Why not an Oregon sales tax?

By Terry Ocana of Keizer, Oregon. Terry describes himself as "an average family man without a political agenda hoping for a stable future for my kids."

I have asked the question around social circles and the most common answer is usually a quick, "It'll never pass a vote." I ask very sincerely, why not?

Oregon has one of the highest income tax rates in the nation, yet we still have budget problems. If we would implement a small sales tax under the premise that it follows the same general guidelines as the Oregon Trail food stamp program, I would think we could generate quite a bit of revenue for the state.

A sales tax only taxes non-essential, non grocery items. Essential groceries and hygiene items could be considered exempt, and therefore, the people that can't afford a sales tax wouldn't be affected.

I am asking the simple question, other than political suicide for any legislator, is there a valid economic reason to not implement a sales tax?

Comments

  • (Show?)

    Sales tax is regressive. It requires the poor to pay a larger portion of their income than people who have plenty and are able to pay.

    Income tax is progressive. It requires people who are able to pay to pay a larger percentage of their income than the poor.

    Your base question, "why aren't taxes higher", is a good one however. But let me suggest that instead of finding ways to make the poor pay more from what they don't have, we lift the limit on State income tax, and make the rich pay more.

    And I say this as someone who would definitely be paying more under such a change.

  • Terry O (unverified)
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    Steve, I read the same or similar response to Jeff Alworth's post about sales tax about a year ago. However, if the sales tax were to exempt essential items that the "poor" need - then the only items that would apply are those that the "rich" would be buying anyway. And, admittedly maybe too simplistic, I also think that the higher priced the item, the more tax that gets paid, and those higher priced items are purchased by the rich.

    Isn't it about spending power really? The more spending power you have the more you buy, the more you're taxed. The less spending power, the less you buy that's not essential, therefore the less you're taxed.

    Am I oversimplifying this?

  • (Show?)

    Steve-

    A progressive income tax is progressive. Like the federal income tax it taxes people at a higher rate the more they earn. What we have in Oregon is a regressive income tax (or at least flat) that taxes everyone at 9 percent of virtually every dollar that they earn.

    I am NOT arguing for a sales tax in Oregon, but we do not have a progressive income tax.

  • (Show?)

    Why not?

    Because a sales tax is massively regressive. If you alter what gets taxed to make it not as regressive, you loose the broad stable revenue stream which is why a sales tax is ever considered in the first place.

  • DSS (unverified)
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    Terry, you're spot-on. This can be (and actually is) politically viable if we marry this concept to decreases in property and income taxes. There are good ways to do this that create more revenue... and most importantly, more STABLE revenue.

    Additionally, with the exemptions that you're thinking about (plus the decreases in the income tax), studies have shown that poor people will indeed pay less in taxes.

    But be prepared for plenty of flak about regressivity. See, the problem that some people have with that plan is that the non-tax-cheating rich ALSO get a tax break. And there's a lot of anger about "Well, how come the RICH get MORE of a tax break?"

    But you've got it right in my opinion.

  • (Show?)

    Well said Paddy. I concur.

    Steve laid out the problem with sales taxes, and you correctly point to the problem with our state income tax. I also suggest that while the property taxes were being raised in ways that were getting way out of hand, that moderate, even-keeled increases in property taxes is another thing that should be on the table (though may be too politically toxic to tough for elected officials).

    The other problem is enforcement. We need better and more robust tax enforcement (while it is Federal tax evasion) the recent spat of Obama nominees being found to be delinquent in paying all their taxes only underscore the abysmal compliance and enforcement regimes we have in place.

  • (Show?)

    DSS

    Except when you introduce exceptions in what is covered by a sales tax in order to not have it be regressive, you lose all the revenue benefits you look for in a sales tax to begin with.

    It no longer is a large and stable revenue stream when you are only dinging non-essentials which fluctuate with the economy. Luxury item purchases go down when the economy tanks.

    Furthermore, it is a hard sell that a very wealthy person with high-income doesn't get taxed accordingly when said person can afford to not spend the largesse they have because their basics are covered, while the low wage-earner gets dinged on the money he spends because he doesn't have that cushion to be able to choose not to spend.

  • (Show?)

    I am asking the simple question, other than political suicide for any legislator, is there a valid economic reason to not implement a sales tax?

    No, it's strictly political, anyone I've ever spoken to with knowledge of the state budget acknowledges we need a sales tax. During downturns (like this one), the state's tax revenue takes a huge hit when incomes and property values drop. It's basic economics: you spend your way out of a recession. However, nobody wants to pay the tax, Republican legislators will get hit from the right, and Democratic legislators will be hit from the left by this charge:

    Sales tax is regressive.

    First of all, I think it's the wrong approach to evaluate individual taxes (sales, income, property, etc) and whether or not they are progressive. You need to look at whether or not the tax structure in its entirety is progressive. If you eliminate every tax that is in any way regressive, you are left with an unsteady revenue stream, like Oregon's. That said, there are ways to make the sales tax less regressive. Exempt food, clothing, medicine, and other basic necessities, and target it more towards luxury items. Then, cut the income tax rate for lower brackets to offset the sales tax increase. I think that's a pretty progressive way to implement it. Then, on the political front, call it a consumption tax, and legislate that retailers must include the tax on the list price for goods. I think that would go a long way towards dissipating some of the public opposition to the tax.

  • Terry O (unverified)
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    lestatdelc - Pardon me for not completely understanding your regressive / progressive comparison. However, I think Paddy brings up an excellent point that I had not considered, nor did you answer. Our income tax is not progressive. We're all basically taxed at 9%.

    So let's remove those people that are below the income tax level and consider the rest of us. Those that make $40,000 per year have only so much to buy non essential items with, such as cars, furniture, clothing, etc. Let's call that amount $5,000 per year for "extra" items. For simple math purposes, if we had a 1% sales tax, that person or family would only spend an extra $50 per year. For someone that makes $150,000 per year, raise their "extra" spending to $50,000. That person now spends an extra $500 per year on sales tax.

    Agreed that's not progressive by definition, however, how is that damaging?

  • Ms Mel Harmon (unverified)
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    I think you'd find more support for a sales tax of any kind if we first got rid of the ridiculously low corporate minimum tax in this state. It's hard to convince people to pay 3% or whatever amount more on even non-necessities if they know the corporation down the street pays only $10 per year.

    Also, many of us have had bad experiences with "the sales tax that never stopped growing" in other states. Once a state gets a taste for a sales tax, they go up on a regular basis and soon you're paying 9%+ sales tax. It also more easily opens the door for Counties and Cities to enact their own sales taxes on top of the state sales tax.

  • Anitra Kitts (unverified)
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    I served on the Oregon House of Representatives Revenue Committee from the '95 to the '99 session. I introduced an initiative that would dedicate a sales tax for school funding. (it was introduced late and held up on title challenges. Oh well) I am a native born Oregonian and this is what I have done.

    A joke we heard often in the halls of the State Capital: In Oregon, you are born and the doctor slaps your butt and immediately whispers in you ear: No Sales Tax. Its like the no self-serve in the gas station. Its in part an Oregon thing. Recycle your glass bottles and never ever vote for a sales tax.

    Its also, I think, comes with the territory of being about the third most popular retirement destination (what I was told in the early '90s) behind Florida & Arizona. Folks on a fixed income don't vote for sales taxes. Its one of the reasons they came here.

    It is, even after you exempt things like drugs, food, clothing, a regressive tax. Joe Poor and Mary Rich go to the store and buy a $10 widget. The sales tax is 10% - $1. That $1 is also 1% of the $100 in Joe Poor's wallet and 0.1% of the $1000 in Mary Rich's wallet. Joe is paying a higher percentage of the money available to him then Mary is in the tax - thus the regressivity of the tax. (also Joe is paying a higher % of the money available to him on the item itself but we don't get into fights over that too much)

    However - regressive as a sales tax may be - it is 1/3 of a serious, revenue generating tax system. We started out with just a Property Tax way way back in the day. Under normal circumstances, the property tax is a stable, slow growth indicator of net worth. Income tax was added (and removed and added again several times) early in the 1900's. It reacts more quickly to turns in the economy, along with the sales tax.

