investments around them. Families planned purchases around them.
Now Oregon says: “We’ll tax that portion anyway.”
That’s not only complicating the tax code, its divergence from the norms and preciddnce Oregonians have been accostomed to.
And Here’s Where It Gets Interesting
Diehl isn’t just issuing press statements. He has already positioned himself as co-chief petitioner of a statewide referendum on transportation taxes and fees. The broader “No Tax” energy circulating right now isn’t hypothetical.
Grassroots frustration over tax increases is real. The signature-gathering muscle is being built. Volunteers are engaged. Networks are active.
If SB 1507 becomes law, it won’t quietly settle into statute books. It’s heading toward the ballot.
Diehl closed his release with this:
“Oregonians want accountability, not more taxes or complexity… Referring these tax increases lets the people decide.”
There’s the crux of it.
Salem May Be Writing Its Own Ballot
Here’s the political irony.
Democratic leadership frames itself as the champion of working families and affordability. Yet this bill increases state tax liability for investors, vehicle buyers, and businesses already operating in one of the most expensive states in the West.
If lawmakers keep stacking revenue mechanisms while affordability worsens, they shouldn’t be surprised when voters decide to weigh in directly.
And if SB 1507 joins transportation taxes and other fiscal moves on the November ballot, Salem may discover that “technical tax conformity adjustments” don’t sound quite so charming when explained in plain English.
November has a funny way of clarifying things.
That’s my viewpiont.
About the Author
Discover more from Right Now Oregon
Subscribe to get the latest posts sent to your email.
