Looking past knee-jerk reaction to tax measures

January 09, 2010 05:00 am

The ballots that arrive in voter mailboxes this weekend ask voters to take sides in an epic battle over the State of Oregon’s taxes and spending.

Past voter decisions forced this crisis. As voters, we have turned down sales tax proposals, given businesses a huge break on property taxes, decided to fund education with income taxes, agreed to incarcerate more felons, and chosen tax refunds over savings for a rainy day.

The short-sighted effect of all these statewide votes created  two figures that are trumpeted loudly in this election campaign. Oregon’s per capita tax burden is among the lowest in the nation, but our personal income tax load is among the highest. The third figure to consider: Oregon’s business taxes per capita are smack dab in the middle among the states.

That reliance on income taxes caught up to us when the rainy day arrived with the current recession. The 2009 Legislature faced a gap of more than $4 billion for the two-year budget cycle that started last July.

The partisan battle lines were quickly drawn: Democrats in the majority versus the Republican minority.

Half the gap was eliminated with budget cuts, some of which are through unpaid “furlough” days for government employees. Another quarter of the hole was plugged with federal aid aimed at economic recovery. What small state reserves that existed are covering just 6 percent. The last 20 percent would be raised by the two tax measures on the special ballot this month.

That created the economic battle line: public employee unions vs. business interests. It’s very clear in the campaign donations. Teachers and public employee unions top the list in the “yes” campaign. Business group donations against the measures are led by grocers, contractors, auto dealers, and a long list of business groups.

The knee-jerk battle lines are not surprising. They are characterized by them-and-us statements, and – unfortunately – they are not likely to go away. You can see them in the official “Voters’ Pamphlet” and even in the Oregon League of Women Voters non-partisan “Voters’ Guide,” which was inserted in today’s Pilot by the local league.

Then, in a single hour this week, we encountered very real examples of the issues involved. First, we watched a part-time school employee buy dinner for a student whose parents are both out of unemployment benefits, and then we talked to a successful business owner about the family’s holiday vacation to a warmer climate.

We find ourselves wanting a more thoughtful discussion than the campaigns are providing. Here’s our take, trying to ignore the knee-jerk reactions. We want to look carefully at the past, the present and the future of Oregon.

Our anti-tax history has created inequities in how we share the cost of government in Oregon. First, our income tax is not as based on “ability to pay” as most Oregonians might believe. A couple with a taxable income of just $15,200 pays the same tax rate as a couple with a taxable income of $1 million. Second, corporations have most of the rights, protections and services from government as individuals, but most corporations pay a flat minimum tax of just $10 per year.

It is fair to consider the predictions from business groups of job losses because of higher taxes, but they cannot be quantified. Frankly, looking at the actual dollar figures in non-partisan documents, these taxes appear reasonable and affordable for those who will pay them.

Looking at our present situation, not raising these additional funds will bring cuts that would balance the budget on those who can least afford it. For example, these measures extend the state tax break for those receiving unemployment benefits. Half of state spending is for education, so we can expect half of the cuts to come from classrooms from kindergarten through university. Another quarter of each dollar goes to human services, helping our most needy neighbors. Not only would the tax revenue be lost, but millions in matching federal funds would evaporate. The loss would be 5.5 percent in a spending cycle that will be close to one-third over.

Then we have two thoughts about the future. First, the disappointing partisan battle lines in Salem will not go away soon. There’s no reason to expect any better solutions from the Legislature either next month or next session. Second, the cost of education is our best investment in both our economic and political futures.

So, to close some tax inequities, to recognize Oregon’s current needs and political realities, and to invest in a better future, we recommend “Yes” votes on these two tax measures.