    Oregon chose to limit its property tax base and rate of growth which traditionally had been used for city, county, regional and school government. Limiting the property tax threw the school funding into the general fund - which at this point in time is pretty much solely funded on income tax - which we can see is a rather volatile form of revenue.

    The last time a sales tax vote (also dedicated to schools!) went to the ballot it was 1993 and it was defeated 721,930 to 240,991. It may have been too early - the property tax limitation had just been passed and its effects wasn't yet obvious to most people. But It was the 7th or 9th such effort in the previous century and that vote was considered to be the latest nail in the coffin.

    I personally think Oregonians would do well to reconsider some of the limitations we've placed on the property tax. Not only did we lose local control over what services we wanted to provide or not provide in our individual communities, we also are shifting the burden from one house/business to another depending on when homes are bought and sold. It is well on its way to being a deeply regressive tax, IMHO.

    I also think that, (and my birth certificate not withstanding), yes its time to think about that third leg of a healthy, minimalist burden tax system is a small, carefully limited sales tax.

    For what its worth. I will always wish my daughters and their peers could have had the same kind of public education I was able to enjoy growing up in the 60's and 70's.

  • (Show?)

    Terry O,

    When you exempt "essentials" including cars and furniture, and add the cost to the Department of Revenue to collect and enforce such a program, are we generating any real money? Chuck Sheketoff (you know a lot more about this stuff than I do), you around?

  • (Show?)

    I am asking the simple question, other than political suicide for any legislator, is there a valid economic reason to not implement a sales tax?

    No.

    This provoked a raging debate at the Oregon Econ Blog for several weeks last year. The blogger, OSU economist Patrick Emerson concluded this way:

    I would support it only if there were adequate exemptions and transfers that could assure we do not add regressively into the tax system. I would also like to see some type of permanent rainy day fund or the allowing of deficit spending. I think we could stand to gain much as a state in terms of investment and job creation from the lowering of the income tax and that boom and bust cycles in state spending are very inefficient. Any exportability we get from a sales tax will be countered by the loss in exportability from the lower income tax, and I don’t expect much in terms of volatility reduction except perhaps in extended downturns. I do think that, all else equal, diversification of revenue streams is a decent goal, but, more importantly, I think we should avoid being an outlier in any one tax dimension in the US.

    I await Darrel Plant's rebuttal with anticipation.

  • Terry O (unverified)
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    Paddy I didn't mean to exclude cars and furniture. I consider those extras.

    I even went so far in my mind to allow the first $5,000 of a car purchase to go exempt. Or allow an income tax credit for anyone under $40,000 for the sales tax amount of a car purchase.

    I'm really undereducated compared to some of you out here. My intent was to really educate myself and understand any details.

  • Brian Collins (unverified)
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    Good discussion. I think that exemptions are a dicey area - we exempt clothes becasue they are essential, but what about designer outfits? And cars are an essential for many low income people to get to work, but if we exempt those is it fair that someone can by an expensive Mercedes tax free? Ultimately, in states that have sales taxes regardless of exemptions, the tax system is more regressive because lower income people spend a larger percentage of their money whereas higher income folks are able to save.

    One person stated that the sales tax would be more stable. This is not necessarily true. In the 2002 recession it was, but in the current recession sales tax dependent states are getting hammered because consumer spending is way down (see California).

    The legislature's task force on revenue restructuring acknowledged that the only stable tax is the property tax, but that is very unpopular. They recommended reforming the kicker by diverting some of the money into a rainy day fund during expansions that would pay out during recessions, smoothing out Oregon's revenue substantially. Then tax rates could be adjusted to provide whatever is deemed to be the appropriate amount of revenue. Check out their final report at http://www.leg.state.or.us/comm/lro/task_force_exhibits.htm

  • (Show?)

    Terry O,

    OK, but the cost of running a sales tax program is not small. Again I need Chuck or someone a lot smarter than me to help out here, but I seem to remember hearing somewhere that a 2 percent sales tax breaks even--meaning no net revenue to the state.

  • (Show?)

    Still smarting from that, eh, Jeff?

    I thought I did all the rebutting I needed to last year. Patrick's arguments were based on economic theory models and not on actual figures. As one of his own comments at the time pointed out, he hadn't even been aware that the tax system in Washington state was as lopsided toward sales taxes as Oregon's is to income taxes until I pointed it out. I used actual figures and reports from tax agencies to make my case.

    The idea that a "third leg" makes the system more stable is pretty much undercut by the example of California, which has property, sales, and income taxes, yet still ends up in financial trouble when there's an economic downturn.

    And as I pointed out, there's evidence that sales taxes -- contra conventional wisdom and, yes, economic theory models -- are actually less stable as a source of revenue than income taxes, and that their introduction would make the revenue stream even less predictable than it currently is.

    Washington state's own department of revenue released a study I referenced last year that indicated that even with exemptions for basics, people on the lowest end of the income scale paid several times more in sales taxes (as a percentage of their income) than people making more than $100,000/year.

    But hey, you've heard it all before. I'm just still waiting for all those examples of a "progressive" sales tax that you guys keep claiming are out there.

    Somewhere.

  • joel dan walls (unverified)
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    Any reason to believe that an ballot initiative to institute a sales tax would pass this time, when it hasn't passed on the last nine attempts?

    No, I didn't think so, either.

  • YouKnowWho (unverified)
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    Why not a sales tax? Okay, it might work, if what you're trying to do is make income and expense balance. How about instead, "why not cut spending"? I may have missed it, but did anyone on this series of comments bring this up even as a possibility, or even a partial solution to the budget shortfall? Is there nothing we can eliminate, or delay until another, better economic climate?

    Here's another idea: reform the property tax system... I could never figure out why my house, valued about $400K (inside PDX limits, mind you) is taxed at close to $5K per year while I can point (due to research on the matter) to houses in the Laurelhurst area which sold for close to $700K in just the past few months and have property taxes for the current year less than $4K. Does that seem like an equitable tax system? Should the folks in Laurelhurst pony up their share, or am I overtaxed?

  • Patrick Emerson (unverified)
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    Recently on the Oregon Economics Blog, Fred Thompson urges us to think in terms of spending stability rather than revenue stability. A sales tax will not do much in terms of revenue stability, I think we need to focus on a permanent rainy day fund system as a first priority.

  • (Show?)
    In the 2002 recession it was, but in the current recession sales tax dependent states are getting hammered because consumer spending is way down (see California).

    Was the sales tax more stable? Wasn't there something ugly going on with California's finances around 2002-2003 that led to someone with a lot of consonants in their last name replacing a guy who was recalled?

    As to the volatility of the personal income tax (PIT), you do sort of have to enjoy this 2002 quote from the California Legislative Analysts Office:

    Factors Making the PIT More Volatile. At the same time that the PIT was gaining dominance, the tax itself was becoming more volatile. In general, this greater volatility can be linked to the increased concentration of income in the hands of high-income taxpayers in California who themselves have large amounts of volatile forms of income—such as stock options, capital gains, and business earnings. ... Why Do High Incomes Exhibit High Volatility? In general, the greater income volatility associated with high-income returns is related to this group's greater reliance on nonwage sources of income. Many components of nonwage income are inherently highly volatile, such as business profits and capital gains. In addition, taxpayers often have more discretion over the timing and amount of such income that they report in a given year. For example, individuals can choose when to exercise stock options and when to realize their capital gains from asset sales.

    Damn socialists! Can't they see that the final solution to the volatility problem is a regressive sales tax?

  • joel dan walls (unverified)
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    Good lord, the property-tax inequity is all about that damn Sizemore measure that We The People passed in the 90s. No mystery here.

  • (Show?)
    OK, but the cost of running a sales tax program is not small.

    As a matter of fact, Paddy, one of the more recent sales tax proposals (the one State Treasurer Ben Westlund was behind a couple of years back) included a "Retailer Compensation Rate @ 1.5% of Gross Collections." The tax was expected to bring in $3 billion a year (offset, of course by cuts in property taxes and capital gains taxes), so that penciled in at $45 million to retailers just to collect the sales taxes.

    That was approximately half the annual allocation to the Oregon Department of Revenue in the 2007-09 budget.

  • (Show?)

