Falling Off A Cliff… Or Not: The Choice Is Ours
We didn’t need the Pew Center on the States to tell us this, but they did it anyway: Oregon is facing a severe financial crisis. Based on several factors, the Pew Center has listed Oregon as one of the ten states in most “fiscal peril,” tied with Nevada for #5. California’s fiscal state is so bad, it’s in a league of its own.
The report takes into account Oregon’s rise in unemployment, our decreasing ability to pay for basic services … and, pointedly, a system in which legislators’ power to act is undermined by the ability and willingness of corporate lobbyists to spend millions of dollars to protect their embarrassingly low taxes.
But what the report highlight more than anything is this: We have a choice in how this turns out for Oregon.
In January, Measures 66 and 67 will give us the choice between two Oregon futures. Do we vote YES, and protect schools and other critical services, or do we vote no to protect the antiquated $10 corporate minimum?
The corporate lobbyists opposing these measures have made their choice known, and that’s what worries the folks at the Pew Center:
“Limited ability to
act. In most of the 10 states, including Arizona,
California, Florida, Nevada and Oregon, lawmakers’ latitude to respond to the
fiscal crisis by raising taxes or cutting spending is limited by their states’
constitutions, ballot measures passed by voters, or other statutory or legal
impediments to change.”
In other words: the ability and willingness of the corporate lobbyists to use the referendum system to overturn legislative decision-making undermines our fiscal health.
But I have faith that in this time of crisis, Oregonians will do the right thing and vote YES on 66 and 67.
This report highlights the need to work to support Measures 66 and 67. By keeping $1 billion in the Oregon economy – much of which will come from big out-of-state corporations, and from Federal matching funds – we can protect Oregon jobs, preserve services, and put our economy back together. We can avoid the Ghost of Oregon Future that haunts the Pew report.
As the economy struggles, it’s critically important to maintain basic services for people who have nowhere left to turn. These measures will make sure that our most vulnerable—children, seniors, and struggling families—aren’t left in the cold.
(Measure 66 also helps Oregonians who’ve found themselves out of work this year by making the first $2,400 in unemployment benefits tax exempt for 2009.)
In the months leading to January, we have a choice: Do we allow corporate lobbyists and special interests to throw our schools, seniors, and other vulnerable Oregonians off a cliff, or do we come together to protect the Oregon that we all value?
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November 12, 2009 |
Steve Novick | Comments (123 so far)
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Posted by: Sal Peralta | Nov 15, 2009 3:04:17 PM
I doubt seriously that someone earning $20k/yr or less is in any position to own real estate and therefor pays $0 in property tax.
There are a substantial number of retirees earning less than $20k per year in taxable income who own real estate.
Posted by: Mike M | Nov 15, 2009 3:21:53 PM
Sal thank you for making that point about property owners.
I would also add that there may be a number of unemployed people owning real estate who are going to have a tough time coming up with their property tax payments due on Monday.
Are there any revenue projections from Oregon or Washington that factor in property tax delinquencies due to inability to pay? How does the state account for these shortfalls? If accrued that masks the issue.
With wages and salaries for most people, withholdings assure that the taxpayer pays their taxes as the income is earned. Not quite the same with property taxes. Also, are estimated taxes for the self employed and for people with other income source meeting forecasts?
Missing from the discussions is still the fact that states assume an increasing population earns more income, that property values rise, and growing businesses result in higher tax revenues. Thus far, the state has not shown that it knows how to deal with income and property tax revenues that may decline rather rapidly as they likely are today.
That is also the issue of PERS and other pension obligations both private and public; if they assume future revenues from taxes or growing businesses rather than actually putting money aside to fund them, it is only a matter of time before the jig is up.
This is a trying moment for all.
Posted by: LT | Nov 15, 2009 6:07:26 PM
Thank you for mentioning this, Mike. "With wages and salaries for most people, withholdings assure that the taxpayer pays their taxes as the income is earned."
