What’s being discussed with SB 1507?
If you’ve been following Oregon news lately, you’ve probably heard the phrase “tax disconnect”. The reason is, Oregon is facing a nearly $900M budget hole due to recent federal tax breaks passed by Congress, and lawmakers are scrambling to decide how—or whether—to respond.
At the center of that fight is Oregon SB 1507, a proposal to “disconnect” Oregon’s state tax code from three specific federal tax breaks that disproportionately benefit wealthy individuals and corporations. The goal? Preserve over $300M for state services like schools, health care, and food assistance.
On Monday 2/16, after a heated debate near party-line, SB 1507 passed the Oregon Senate and now heads to the House.
But what is a “tax disconnect” and how and why do states use it?
What Tax Disconnect Really Means
Tax disconnect sounds complicated, but it’s not. Here’s what it means, plainly.
Every American follows two sets of tax rules:
- Federal tax rules – from the U.S. government in Washington, D.C.
- State tax rules – from Oregon’s government in Salem
For a long time, Oregon has had a policy that makes things simpler:
Oregon’s state tax rules automatically copy many of the federal tax rules.
This copying is called “rolling conformity.”
What Changed?
In 2025, the federal government passed a big tax law called HR 1 (the “One Big Beautiful Bill”). It created new tax breaks that mostly benefit very wealthy people and large corporations.
Because of Oregon’s “copy the federal rules” policy, Oregon would automatically lose hundreds of millions of dollars in state tax revenue. That’s money we use for schools, health care, child care, and other services.
So What is the “Disconnect” Part?
“Tax disconnect” is when Oregon decides not to copy a specific federal tax break into our own state tax rules.
For example:
- If HR 1 says an investor, for instance, doesn’t have to pay federal taxes on certain stock profits,
- Oregon can say: “For Oregon state taxes, that person still has to pay.”
What Disconnect Does Not Mean
- It does not mean Oregon is breaking federal law.
- It does not mean wealthy people lose their federal tax break.
- It does not mean Oregon stops copying all federal tax rules.
It only means Oregon chooses not to copy certain parts of the federal tax code that would hurt our state budget or would undermine Oregon’s ability to fund essential services.
Why/When Does Oregon Disconnect?
- To protect our budget – So we don’t lose money needed for services.
- To make our own choices – Oregon can support working families instead of giving more breaks to those who already have the most.
The Bottom Line
“Tax disconnect” is Oregon’s choice not to follow specific federal tax breaks in our own state tax system. It’s a way to keep Oregon financially healthy and fair for everyone.