    The Pew Center for the States out of Harvard's Kennedy School of Government ranked Oregon 43rd out of 50 states in money management in 2007. Following that report and many other factors the Governor appointed a Task Force on Revenue Restructuring, HB 2530 to examine Oregon's tax structure from bottom to top. Oregon now faces a budget hole as big as $750 million. Back in 2003 nearly 100 school districts had to shorten school days and we became the laughing stock of the country thanks to being highlighted in Doonsbury cartoons. Oregon needs structural tax reforms that would reduce the uncertainity and volatility caused by the current tax system.

    So what happened with the findings of the Task Force on Revenue Restructuring? Where are the recommendations?

  • DSS (unverified)
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    "Any reason to believe that an ballot initiative to institute a sales tax would pass this time, when it hasn't passed on the last nine attempts?"

    Only because if that were a valid argument, Oregon would not have eventually passed women's sufferage.

    Not to mention that it's always been an addition of a sales tax without any accompanying tax cuts.

    (FYI, it's prudent to await a response before saying "I didn't think so")

  • davidg (unverified)
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    Oregon has one of the highest income tax rates in the nation, yet we still have budget problems.

    Terry, in case you hadn't noticed, states with sales taxes are having budget problems too. As Brian points out, California is probably in the worst shape of all the states. New York and New Jersey are competing for second worst. Their sales taxes don't prevent that.

    Sales taxes are not a stable source of funding either. Wherever sales taxes are imposed, automobile sales are the single largest contributor to sales tax revenues. As car sales tank, as they are doing now, sales tax revenue tanks as well. So tying sales tax revenue to school funding, or anything else, will not produce stable funding for the targeted spending.

    The false belief is that adding a sales tax in Oregon now would produce windfall revenues which would make Oregon perpetually solvent. The experience in other states is to the contrary. Any new revenue produced will be committed to new spending as soon as the revenue comes in. When the next general economic downturn occurs, both the old and new spending programs will suffer.

    There is an old saying about learning to live with what you got. Sales tax advocates refuse to learn.

  • YouKnowWho (unverified)
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    Here's another thought, and feel encouraged to correct me if I'm wrong about the main premise for this idea, which is that income reductions for tax purposes are 100% for contributions to arts organizations just as they are "charitable" organizations. So: does this seem right? Before you jump on me, be aware I moved to Sirius radio only to have EVEN MORE choices for listening to classical music... but as much as I love the arts, and feel they bring enrichment to our lives, I can't look anyone in the eye and tell them Bach brings as much value to the world as putting bread into the mouth of a starving child, or funding a shelter for battered women... do we really want to value a contribution to the symphony the same as a contribution to Loaves and Fishes? And what if we eliminated, or even "halved" the value of contributions to "non charitable" non-profits insofar as tax deductions go... would their patrons abandon them? No - likely they'd pay the higher ticket prices which would result. And maybe, to keep their taxes down, they'd switch thier contribution to a "true" charitable organization... which would help the common good...

  • mp97303 (unverified)
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    The state is generating all the revenue it needs, if someone in Salem would just bother collecting it:

    Study says Oregonians fail to pay 18.5 percent of taxes every year

    SALEM — Nearly $1.3 billion in taxes aren't paid each year in Oregon, according to a study by state officials.

    Read the article here

    Aren't we $800M short? $1.3B NOT collected. Anyone see where I am going here?

  • (Show?)
    Not to mention that it's always been an addition of a sales tax without any accompanying tax cuts.

    What about the 1990 advisory measures that asked voters what they thought about adding a sales tax and reducing or eliminating school property taxes (Measures 5D and 5E)? What were they, chopped liver? The reduction lost 35/65. The elimination did slightly better: 37/63.

    It's prudent not to assume that nobody's ever thought of that idea before: pereant qui ante nos nostra dixerunt.

  • Hartlimes (unverified)
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    Terry,

    You're new in town, right?

  • (Show?)
    The Pew Center for the States out of Harvard's Kennedy School of Government ranked Oregon 43rd out of 50 states in money management in 2007.

    I think it was, oh, Fred Thompson over at the Oregon Economic Blog who wrote about that study:

    What don’t they like about us? We don’t have a sales tax; our ‘rainy-day’ fund is insufficient; and we have the kicker. All true; but adopting a sales tax and eliminating the kicker would still leave us with a revenue volatility problem, which is the main concern driving the Pew Center’s assessment...

    If Pew's assumption is that a sales tax is necessary for a good ranking, then the lack of a sales tax will doubtless push Oregon down the ladder. But that ranking is an arbitrary measure, which is only as good as the assumptions underlying the evaluation model.

  • (Show?)

    Oh, and:

    So what happened with the findings of the Task Force on Revenue Restructuring? Where are the recommendations?

    Here.

  • (Show?)

    Poor people do not end up paying less taxes under sales tax - they pay more. Even when coupled with income and property tax breaks, they pay more. Why? Because they already pay a low amount in income taxes and are more likely to be a renter (and therefore they don't directly pay a property tax).

    Everyone likes to bring up Westlund's plan. A few years back when we were in heavy discussions on this, I showed that tax breaks only happened for those above a certain income. The upper middle class saw the biggest % breaks in their taxes, with it flattening out as you went higher. The lower income people paid more. I even plugged in my family's actual numbers for income, taxes paid, and the estimated amount the state said Westlund's plan would cost our family in sales tax. Sure enough, we'd pay more taxes each year than we did then.

    Why should a family just barely above the federal poverty level pay more taxes while those making more pay less?

    That is the problem with a sales tax.

    And of course everyone likes to bring up tax credits or whatever to pay poor people back at the end of the tax year. I guess those people have never been in the situation where they only have a few bucks to feed their family. Every penny matters when you're poor. And I can tell you my older sister, who was on welfare, routinely had to put back food items to cover sales tax on needed items like toiletries, toilet paper, cleaning supplies, clothes, school supplies, and shoes.

    Why can't we look at our existing system and fix what is wrong with what we're using now, rather than throwing another tax on low income people?

  • (Show?)

    Paddy, our income tax is progressive. Not much, I'll grant you. But if you really aren't making any money at all, you aren't taxed under Oregon's system.

    In terms of making Oregon's income tax more progressive, I'm pretty sure you were just restating my position. Glad to know we all agree with each other.

  • Jim H (unverified)
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    Was the sales tax more stable? Wasn't there something ugly going on with California's finances around 2002-2003 that led to someone with a lot of consonants in their last name replacing a guy who was recalled?

    I believe that "something ugly" was Enron and other deregulated energy marketers manipulating energy prices. Not so much to do with sales taxes.

  • Terry O (unverified)
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    Hartlimes - not sure what you mean or the relevance of your question. If you mean new to Oregon, then no. I've called Oregon home for almost 30 years.

  • Mike (unverified)
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    YouKnowWho stated it best: control spending

    In Oregon as well as in DC, we show our ignorance and unwillingness to debate intelligently when we misuse the term "budget cuts". Whenever a particular sector complains that their budget has been cut, closer inspection usually means less money is being allocated than expected, even though there may be an increase from previous year funding.

    As the other posters note, having a sales tax won't solve the problem - other states with all 3 legs have budget problems - partly due to revenue shortfall, partly due to budget increases expanding faster than revenues.

    Another commenter noted that they would like their children to have the same opportunity at education as they had in the 50's or 60's. Why have education expenses grown faster than the economy has?

    What has happened is that everything in now more expensive, and households have even more options to spend their hard earned dollars. What was considered a luxury in the past, is now assumed to be an essential expenditure. We simply want and consume too much, and are not willing to consider the consequences.

    Years ago, it took a certain percentage of total income in the state to run things. The percentage required today is much larger - partly due to increased costs, but more to do with the government paying for many more services than it did decades ago.

    So, since we never are going to resolve the "best" way to harvest tax revenue from the citizenry, there needs to be an effort to go back to the basics of budgeting, perhaps a ZBB, where the budget is rebuilt each year or biennium, rather than simply developing a budget by using a percentage multiplier over the previous year.

    The legislature is slowly revealing the consequences of this year's tax revenue shortfall. Serious belt tightening is warranted, jsut as all of us have had to do in our own households.

    And to the other commenter, regarding uncollected taxes. . . why are some citizens not paying? Are the examples coming from DC a clear demonstration that they are not being paid because they don't have to?