There have been Republicans (most famously Gov. Reagan back in those days, and Steve "flat tax" Forbes) who wanted to do away with the withholding process and then wondered why people thought them out of touch with ordinary wage earners.
Posted by: rw | Nov 15, 2009 10:39:07 PM
So about this championship-wording for a sales tax: please explain to me why the sales taxes I've lived under in ohhh, say.... five states.... have ALL included every basic necessity I ever had to buy and then the rest?
I am most likely ignorant as can be, so I had no idea we had a state in this union that DOES have a selective tax that only somehow targets the well-fluffed in hard times.
Sales tax: regressive.
Posted by: Zarathustra | Nov 15, 2009 11:23:12 PM
I think we all pretty much agree on the sales tax. It would stabilize the economy, but writing one that isn't regressive would be an historic accomplishment. My major point, originally, is that I would rather see the budget managers doing that than juggling budgets every few years.
Of course, failure would pretty much write that off as a permanent no starter. Makes more sense to try than to dole out school days, punctuated with panicked public referenda.
mp, I mention the no-tax cutoff on the business tax as a way to keep it from being regressive. Hey, maybe that's a partial answer to general sales tax. Something like a handicapped parking permit, or Oregon Trail Card, that exempted certain people from ALL sales tax. Theory would be that it doesn't have to be graduated, because you can either afford it or you can't, owing to its small, absolute amount.
The way M66/67 take such a flat, monolithic view towards corporations isn't encouraging. It resembles posters that bang on about "business", without realizing that there are a lot of start-ups that never become big or fail in a few years that have nothing in common with large, established corporations. And there's an inverse relationship between size and how much tax they pay. If you're in the former camp, a "tax on business" seems pretty unfair.
For what it's worth, I'll vote for it, with reservations. I only know one concrete business example, a non-profit run by a friend that declared bankruptcy last week. She was going to continue to keep it afloat on a shoestring budget, but if this passes, she'll have to shut down. $250 is a fortune when you've never made a penny in revenue and rent is $600. So, yes, a flat business tax is regressive too. Wish our adroit legislators had at least as much sense as can be found in this thread.
And if you're going to embrace regressive taxes go all the way and talk about a poll tax.
Posted by: Zarathustra | Nov 15, 2009 11:24:34 PM
sorry, "stabilize the budget", not "stabilize the economy".
Posted by: Peri Brown | Nov 16, 2009 12:56:42 AM
Rereading this thread, I think the devil's in the first word. "Falling". Doesn't make the agent explicit. Reading the responses it seems like some are being pushed, others, like matthew are jumping. Richard is getting a running start for his leap of faith.
Not a minor semantic point, either. Think about it. Try to change the word. "Being pushed off a cliff...or not, the choice is ours"? If you're being pushed it's not a choice. "Jumping off a cliff..or not, the choice is ours"? Oh....that's it. There's what we're trying to avoid. Why would someone jump off a cliff? Must be pretty motivated. Or pretty deluded. Either way, we don't have time to address that. Must get this passed. Cut straight to the pitch.
Taking that seriously would mean seriously considering both sides of the issue. The conclusion was given a priori, hence the neutral verb to make the conclusion fit.
Add to that what has become standard BO editorial policy, a la t.a., "I only look at a few responses, then I don't pay attention to the rest. Most of it is garbage" (or something to that effect), and these posts start to look like mailers from the national committee. But then, what do I know? You're obviously fired up to balance conservative paid ad. spin. I don't have a TV anymore. No point. So, all people like me see is your rhetoric. It's not balanced by another, extreme POV. But than, those couch potatoes are your real constituency, no?
Posted by: peter | Nov 16, 2009 3:57:25 AM
Oregon unemployment is improving, but conditions vary throughout the state according to this heat map:
http://www.localetrends.com/st/or_oregon_unemployment.php?MAP_TYPE=curr_ue
Posted by: Mike Parr | Nov 16, 2009 9:07:22 AM
From the Legislative Review Office, please note the following figures (numbers have been "rounded"):
State General Fund Budget:
2003-2005 = $ 10,223,200,000
2005-2007 = $ 11,609,200,000
2007-2009 = $ 12,793,500,000 (legislatively approved)
2009-2011 = $ 13,278,500,000 (legislatively adopted)
This is a 29.9% increase. (It's a 217% increase compared to 1993-1995.)
