Oregon Gas Tax Hike Referendum Moved to May Primary, Sparking Political Fight

SALEM, Ore. — Oregon voters will now decide the fate of a controversial package of transportation tax and fee increases in the May 2026 primary, after state Democrats advanced legislation to move a voter referendum up from the November general election. The move has ignited a fierce political battle, with Republicans accusing the majority party of manipulating the election calendar to shield themselves from voter backlash over tax hikes amid rising fuel costs and inflation. The conflict centers on House Bill 3991, a measure passed by the Democratic-controlled legislature in a September 2025 special session. The bill was designed to generate new revenue for the state’s transportation budget by enacting several increases, including a six-cent hike to the state's gas tax, from 40 cents to 46 cents per gallon. It also includes a $139 increase to vehicle title fees and a doubling of the state transit payroll tax from 0.1% to 0.2%. Following the bill's passage, Republican lawmakers and conservative groups launched a successful petition drive, gathering over 250,000 signatures to force a veto referendum. The qualification of the referendum, now designated as Referendum 120, put the tax and fee increases on hold pending a statewide vote. According to petitions signed by voters, the referendum was certified by the Secretary of State for the November 3, 2026, general election ballot. However, in a February 5, 2026, announcement, Democrats revealed plans to move the vote to the May primary. Senate Republican Leader Bruce Starr condemned the action, stating, “Democrats couldn’t stop the referendum, so now they’re trying to rewrite the rules. It’s clear that Governor Kotek and supermajority Democrats don’t want to defend their unpopular gas tax and fee scheme alongside their own names on the same ballot, so now they’re trying to sneak it past voters in a low-turnout election.” For Oregon businesses, the political maneuvering around the referendum date creates significant operational uncertainty. Companies with vehicle fleets, from delivery services to construction firms, must now budget for two potential cost scenarios depending on the May vote. A sudden six-cent per gallon increase, coupled with higher vehicle registration and title fees, directly impacts operating margins. This kind of tax volatility makes long-term financial planning and capital allocation extremely difficult, especially for small and mid-sized businesses that are more sensitive to cash flow fluctuations. The debate is unfolding at a time of heightened economic anxiety for consumers. Soaring gas prices, which one source attributed to a conflict in Iran, have left many Oregonians frustrated. “It is a hell of a time to be raising gas taxes on people,” Portland resident Jeanine Holly told the Associated Press while filling her tank. Michael Burch, a 76-year-old retiree, noted he used to spend $70 for three-quarters of a tank in his pickup truck but now pays $80 for just over half a tank. The proposed increase would make Oregon’s gas tax tied for the eighth highest in the nation, according to the U.S. Energy Information Administration. Chris Koski, a political science professor at Reed College in Portland, described the political environment as uniquely challenging for such a measure. “It’s difficult to imagine a worse situation for a gas tax increase than right now in American politics,” Koski said, noting the focus on affordability that is dominating the national conversation ahead of the midterm elections. Adding another twist to the saga, Governor Tina Kotek, who had signed HB 3991 into law in November 2025, announced in January 2026 that she would ask the legislature to repeal the bill entirely. Kotek cited the uncertainty caused by the referendum, stating that leaving the law in place would force the Oregon Department of Transportation (ODOT) to incur implementation costs without new resources. Republicans, however, dismissed the governor's move as a political calculation. “Governor Kotek is not repealing this bill because she suddenly discovered it was bad policy,” Senator Starr said. “She is doing it because Oregonians stood up, made their voices heard, and forced her to make a political decision to save face.” The proposed doubling of the transit payroll tax, while seemingly small at 0.1%, adds another layer of complexity and cost for employers. In our experience, these incremental tax hikes often have a cascading effect on business finances, complicating payroll processing and tightening budgets that could otherwise be used for hiring or investment. This situation highlights the critical need for stable and predictable tax policy. Navigating these frequent state-level changes is a core challenge we address for our clients. For businesses looking to ensure they remain compliant while managing costs, the team at C&S Finance Group LLC at csfinancegroup.com provides expert tax preparation and compliance services. The tax fight has become a central issue in the state's gubernatorial race. Republican candidate Ed Diehl has actively campaigned against the tax increases, framing them as an example of fiscal irresponsibility. “Before demanding more from Oregon families and businesses, state government must first prove that it can responsibly manage the billions it already collects, reform ODOT, prioritize road maintenance, and eliminate waste,” Diehl stated, advocating for tax cuts and audits of state agencies. As the May primary approaches, the outcome of Referendum 120 remains uncertain. Its passage or failure will not only determine the immediate future of Oregon’s transportation funding and the costs for its businesses and residents but will also be closely watched as an indicator of voter mood on economic issues heading into the critical November midterm elections.