  • Terry O (unverified)
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    Every penny matters when you're poor. And I can tell you my older sister, who was on welfare, routinely had to put back food items to cover sales tax on needed items like toiletries, toilet paper, cleaning supplies, clothes, school supplies, and shoes.

    Exactly why we exempt essential items. Granted, clothes would not be considered exempt, but assuming that a "poor family" only spends $500 - $1,000 per year on clothes, even at a 5-7% sales tax, that's an extra $25-$70 per year.

    I am not trying to sound insensitive at all. I do understand that can make a difference in some peoples budgets, but I think that $500 per year on clothing is a lot more than a family that's considered poor would spend.

  • (Show?)

    Not smarting, Darrel, but I do recognize the potential powderkeg.

    For me, looking at the revenue side alone is the thing that makes the "regressive" argument tenable. If you want to pay for things like social services, K-12, and higher ed, you need to fund them. Since these funds go back disproportionately to the poor, it offsets a modest sales tax. We have failed for years--going on decades--to fund the things that would make it possible for working-class people to get ahead. Arguing regressivity is penny-wise and pound foolish in my view.

    I'd add that one feature of a sales tax I'd definitely add is that a portion goes into a rainy-day fund. That's the biggest problem we have, and the thing that makes us so vulnerable to economic downturns (to which we are already extremely vulnerable, thanks to the reliance on income taxes).

    I know the arguments, though, and I know that there's unlikely to be a happy middle ground on this one. Oregon is not going to get a sales tax anytime soon. And it damn sure isn't going to get one in the middle of the biggest recession in decades.

  • (Show?)

    I think the readership's income bias is showing--you pay one rate of OR income tax until 10,000 dollars. While this is a pretty low step before hitting the maximum, and I would definitely support more tiering and higher rates at the top, you can't say it's not a progressive tax. Believe it or not, there are thousands of households where 10K is more than they earn in taxable income.

    Mitch has said it best here, I feel, although the insight from the Leg staffer is quite interesting: regressive, and if you make it less regressive by exempting items then you either lose too much revenue or have to make the rate too high. How about we restore the corporate tax burden instead?

  • (Show?)

    Oh, and the way I'd deal with essentials is through tax breaks. Exempt all food. For clothing, offer a tax credit to families making under a certain amount of money, perhaps on a sliding scale. There are some straightforward fixes that would remove the pain to the lowest-earners.

  • (Show?)
    I believe that "something ugly" was Enron and other deregulated energy marketers manipulating energy prices. Not so much to do with sales taxes.

    In December 2002, Gray Davis announced that the projected shortfall was $34 billion, of which he said 56% was due to reductions in revenue predictions on the current budget.

  • (Show?)
    Posted by: Terry O | Feb 3, 2009 3:23:35 PM Granted, clothes would not be considered exempt, but assuming that a "poor family" only spends $500 - $1,000 per year on clothes...

    Ok, so no poor families with kids in your calculations.

    Next?

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    See, that's the thing. If you don't think $20-70 makes a huge difference to someone who is low income, then you really don't get it. Something as low as $20 could be several meals. I've been there. I've been on food stamps when I lost my job and had an 11 month old. And believe me, every single penny mattered. If I had to spend a few dollars in sales tax in a month because the little one outgrew her car seat and I had to buy a new one, or 50 cents because I had to buy new clothes for job interviews, or whatever, that was food that wasn't on the table.

    Our poorest families and individuals can barely survive right now. They're spending as much on food in a month as many would spend in a week. They are struggling to survive as they watch all their expenses skyrocket and their income drop. Every single extra dollar they have to pay makes them that much more hungry, closer to being on the street, etc.

  • Terry O (unverified)
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    I'd argue that if a family can spend more than $1,000 per year on clothes, they probably aren't poor.

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    Posted by: Terry O | Feb 3, 2009 3:51:23 PM I'd argue that if a family can spend more than $1,000 per year on clothes, they probably aren't poor.

    And I'd argue that you must not have kids then because you are living in fantasyland if you think you can cloth a school age kid for $500 a year (on top of school supplies, food, doctor co-pays, etc.).

  • Terry O (unverified)
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    Jenni - fair enough. I see your point that there are some families that $20 per year could make a difference. However, would the benefit of increased revenue for the state, allowing more benefits for that family in need, offset the $20?

  • Mike Austin (unverified)
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    I would only support a sales tax if it included major changes to the income and property tax laws. On the income tax side, I would favor a progressive flat tax with no deductions, lowered rates, and all income treated equally. On the property tax side, we have far too much property that isn't taxed at all or receives very generous treatment. These properties need to come back on the rolls.

    I'm a big advocate of tax fairness. Adding a sales tax on top of a grossly unfair income and property tax structure is just not gonna fly with me.

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    I would favor a progressive flat tax...

    That's an oxymoron.

  • Zarathustra (unverified)
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    I have to agree with Steve M's basic premise. How depressing. It really is a regressive tax. It's worse, too, imo, that it isn't totally regressive, but hangs around the point that people will just tolerate.

    Income taxes are the only truly progressive tax. If you want a regressive tax, I say scrap income and sales tax and go with a poll tax. Well, not literally, as you wouldn't collect half your revenues, but a per head tax. That's regressive. This half measure stuff is irritating.

  • cw (unverified)
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    Terry, $1,000 per year on clothes for a family of how many? That's only $83 per month. If you are including socks and underwear (which are less likely to be purchased second hand, I assume), then a family of 4 or 5 could easily go past that.
    As someone who works in a semi-casual office setting, I would find it tough to keep within the $1,000 per year budget just for myself, and I am quite thrifty when it comes to clothes. I am not that into fashion at all, but it is important to be well kept and professional at work at most jobs. Very tough to do on $1,000/ year. Really. What about shoes? My kids sometimes grow through 3 sizes within one school year... I'm not trying to rant, but I really don't think that your assumption about spending $1,000/ yr on clothing is reasonable at all or very well thought out...

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    I don't think that $1000 is necessarily going to be just clothes. There will be more on the non-exempt list than just clothes.

    Have a car? If you're low income, chances are you're going to do your own maintenance. So that's oil filters, motor oil, spark plugs, windshield wipers, etc. that are going to be taxed.

    It's not like low income people buy food, some toiletries, and a few items of clothes and that's it. They make purchases just like everyone else. They just spend less.

  • cw (unverified)
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    Posted by: Terry O | Feb 3, 2009 3:51:23 PM I'd argue that if a family can spend more than $1,000 per year on clothes, they probably aren't poor.

    Really? That's only $83/month. When you factor in shoes (my kids sometimes change shoe sizes two or 3 times during the school year), socks, underwear, and the basics to keep a person warm, that's not much.

    The assumption that someone spending $1,000 per year on clothes not being poor, is not very well considered, I think.

    Even without kids, just someone making $11/hour or so in an office environment would need to spend at least that to stay well kept and professional in appearance (which could be important to moving up, or even keeping your job)

    This is really a bad figure to start with. Not realistic AT ALL.

  • LT (unverified)
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    Only Wyden's Fair Flat Tax makes any sense among the flat tax proposals. Some proponents don't even want to discuss details like whether there is withholding of income tax.

    Why are we taxing unemployment benefits?

    How much of the Tax Expenditure Report is really valid in a time of budget crunch? Which would create more outcry--debating a well worked out proposal which includes a sales tax, or demanding that every tax credit in the Tax Expenditure Report be sunsetted and have to prove its worth to a skeptical public to continue?

    Some things should be taxed very highly--salaries of pro sports players, management salaries at "nonprofit" organizations like Goodwill where managers make over $200,000, school administrators who earn over $100,000 AND have a car allowance, etc.

    If there were a proposal to tax some income highly, soften the property tax blow for folks of modest incomes who have lived in their homes for a long time (as opposed to speculators), and contained a sales tax, I would support it.

    But as the saying goes, the devil is in the details.

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    Actually, the increased spending the state/city/county is going to be able to do if they bring in more taxes is going to do little to help that family put food on the table, pay their electric bill, etc.

    We've cut for so long that the money will go into things like decreased class sizes, making our school day/year longer, fixing our roads and bridges, bring people back onto the Oregon Health Plan, and the like.

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    People always like to talk about property tax decreases offsetting any increase in sales tax. This overlooks the fact that many of our lower income families do not own property - they rent.