State All Funds Budget
2003-2005 = $ 38,150,000,000
2005-2007 = $ 40,297,900,000
2007-2009 = $ 47,748,700,000
2009-2011 = $ 53,760,000,000
This is a 40.9% increase. (It's a 268% increase compared to 1993-1995.)
Before any changes in tax policy are discussed, don't we need to discuss the reasons behind requesting more funds when the above percentage increases far outstrip inflation AND population growth? Don't we need to discuss this more than saying we need the increase to "maintain services"?
As to changing tax policy, how is it logical and rational to:
Permanently change (increase) rates for a temporary problem?
Make the changes (increases) retroactive?
Tax companies on gross receipts (and not net/gross profits)?
Posted by: Scott in Damascus | Nov 16, 2009 9:19:51 AM
"As to changing tax policy, how is it logical and rational to ... Tax companies on gross receipts (and not net/gross profits)?"
In a word - profit laundering.
The cost of manufacturing drugs or computer technology (for example) is minimal compared to the cost of research and development. So, beginning in the early 1990s, several dozen companies established subsidiaries in Bermuda, the Caymans, and other tax havens to game the system.
They set up shell companies and transfer patents, logos, and other intangible property there. Then when profits rolled in, the company paid big license fees or royalties to its own shell (at the price it decided) and deducted that from home taxes. Revenues were sucked out of the U.S. or other countries even though the patents were created and were still used for work within home borders.
Just ask Intel.
Posted by: darrelplant | Nov 16, 2009 11:07:55 AM
I think we all pretty much agree on the sales tax. It would stabilize theeconomybudget, but writing one that isn't regressive would be an historic accomplishment.
What makes you think that it would stabilize anything, though, Zara? California has the vaunted "three legged" revenue system and its budget is possibly in worse shape than Oregon's. A number of other states with property, sales, and income tax triads are in economic trouble.
Sales taxes are far more volatile than property taxes, and as I can't help but keep pointing out, part of the recent sales tax plans in Oregon have been to replace property (and income) tax revenue with sales tax revenue. That would tend to destabilize the system, not make it more predictable.
As for writing one that's not regressive, there's just no way to do it. You might be able to come up with a tax system that includes a sales tax that's somewhat progressive by using very aggressive ramps in income tax brackets and rebates to low-income sales tax payers to counteract the regressivity of the sales tax but you could just save yourself a lot of hassle, skip the sales tax, and hike the income tax rates less aggressively.
Posted by: Sal Peralta | Nov 16, 2009 11:55:42 AM
Mike - I agree that the state needs to get a handle on spending. However, I am skeptical that a 30% increase over an 8-year period significantly exceeds inflation plus population growth. Oregon's population growth is 1.8 percent per annum, and the national rate of inflation has been 2.5 - 3.5 percent for most of the period you mention.
Also, to what extent do other variables -- increased prison population, health care costs rising faster than inflation, unemployment rising faster than population growth, aging population, etc -- affect the state's budget growth in a way that goes beyond a simple equation that uses very high level population or inflation statistics as you propose?
Posted by: Zarathustra | Nov 16, 2009 12:08:14 PM
Valid point, Darrel. I'm thinking more of when it becomes destabilized. When I say stable, I mean that you start with something workable, and something that resembles the last budget, before deciding how much to spend. Obviously you can always spend more than you have and end up back in the same situation.
Kind of like financial planning. May work for a middle class, employed bread winner, to keep spending on a par with earnings, but not very helpful for an unemployed worker at poverty level. The best financial advise for the latter is to get a job.
You could summarize my position as "without a sales tax, it's like having Oregon on a fixed income". Like people on fixed incomes, it's easier to fix the prob by beefing up revenue than by cutting costs. Of course, I think costs could be cut hugely too by doing things differently, using better modeling assumptions.