    The complex where I live has a value of $25,471,020. Do you really think under any of these proposals that there would be a decrease in property taxes for this complex? Does $25.4 million really meet the qualifications for being a "modest" property?

    And even if there is a decrease, what do you think the chances are that a decrease would be passed along to the renters?

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    I can see how you might spend $1000, but have to? I doubt I spend more than $200-250 in a year--and that would include shoes. Where are some of you people shopping?

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    Kids are expensive, especially when it comes to shoes and clothes. If you spend $200-250 for you, add in another adult and kids. You're already close to or at $1000. And I can assure you I spend more on kid's clothes than I do my own.

    I also spend more on my husband's work clothes, as we have to purchase new dress shirts and slacks fairly regularly. While he's in a management position in a retail store, they're always short staffed in the stocking department that he oversees and he ruins multiple sets of clothing each month. Since he's constantly back and forth between the front of the store dealing with customers and the back of the store, changing clothes to do the work in the back isn't an option. Neither is just putting on patches or whatever, since he's held up to a higher standard on clothing because he is a manager. So that means multiple purchases every year of new dress shirts and slacks... at $12-16 per shirt and $15-20 per pair of slacks, that adds up. I'd imagine he definitely spends $250 a year in just that, not including having to replace his shoes (which are steel toed)... or his non-work clothes.

    I typically only buy one pair of shoes a year, and that's to replace the sandals that I wear most of the year. The other kinds of shoes (dress shoes, boots, etc.) get worn so little that they last years. Last year I would not be surprised to hear that I bought Abby 10 pairs of shoes. Not only do kids wear them out fast, they grow out of them fast. We just bought Abby shoes 2 months ago and now I need to go buy the next size.

    She also goes through clothes like crazy. Between what she wears out and what she grows out of, I have to buy a new set of clothes every 4-5 months. We're already having to transition her into a new size right now, which means a set of clothes... again. This will be the second time since the school year began that we've had to do that. And that doesn't include the set of clothes that were purchased for school. We bought size 6 for school, ended up buying size 7 not too far into the year, and now are looking at moving into an 8. I doubt it will be the last time.

    I don't think that people really understand how much this stuff costs or what people spend. Clothes and shoes can be expensive. They don't get any cheaper just because you're poor. It just means that you spend a larger percentage of your budget on those items.

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    Not smarting, Darrel, but I do recognize the potential powderkeg.

    Jeff, I'd actually consciously made the decision to stay out of this one until I saw you'd mentioned me by name. A wag of my finger at you for tossing out the meat.

    For me, looking at the revenue side alone is the thing that makes the "regressive" argument tenable. If you want to pay for things like social services, K-12, and higher ed, you need to fund them. Since these funds go back disproportionately to the poor, it offsets a modest sales tax.

    Not if it shifts the tax burden further toward the low end of the income scale, it doesn't. If you offset cuts in barely progressive or flat tax revenue streams with a regressive tax stream you've created a more regressive tax system than you started out with.

    Even if the overall tax system is still progressive, it won't be as progressive as it was before. By creating a more regressive tax system, you are now taxing people at the lower end of the economic spectrum more (as a percentage of their income) than you were, making it more difficult for them to afford things like shelter, food, and other basics they may have already had difficulty paying for. No amount of funding for K-12 and higher ed is going to offset that.

  • Admiral Naismith (unverified)
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    People who want sales taxes should move to a state that has one.

    Good God! Terry O managed to make me miss the Sam Adams posts.

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    A sales tax is like AIDS: once you get it, you keep it. It only gets worse. And you die before it does. Besides, a sales tax would take the pressure off of the sentiment for increasing the corporate share of Oregon's revenues.

    It is the corporations from which we need to raise the kind of money that a sales tax would raise. Consumers already bear enough of the burden.

    And please don't respond that a corporation will only pass the tax expense on to consumers. They are controlled in their pricing by competition and in any case any passing on would be of miniscule per transaction when compared to the sales tax. And don't get bedazzled by the "three-legged stool" nonsense put out by the sales taxers -- it's a smoke screen.

  • Dan Gicker (unverified)
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    a name mentioned by Al Giordano is Dr. Jeanne Lambrew who was tapped to be deputy health care czar. She helped create the CHIP program in the Clinton Administration.

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    A sales tax has the advantage of raising funds from tourists, commuters and other out-of-state folks that we are not now taxing. But, as a negative, it adds costs to the process of collecting taxes. And, although its champions claim it would add to revenue stability, I have not been convinced.

    Don’t assume adding a sales tax would increase revenues. Often, a sales tax proposal is linked to reductions in property and/or income tax, making it effectively revenue neutral.

    The one sales tax we surely need is a substantial, revenue-neutral gas tax to reduce our financial support of foreign, hostile petro-states, to bring funds home we are spending abroad, and to reduce the emission of greenhouse gases. I’ve advocated for it on my own blog repeatedly, see here and here for examples.

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    A sales tax has the advantage of raising funds from tourists, commuters and other out-of-state folks that we are not now taxing.

    As for commuters, Washington residents working in Oregon have to pay Oregon income taxes. Four years ago Maria Cantwell and Brian Baird tried to get a bill through Congress to ban that, but I don't think it went anywhere. That's the bulk of out-of state commuters working in Oregon; California, Nevada, and Idaho don't add up to that many people coming in to work. Oregon workers going the other direction have to pay. So I'm not really sure what the commuter argument there is about.

    As for visitors, I'm not totally convinced that if someone is planning to vacation in Oregon and that they've got a budget of, say $1,000 for discretionary items, that they're going to add an extra $50 bucks to their budget to cover sales taxes or if they'll just spend $952 + $48 on taxes, making local businesses less profitable and cutting into the business income taxes they might have paid. We'd also lose the tax revenue from purchases and trips made here precisely because we don't have a sales tax. Some of the biggest-ticket items -- lodgings -- are already taxed at 1% by the state for tourism promotion.

  • Steve (unverified)
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    "Why not an Oregon sales tax?"

    Pretty simple, politicians in the state are tone deaf. If they drop the income tax without any chance of it coming back, then we could have a sales tax. I think WA does OK with just two taxes.

    However, the pitch is always we'll lower your income tax and promise not to raise it if you let us have a sales tax. No one is stupid enough to believe politicians to that extent.

    You may not like it, but instead of arguing about how fair a sales tax is, you might have better results convincing tax payers that our elected officials are good stewards of our money.

    The sense is, that even if Oregon had more revenue, they'd blow it. Ted K and the Legislature had a huge surplus 2 years ago they could have put totally in the Rainy Day fund, but instead decided to fund non-vital things instead. Don't get me started on how they wasted the Tobacco Settlement by just throwing it all into the general fund instead of using it to help people who smoke.

  • JellyRicardo (unverified)
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    We already have a sales tax on gasoline, tobacco, liquor, rental cars, lodging, and gas/electric/cable utilities.

    I don't believe the problem is inadequate tax revenue. The problem is inadequate political will to prioritize spending and recognize that even the State of Oregon can do more with less during a recession.

    Oregon voters will NEVER support a sales tax without a corresponding decline in the income tax. And the legislators aren't interested in a zero sum compromise.

    Not to mention the powerful retail and restaurant lobby: this is the third rail of Oregon Politics. Fuggehdaboutit.

  • Gil Johnson (unverified)
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    I would support a sales tax if it were coupled with legalizing gay marriage. Gays from California would come her to get married and then have honeymoons and the state would get a cut of all that spending. Might even save the Columbia Gorge Hotel.

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    A few points.

    Last time we modeled the incidence of a general sales tax with "essentials" exempted we showed that it is hard to get rid of the overall regressivity. See Addressing the Regressivity of Sales Taxes (PDF), showing even with a large refundable EITC its still regressive. Now a sales tax on luxury items and services (items and services typically only purchased by the well-off, such as legal, accounting services over a set price, lawn care, jewelery, etc.) if carefully crafted would work. But remember, when the leg starts to define "essential services exempt from the tax" many lobbyists line up....

    As to the comment earlier about our income tax and progressivity of our tax system, our income tax is only moderately progressive, made less progressive not only by the rate structure but also by the subtraction of federal tax liability and many ways tax expenditures favor the well to do...Our overall tax system is regressive as shown by the purple in this chart (PDF).

    Before we consider adding a new tax, let's better tax those with the greatest ability to pay who also reaped the greatest (and only) rewards from the last economic upturn, and put the income back into the corporate income tax by creating an alternative minimum tax and other changes.

    Terry's post essentially speaks to the problem of volatility, and the solution to that is an adequate rainy day fund. Recall that the 2007 legislature let a $1.1 billion personal income tax kicker kick, without ever voting to stop it. Well, that would have done wonders for our grossly underfunded Rainy Day Fund and could have been coming in handy today. Just as rivers and sreams have winter and spring floods and summer dry spells, state tax revenue volatility happens, and a sales tax is not a cure all. What's needed is the discipline to save during good times for the inevitable downturns. We failed to do so in the 1990s and we failed to do so this decade, other than the small, partial corporate kicker diversion in 2007.

  • niceoldguy (unverified)
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    Would people prefer a fuel (gas) tax increase to a sales tax? Gas taxes are ridiculously easy to collect, some mechanism could be devised to offset the regressiveness, and it would capture underground economy (getaway cars need gas, too) and tax-free corporations, stem small biz tax evasion, involve tons less paperwork for everybody. Yes, we are trying to reduce our reliance on petroleum, but do you really see that as widespread in the near-term? BTW:We could control spending to some extent by cutting high school to a three-year program (I know, education association would scream, but does anyone think we couldn't compress the academic content?) Best feature: It is not (exactly) a sales tax. We would drive some fuel sales to border states, but if we just don't build anymore bridges, congestion in the Portland area would severely limit gas runs to Washington.

  • Terry O (unverified)
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    Thanks to everyone for their input. My purpose in asking the question was to educate myself from different perspectives. Aside from the emotional distaste for a sales tax, there are some valid reasons why one would work, and some valid reasons why they wouldn't. However, I think the overwhelming lesson I learned here is that there are several other options to consider first.

    Corporate tax reform and Property tax exemption reviews are two of the big ones that would be a great start.

    I am not sure how I feel about the answer of cutting spending. While I believe that there are probably some projects or some divisions that could cut spending, I find it hard to believe that we have enough gross overspending that would account for how much under spending we have on school funding, teacher salaries, road maintenance, department of corrections, parks, or any other grossly under funded issues Oregon has.

    We are one of 50 states with a problem. Excuse me, make that 49 states with a problem because I heard on the news last year that Alaska is perfect. (Sorry, I couldn't resist.)

    To those that believe $1,000 is unreasonable to clothe your kids or say I’m must not have kids, I have 3 kids so I do speak from experience. My two boys are older teenagers that are only 20 months apart and one daughter in elementary school. I did not spend $1,000 per year on school clothes and shoes combined when my boys were younger because I couldn’t afford to so I bargain shopped at discount stores and did just fine. Now that my daughter is elementary age and old enough to care about what she wears, it is a little harder, but honestly that's because I can afford to and CHOOSE to spend more money, not because I have to. Regardless, I still don't spend $500 on her for clothes and shoes. Do not misunderstand my point. I'm not saying people shouldn't spend that much. I'm saying that anyone of us that are referencing "poor families" that can't afford a sales tax do not spend that much on clothes to begin with and people that do spend that much choose to and are most likely not poor.

    As far as "essentials" that I hadn't thought of, such as car parts, school clothes, job interview clothes, etc... Optimistically, I would hope that the state having extra funding for DHS to provide more benefits for these families would offset extra $200 they spend in sales tax annually. Maybe my optimism is naive.

    The most important lesson I learned here is how little I know, which is a humbling lesson, but easy for me to accept. The number of perspectives on this subject, let alone any subject, reminds me that none of us have THE answer, but ALL of us, collectively, have good ideas that can become an answer.

    Thanks again for all of the input.

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    Optimistically, I would hope that the state having extra funding for DHS to provide more benefits for these families would offset extra $200 they spend in sales tax annually. Maybe my optimism is naive.

    I think the optimism is naive, especially since so many cuts have been made in programs over recent years that we have a long way to go just to build programs and services back up before families would see much in any way of additional benefits. Even more so since much of the actual benefits that would affect their pocketbooks come from the feds, not the state (TANF, food stamps, etc.).

    I don't necessarily think $1,000 is unreasonable to clothe your kids... you also have to include yourself and your spouse in there as well. And like I said before, there's going to be a lot more that families will end up paying sales tax on in addition to clothes. So I think the total of those items that have a sales tax on them could easily outpace $1,000.

    I lived in a sales tax state for 22 years. I saw what it does to low income families. Nothing like having to put food back so you can pay the sales tax on needed items.

  • ValkRaider (unverified)
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    I read through all the comments and I have not seen one mention of this:

    A sales tax means I skip local retailers and buy things on the Internet.

    Not having a sales tax helps local businesses. It also helps lure shoppers from Washington.

    However, one thing that I have not also seen is that a sales tax earns revenue from tourists and those just passing through. In addition, sales tax helps get revenue from people who earn "under the table".

    But I vote against a sales tax. Having lived in 5 other states that had sales tax ranging from 5 to 10 percent, I much prefer Oregon.

    Now back to your regularly scheduled debate about regressive tax...

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    I think WA does OK with just two taxes.

    You may not have been paying much attention to the state of finances in Washington. They've been studying the problem with volatility of their sales taxes for years and a task force in the early part of this decade began looking into how to make their system less subject to economic fluctuation, as well as less regressive.

    Aside from the emotional distaste for a sales tax, there are some valid reasons why one would work...

    Really? What were they? So far, I haven't seen any evidence that a sales tax "would work." In fact, the only rationale in your original post for a sales tax was that it would "generate quite a bit of revenue for the state." So would raising the income tax. So would reversing Measure 5's property tax limitations. So would slapping a $1,000/head flat tax on all Oregonians. Just because they'd raise money doesn't mean each of those ideas are equally reasonable.

    I also like the idea that opponents of a sales tax are driven by "emotional distaste." Right. It's all about how hysterical we get. Let's just pretend that sales tax proponents are all Spock-like in their cold, emotionless logic and that they're basing their arguments on well-thought-out proposals backed up by facts and evidence. What? They're not? Well, never mind then.

  • LT (unverified)
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    Jenni, "I lived in a sales tax state for 22 years. I saw what it does to low income families. Nothing like having to put food back so you can pay the sales tax on needed items."

    This is the problem. Not all sales tax proposals are the same. There is no requirement that a sales tax cover food.

    I went to college in a state which had a restaurant tax for dining in, so college students got take out food instead.

    It is all about how the sales tax is constructed.

    Democrats should know by now that HOW something is written and implemented is as important as the label on it.

    Measure 5 was sold as property tax relief.

    If grocery store food (incl. farmers markets), medicine, and services were excluded, in a balanced package which might include a restaurant tax, more income tax brackets (employer provided car allowance should be taxed at double ordinary income IMO) and tax relief of some sort, that should be discussed.

    Someone should bring up the Barbara Roberts plan from when she was Gov. and Speaker Campbell got it killed on a party line vote. Why not debate that--I saw her in an Oregon Channel interview saying she still believes it is a good package.

    No one will win me over by screaming SALES TAX IS BAD!

    Show me an alternative proposal.

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    No one will win me over by screaming SALES TAX IS BAD! Show me an alternative proposal.

    Another claim of hysterics. And you didn't understand Jenni's comment. She said that a sales tax on items other than food would take money out of the budget that might have been used to buy food, not that food itself was taxed.

    Why do you think a sales tax is good policy?

    It's not necessarily more stable than the other taxes we pay. It would would make our tax system more regressive and therefore shift the cost of the services poor people need even further onto poor people. Whatever it might capture from tourists (which is itself a debatable point), the people who live here year-round are going to be the ones who pay the overwhelming bulk of the tax.

    So what do you see as an advantage of having a sales tax as opposed to, say, making the state income tax more progressive? You have yet to make your case for the benefits of a sales tax with any data. If you want a sales tax, make your proof for your own case, don't just accuse others of emotional response.

    You'd think people would have had enough of that kind of crap about opposition to the Iraq War.