Posted by: Steve Maurer | Nov 16, 2009 12:11:56 PM
Mike Parr: Before any changes in tax policy are discussed, don't we need to discuss the reasons behind requesting more funds when the above percentage increases far outstrip inflation AND population growth? Don't we need to discuss this more than saying we need the increase to "maintain services"?
Certainly. So let me point you to Representative Chuck Riley's (D-Hillsboro) excellent piece, Oregon Legislature Holds the Line on Spending. (http://www.leg.state.or.us/press_releases/riley_022309_II.pdf). You should read the whole thing, as it has charts that fully detail what is going on, but here's a quote:
Since 1991 about 50% of new spending of general fund and lottery dollars has been due to voter initiatives. Without discussing whether these were good changes or not, we must acknowledge the effect they had on state spending. In 1990 voters approved Measure 5 which changed the share school funding from 70% local funding (30% state) to 70% state funding (30% local). In 1995 Measure 11 was passed requiring new prisons to be built, staffed, and maintained. Voters passed two initiatives limiting property tax assessed valuation, Measure 47 in 1996 and Measure 50 in 1997. expanded the state’s share of school spending even further. In 1998 voters approved Measure 66 which dedicated 15% of lottery revenue to parks and natural resources. While Measure 5 has hagreatest impact on state budgets, the combined effects of these measures is demonstrated in the following chart.
(I can't show you the chart directly, but it shows that since 1983, state government spending has been progressively reduced under CPI + population increase, and the legislature is far less than that.)
Now please understand something: Rep. Riley's charts account for total spending of all governmental entities in the State of Oregon. Because of Measure 5, the State government has had to make up for drastically slashed revenue from the one source that municipal and counties have. So the State general fund spending has gone up, even while the overall government spending has gone way down. (And there is little local control over schools any more - because the as the legislature controls the purse strings, they now call the shots.)
The middle class is also paying much more than they used to because property taxes are paid largely by businesses with multi-million dollar properties, and Measure 5 slashed that - shifting the burden to the people least able to pay.
Posted by: Kurt Chapman | Nov 16, 2009 12:46:50 PM
rw - Kentucky (not well known for being progressive) has a state sales tax that exempts medicine, basic food items and primary heating (electricity, gas). the state tax code also allows for a sales tax deduction off the annual filing forms. This certainly is a form of sales tax that at least recognizes that low income folks need to save what they can, where they can.
However (and using the food example again), opting for fast food hamburgers instead of butinng and preparing is rightfully subject to the sales tax.
The other huge problem with 66 and 67 is the PERS iceberg headed our way. Novick and CO do not want to face, let alone acknowledge that these two measures do NOTHING to deal with the PERS increases.
Posted by: Sal Peralta | Nov 16, 2009 12:58:16 PM
The other huge problem with 66 and 67 is the PERS iceberg headed our way.
Kurt, you've mentioned this previously, and I agree that it's a major problem. Something like a $2 billion hole that needs to be filled, if Phil Keisling is correct. But I still haven't had a response to the question: How would these measures failing improve the PERS situation?
Posted by: KenRay | Nov 16, 2009 1:42:23 PM
I must correct LT or at least enlighten him.
Westlund-Williams-Shetterly plan when the Republicans controlled the House (all 3 of those moderates found a way to leave the House not long afterwards, were they not ideologically pure enough for the majority leadership)
Westlund became a Senator. They run for office half as often. Almost every Rep. wants to be a Senator.
Williams was appointed to be the Director of Corrections by Democrat Governor Ted Kulongoski.
Shetterly was appointed by Governor Kulongoski as director of the Department of Land Conservation and Development.
None of this had anything to do with a 'plot' by the House Republican Majority office. In fact, it was likely a shrewd move by Governor Kulongoski to play politics and it partially worked as Max Williams seat was won by a Democrat.