  • Anitra Kitts (unverified)
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    California's Property Tax "leg" was among the first to be limited in rate of growth. It is not a fully functional piece of a stable tax base. Which leaves income and sales tax. Cities and counties down here try to run on sales taxes which leads to several layers of sales taxes on stuff you buy. There is and has been for a while a real budgetary melt down in the California legislature which has led to all kinds of shell games where cities and counties don't actually get the benefit of the taxes collected in their region but find it has been grabbed by the Legislature. California is trying to run on sales & income taxes which are as volatile as the economy and its a big mess.

    At the same time, California's state budget not unlike Oregon's state budget, has been increasingly locked up into dedicated pots of money due to citizen initiatives that mandate "tough on crime" which equals lots of money for prisons and the people who work there and not a lot left over for Higher Education or Safety Nets for our vulnerable populations. We're about to do another round of no money to run the state in a few weeks California Budget Negotiations

    For those who write that there should be something that can be cut in the state budget (either one), I'd like to invite you to please research - for yourself - just what has already been going on for the nearly 15 years as the State of Oregon accommodates the shift of k-12 education while at the same time supporting the building and staff of major new prisons. Programs have been cut and cut and cut again. I'd like to hope your local elected official should be able to get you in touch with the information if its not on a blog/web site somewhere around here.

  • Terry O (unverified)
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    Darrel, don't take part of what I said and use it as an isolated statement. The rest of what I said was...

    and some valid reasons why they wouldn't. However, I think the overwhelming lesson I learned here is that there are several other options to consider first.

    If you read my original post, and again my recent thank you comment, I was asking a question to educate myself, and of course to open discussion. I did not enter this with any agenda other than to understand from people more educated than I am on the subject.

    I have noticed that those opposed to a sales tax are more emotional about the subject, which was my point when I said emotional distaste.

    Take a moment, Darrel, to recognize I am not attacking either side. I am understanding both sides. I gather from the dripping sarcasm and reference to Spock-like proponents, you have a very strong opinion on this subject. I don't have a problem with that, but don't criticize me for trying to understand both sides. I've acknowledged your perspective:

    Corporate tax reform and Property tax exemption reviews are two of the big ones that would be a great start.

    I'm all for a decent discussion or even a debate if I'm prepared, which I am not on this subject. But don't take my points out of context or twist them into something they aren't.

  • Terry O (unverified)
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    Why do you think a sales tax is good policy?

    If administered correctly it could be a good policy. However, a sales tax is neither good or bad by itself. It's HOW the sales tax is written that makes the difference.

    However, I will say that, from reading, the idea of another tax without first correcting larger problems with our current tax policies doesn't make sense.

    Anitra, thank you for the perspective from someone that worked inside the system in Oregon and is now seeing a different perspective in California.

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    This is the problem. Not all sales tax proposals are the same. There is no requirement that a sales tax cover food.

    I never said it did. I said "sales tax on needed items." Those "needed items" could be a pair of shoes, a part for your car, toiletries, or whatever. Food was exempt in Texas. But that didn't mean you left the grocery store, Wal-Mart, etc. without paying some sales tax. And when you're counting pennies to pay for food, every penny spent in sales tax is a penny not spent in food.

    A big problem I have with many Dems that has grown over the years is how out of touch they are with the realities of being poor. They act as if $5, $10, $20 isn't that much and that paying out that much in a tax, a donation to a campaign, a ticket to a political event, etc. must be affordable for anyone. When you're feeding a family for a month on what many spent in a week (such as less than $90 a month, which I did in 2003 when I was laid off), every dollar, every penny is important.

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    "Show me an alternative proposal."

    Increase the corporate minimum. Kill the kickers. Un-flatten the personal income tax. Raise the gas tax.

    As far as I can tell, each of these alternatives has already been proposed in this thread. Were you not reading?

  • Eric Parker (unverified)
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    Once we enact a sales tax, it would encourage and entitle our leaders to put in more and more sales taxes to the point where it gets too confusing for consumers. In the province of Alberta, Canada's GST (goods and services tax) tells you that if you purchase just one can of soda, you pay a lot of tax on that item, yet if you purchaseda pack of 6 sodas, you pay less tax. While this seems logical to some, it is a discouragement to others. Some people don't want six sodas...they just want one, yet are getting punished for not buying in bulk or in quantity. Go figure.

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    We all use government services, even the retirees who move here and then refuse to educate the children around them, i.e. "they're not my kids..etc." No one who uses services should complain about the cost (yes, provided the money is well spent.) If it takes a sales tax to get rid of the ups and downs that make long-term progress impossible in the way Oregon provides services, then bring it on.

    And a question for any actual economists who might be reading--doesn't the current economic stimulus plan in Washington assume that the most needy will spend their bail-out/stimulus checks fastest, as opposed to saving, and therefore won't states that tax spending get the biggest multiplier out of stimulus package in terms of their state budgets?

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    I do feel for you Terry. I don't know which of the BO editors you submitted this to, but they basically shoved you out into the open with a big target painted on your back.

    I have noticed that those opposed to a sales tax are more emotional about the subject, which was my point when I said emotional distaste.

    That's a judgment call on your part, Terry. You see people opposed to a sales tax as more emotional but that's not exactly a verifiable claim. The debate gets heated on both sides. And yes, if you accuse one side of making their argument more on emotion than fact then you are, in fact, attacking that position. It rather belies your claim that you are "not attacking either side."

    I still don't understand what you referred to when you wrote "there are some valid reasons why one [a sales tax] would work." Rather than address that question, you try to deflect the argument onto my use of "dripping sarcasm." It's true, I'm a sarcastic guy, and the stuff literally drips off of me when I'm on a roll, but it doesn't keep me from noticing that however much more emotional the opponents supposedly are, that proponents seem to have a hard time coming up with any proof to bolster their case that a sales tax would stabilize the state's revenue stream, bring in a significant amount of money from untaxed sources (like tourists), not adversely impact the poorest residents of the state, or provide a pony for every child. Oooops, sorry, that's the sarcasm dripping again.

  • Zarathustra (unverified)
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    This is the problem. Not all sales tax proposals are the same. There is no requirement that a sales tax cover food.

    I never said it did. I said "sales tax on needed items." Those "needed items" could be a pair of shoes, a part for your car, toiletries, or whatever.

    If you add much more to that list, it's going to be a luxury tax, not a sales tax.

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    A sales tax is like AIDS: Once you have it, you keep it forever; it only gets worse; and it dies before you do.

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    A sales tax is like AIDS: Once you have it, you keep it forever. It only gets worse. You die before it does.

    All three are great reasons why a sales tax is a dumb idea. There are better ways to finance state government, starting with corporate taxation finally and adequate taxation of contributors to poor health such as alcoholic beverages and tobacco.

  • Terry O (unverified)
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    Darrel - point taken about my comment of emotional distaste. Not that I can retract it now, but I will admit that it wasn't a fair comment. I'm not worried at all that I was put out here with a target on my back. I think the vast majority of readers here understand that my post, my comment, and other comments aren't personal. It's just a topical debate. I did get riles up when it seemed that you were taking my comments out of context, but it's a new day and I'm past that... No worries.

    As far as valid reasons why a sales tax, I'll stick to my comment that a sales tax is neither good or bad. How it's administered determines it's usefulness. If administered correctly, certain exemptions would minimize the impact to low income families that can't afford it, and those that can afford non essential items would pay more just using the logic that they have more spending power.

    We would also capture income from tourists. Although the tourist market decreases during an economic downturn, it is another revenue source, none the less.

    I admit that I don't believe the argument that a sales tax would stabilize the state's revenue, because it's just as likely to be affected when the economy is down as any other tax.

    Washington has successfully survived by using a sales tax, without an income tax. That's enough evidence in itself that a sales can work. However, like I said above, it hasn't exempted Washington from revenue problems.

    I can say that I am now more educated for sure, and I now have an educated opinion rather than a water cooler opinion. I think there are better options before a sales tax would make sense.

    Increase the corporate minimum. Kill the kickers. Un-flatten the personal income tax. Raise the gas tax.

    I don't agree with raising the gas tax because that affects too many people with a broad stroke. Low income families pay just as much as high income. So I say cancel that idea.

    I'm all for a more progressive income tax. How about a 1% increase on personal income tax for individuals with an AGI over $75k and couples over $120k? Then another 1% increase for $250k? I can say that without pointing a finger because I'd be paying an extra 1%.

    I do think that corporate tax reform should come first, then corporate property tax reform, kill the kicker, and lastly consider a more progressive income tax.

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    Washington has successfully survived by using a sales tax, without an income tax.

    Washington has survived better because it has had a more diverse economy than Oregon, with major hubs of technology, manufacturing, and shipping. Here's how the Washington State Tax Structure Study, headed by Bill Gates, Sr., introduced their November 2002 report "Tax Alternatives for Washington State: A Report to the Legislature":

    The Committee concludes that our current system is fundamentally inequitable to low- and middle-income people, unfair to many businesses, and subject to sharp fluctuations in revenue. The Committee also finds that while our tax structure, which was put in place in 1935, might have worked well for a mid-twentieth century manufacturing economy, it doesn’t work well in today’s economy with its greater dependence on the service sector. If this current trend continues, our tax structure will be even less adequate in the future. Furthermore, the rapidly expanding “Internet economy” is eroding our retail sales tax base. This impedes Washington’s ability to collect its fair share from economic activities occurring over the Internet.

    That's not me talking, that's the committee headed by the father of one of the richest guys on the planet. And it was written more than six years ago, because Washington realized that their dependence on a sales tax was problematic for a number of reasons.

    I've already addressed why I think the argument that a sales tax would capture money from tourists seems flawed to me. You can't get money for nothing. If a tourist has to pay more of their travel budget in taxes, they'll simply buy less stuff, and the business they would have bought that stuff from will pay less income tax on their profits. So far as I know, nobody's actually cranked out any figures showing that any losses would be substantially offset by taxes paid by tourists. Did you know that a 2005 report commissioned by the state showed that half of all "overnight marketable trips" were made by Oregonians? That's not going to bring extra money into the economy, it's just taxing Oregonians more for services for Oregonians, which can be done far more efficiently.

    That doesn't even begin to address the need to increase the size of the Department of Revenue budget to administer a sales tax. An increase in income tax rates could raise the same amount of money without the need to do anything except change some numbers on the forms. That's a lot more cost-effective.

  • cw (unverified)
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    what is going on with this thread? The number of comments keeps growing, but there not showing up here?

  • Marvin McConoughey (unverified)
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    The question: "is there a valid economic reason to not implement a sales tax?"

    The answer: No. In economic terms a sales tax is doable. In broader terms, there are many reasons not to impose an Oregon sales tax.

    1. Administrative cost.
    2. Net tax increase on taxpayers.
    3. Not stable.
    4. Weak coverage: Stocks, bonds, professional services, travel abroad, etc.
    5. Loss of national options. Americans now have few choices of sales tax-free states.
    6. Creates new problems: writing laws, legislative time demands, enforcement, updating, etc.
    7. Added uncertainty. One more worry about future tax changes. One more obstacle to planning for the future
    8. Hidden costs. Evasion, erosion of incentives to spend in Oregon, loss of tourism.
    9. Added risk of "me too" local sales taxes.
    10. Weakens economic incentives for state and local governments to economize and innovate efficiencies.
    11. Unknowability. Who really knows what is a "basic need" for each individual and family situation? What about "non basic" needs that are deemed essential?
  • Marvin McConoughey (unverified)
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    Why the extremity of message truncation?

  • Jim (unverified)
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    One thing I haven't noticed in this discussion is the impact of a sales tax related to the tourism industry. One great source of revenue for the State (especially Oregon as a tourism destination) is other peoples money. I'm not a big fan of the sales tax having moved here from Idaho via Washington which both have some form of sales tax - but the extra dollars brought into the State by outsiders would certainly be significant.

  • Jim (unverified)
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    "Years ago, it took a certain percentage of total income in the state to run things. The percentage required today is much larger - partly due to increased costs, but more to do with the government paying for many more services than it did decades ago."

    One thing of note here - we can thank the devolution of the federal government under Reagan for this dandy. A lot of state services prior to 1980 were paid for (at least partially) with federal dollars. Reagan devolved the cost for many of those programs (which are still required) back to the States to be paid for solely by the states - leading to higher costs passed along directly to the state taxpayer (and spread over a smaller base I might add)....thus driving up the cost of government to everyone. Also - the explosion in prisons has been a huge driver of cost everywhere.

  • Dennis (unverified)
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    No Oregon sales tax...not now...not ever!

  • Eric Parker (unverified)
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    "One thing I haven't noticed in this discussion is the impact of a sales tax related to the tourism industry"

    Years ago, when my family toured in Seattle, My sister (then only 6) had 'enough money' to pay for a sandwhich for her lunch...she was hungry. She saw what it costs and had the exacty amount. However, when it was rung up at the counter, she was told to produce some more pennies for the lunch. Because she didn;t have the extra money, the clerk told her 'too bad' and took the sandwich away, leaving my sister - a six year old, running and crying and still hungry. Thank you to the sales tax for this traumatising moment.

    Oregon makes it a point that there is no sales tax in the state. That fact is even advertised in Western Canada (Alberta and British Columbia) on thier cable systems.

    Oregon would stand to lose a lot by alienating those tourists.

  • Zarathustra (unverified)
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    Posted by: cw | Feb 5, 2009 10:39:22 AM

    what is going on with this thread? The number of comments keeps growing, but there not showing up here?

    I think a lot of the appearing/disappearing comment issue is pilot error, though understandable.

    The scenario is that you are reading a comment on, say, comment page 2 of 3. You post a reply. You scroll to the bottom of the page and it isn't there. You can refresh the page, ad nauseam, and it never appears. Sometimes, you later notice it, much later in the thread.

    What is happening is that you were on page two. The comment posted to page 3 or maybe a new page 4. You would have to go to the bottom of the page you're at, hit "more comments" however many times it takes to get to the end, and there will be your comment. Sounds obvious, but when you mentally are thinking of it as a single page, it can appear very screwy, particularly after hours.

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    To whoever keeps deleting my comment on this subject: please exhibit the spine to communicate with me directly. The answer I give to the question "why not a sales tax" is that a sales tax is forever and only increases; it cannot be controlled. If the deleter doesn't like my comparison of sales tax to AIDS, why not come right out and argue with me about it and be honest, open and direct?

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    Oops! I withdraw the previous comment. Sorry.

  • mp97303 (unverified)
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    "Increase the corporate minimum. Kill the kickers. Un-flatten the personal income tax. Raise the gas tax."

    How about a personal minimum tax. I mean, we are ALL in this together, aren't we?

  • Peter Hall (unverified)
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    The sales tax is not regressive!!! I lived in Washington State most of my life and I had the lowest tax burden of any place I've lived. Why? Because with the sales tax you only tax disposable income which the poor have almost none of. I pay twice as much in Oregon income tax as I did sales tax in Washington State. The income tax system would work here if we adopted the federal levels of deductions and exemptions as Utah and Idaho have. I'm being killed by the income tax here and wish I were back in Washington State where they have the same attitude about the income tax as Oregon has about the sales tax. And I'm far from rich. I made less than 25,000 last year.

  • Chris Shaffer (unverified)
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    Sales taxes are proven regressive and very inefficient to operate. Progressives should be banding together to fight a sales tax, not considering ways to support it!

  • Jeanne (unverified)
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    Don't get fooled into a sales tax! If they even claim it's "temporary"- it really won't be. Trust me because here in California we keep getting "temporary" tax increases in good times and in bad. It's all a scam to redistute wealth from those who work to those who don't want to. In Los Angeles, we are facing a new 10% sales tax rate! The budget problems are not caused by you not paying enough in taxes - it's the government has a spending problem. The legislatures have better benefits that you, they get per diem, they get expense accounts, cars and maintenance paid for, perks galore and a salary that can't be matched in the private sector. They are supposed to be public servants, but instead vote themselves pay increases like kings. You hold the purse strings - make them accountable and hold on to your hard earned money.

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    Why do we keep touting that old line that sales tax is regressive? Low income people pay $15 for a pair of pants and about $1 in tax. A well to do gent pays $200 for his slacks and pays $16 in tax. How is that regressive?

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    Furthermore there is a giant undergound ecomomy in Oregon of small business people who earn money under the table and don't pay taxes. Also the entire drug economy is tax free now. A sale tax solves both these problems by exacting tax money from theese crooks.

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