Posted by: Steve Marx | Nov 16, 2009 3:53:52 PM
"Because of Measure 5, the State government has had to make up"
Explain that one again? Measure 5 was in 1990 (19 years ago) and state revenues have been growing at about a 8-10% clip every year on average for almost 30 years now.
Sorry, I'll give the next gov his campaign slogan - Government needs to do more with less (just like the rest of us.)
Posted by: rw | Nov 16, 2009 11:47:26 PM
Kurt - I find it interesting that you buy into and elucidate that tired old stereotype of the gap-toothed hick or urban slick chowing up in a fast food joint. Those who have experienced TRUE poverty do not have such money, and so escape the stereotype and the radar.
However, thanks for telling us about the only state in the union to have a SEMI-progressive sales tax. In Kentucky and other rural states, there is often no mass transit, or exceedingly poor mass transit. A tax on gasoline is regressive. Having lived in those states, I can speak to the distances one must drive to one's minimum wage or somewhat-better-wage jobs... taxes on clothing and shoes: regressive. The impoverished cannot afford a sales tax on many more items than appear to be exempted.
I'm not being querulous here -- just holding the flag for the real facts of life for those in poverty. Those deemed barely over the line of poverty and thus denied support for base needs... are in poverty. THe line is shaven so close that you may have enough for your rent, but, fifty five dollars on the other side of that line, you are too well off for food support. And so you live on foodboxes month in and month out. This is reality. I have relatives living generationally on beans, biscuits, hog and squirrel gravy. :)... yep, it's liked. But it's also necessity.
Posted by: darrelplant | Nov 17, 2009 9:54:00 AM
Kentucky (not well known for being progressive) has a state sales tax that exempts medicine, basic food items and primary heating (electricity, gas). the state tax code also allows for a sales tax deduction off the annual filing forms. This certainly is a form of sales tax that at least recognizes that low income folks need to save what they can, where they can.
That doesn't mean it's not still a regressive tax. Every sales tax makes some attempt to not appear as if it's just a rip-off of poor people. rw, I think the "gas" Kurt mentioned was not gasoline but natural gas for heating.
Kentucky's sales tax might be more equitable than you'd find in the disparity between the low-income and high-income residents of Washington State, but you're going to have to come up with some actual figures to prove that's it's not still taxing people at the bottom at a higher rate than others.
That's what's continually lacking from these discussions. People who want to change the tax code need to do some concrete research and come up with some realistic figures, not simply make claims that everything would be better if we just did things differently.
However (and using the food example again), opting for fast food hamburgers instead of butinng and preparing is rightfully subject to the sales tax.
I have to say, I find your obsession with hamburgers fascinating. By your standard, it would be better for someone to go into Safeway and buy a $3 bag of Pepperidge Farm cookies (sales tax exempt) rather than go to a Burger King and get a Whopper Jr. for $1 and pay sales tax.
Posted by: MovotoRealEstate | Nov 19, 2009 5:59:28 PM
Going to back to OR real estate, there is plenty of real estate out there that people with a lower income could afford:
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Posted by: darrelplant | Nov 15, 2009 1:44:45 PM
Kurt, I know Washington's tax system is regressive. That's the Washington State Department of Revenue's own assessment of their tax system. It's as heavily based on sales taxes as Oregon's is based on income taxes. It's a regressive system because it's based on a sales tax.
Perhaps you should have read a little further in the study done by the Washington State Department of Revenue. They don't agree with your gut assessments or your doubts. Page 100, Tables 9-1 and 9-2 breaks down their estimates of average income within income levels, retail sales taxes paid by income level, other excise taxes (alcohol, tobacco, ins. premiums tax, gasoline) paid by income level, and property tax paid by income level.
For people making up to $20K (in 1999): 6.7% of their income went to retail sales taxes. For those making more than $130,000, that figure is 2.2%.
And yes, people making less than $20K a year do own real estate. You've heard of senior citizens, no doubt? You know, people living on Social Security or small pensions, etc.? Sometimes they own their own homes.