I hereby apologize to Bill Bradbury and his fans for posts seeming dismissive of Bill and his proposal to raise $2 billion for schools. As to the $2 billion, I should not have dismissed Bill’s vague promise to get $2 billion out of tax expenditures with equally vague assertions of my own. In this post, I will go through the major items in the Tax Expenditure Report, and explain why I think Bill was being unrealistic. I think this exercise is important, not just for purposes of this primary, but because the “can’t we just cut some tax expenditures?” question is one I have been hearing from a variety of fellow progressives for years.
I should also stress that I am not dismissing the idea of $2 billion for schools per se. If Measures 5 and 47 had not passed in the 1990s, schools would, in fact, probably have at least $2 billion more per biennium than they do today. So unless we are satisfied with living in the world Don McIntire and Bill Sizemore have given us (to paraphrase a line I once heard David Sarasohn use), striving for $2 billion more for schools in a worthy goal.
Finally, I should have made it clear that although I do not think Bill has a realistic shot at the nomination, I have high regard for him as a person and a progressive leader. In fact, on one issue dear to my heart, he has been demonstrably better than my choice, John Kitzhaber. Bill was one of the few electeds who went down to Lottery Commission hearings with me to protest the ongoing giveaway of lottery dollars to taverns, in excessive commissions, at the expense of schools, economic development, and natural resource programs. As to John as Governor – well, just to prove my goodwill to the Bradbury forces, here, free of charge, is the question I would ask John at the City Club debate if I were Bill:
“John, one of the greatest ongoing scandals in state government has been the excessive commission payments the Lottery has made to video poker taverns, at the expense of schools, economic development and natural resource programs – the intended beneficiaries of the Lottery. While you were Governor, you retained and / or appointed Lottery commissioners who perpetuated this shameless giveaway. What do you say to advocates for education, parks, salmon restoration, and economic development about that aspect of your record?”
Based on conversations I have had with John, I think his answer will be something along the lines of: “You are right. I ignored that issue. I should have done something, appointed more responsible people. I am sorry. If elected, I will end the giveaway.” But it wouldn’t hurt to get him on the record.
Now, let’s turn to the $2 billion in tax expenditures. I have the 2007-2009 tax expenditure book here. I don’t have the most recent one, so the numbers will be slightly out of date, but the big items will still be the big items. (I’m leaving the much-discussed BETC out of it.)
The single biggest ‘tax expenditure’ is the fact that we do not apply the property tax to intangible property – such as stocks and bonds. That ‘costs’ $11 billion. I kind of assumed that if Bill meant to extend the property tax to all forms of wealth, that would be a big deal and he would have mentioned it specifically. But if Bill in fact intends to do that, that would be a very interesting idea, and it would be progressive: Rich people own most of the stocks and bonds. Essentially, we’d be transforming the property tax into a broader-based ‘wealth tax.’
Now, I would not jump on that bandwagon without a lot of study. The tax experts who write the Tax Expenditure Report claim that “the experience of most states that impose taxes on intangible personal property is that the taxes are difficult to administer effectively and equitably … [and] are relatively easy to avoid.” Also, although I like the idea of a wealth tax at the Federal level, there probably is SOME point at which, in a Federal system, we might start taxing the rich enough to drive them to other states; I don’t think the 0.9% Measure 66 income tax increase is going to do it, but maybe an $11 billion wealth tax would. I dunno.
But if Bill has that idea, it’s a serious idea. I have not heard him express that idea. But if he’s for that, it would be bold and real. Maybe too bold. But it would be real.
But when you get beyond the exemption of intangible assets … I’m going to give you a list of tax expenditures above $100 million in the book. I think they’re all pretty tough nuts to crack. I invite Bradbury supporters to tell us which ones Bill has said he’s willing to go after. I realize he could talk about means-testing them, not eliminating them entirely – but if that’s what he has in mind, he should tell us.
Here you go:
Cafeteria plan benefits: $286 million
Employer paid medical benefits: $910 million
Medicare Part A benefits: $190 million
Medicare Part B benefits: $130 million
Pension contributions and earnings: $884 million
Capital gains on home sales: $352 million
Life insurance investment income: $216 million
Capital gains on inherited property: $807 million (another possible progressive target, but opponents would point out that Oregon already has a separate estate tax)
IRA contributions and earnings: $120 million
Medical and dental expenses: $275 million
Accelerated depreciation of equipment: $104 million (OK, that IS a business tax break)
Property taxes (the fact that you get to deduct them): $259 million
Home mortgage interest: $972 million
Social security benefits (Oregon exemption): $299 million
Federal pension income: $137 million
Federal income tax deduction (this is what the Legislature just phased out, for the rich, in Measure 66): $747 million
Personal exemption (which we all take on our income tax): $924 million
Inventory (the fact that we don’t apply the property tax to the business inventory): $434 million
Western private standing timber: $415 million. (This refers to the fact that we don’t apply the property tax to the value of standing timber. An argument for this exemption is that otherwise we would give timber companies an incentive to harvest ‘prematurely.’ I don’t know if that’s a good argument or not. If Bill plans to eliminate this exemption, I’m ready to hear his arguments.)
Motor vehicles and trailers: $748 million (this refers to the fact that we don’t apply the property tax to cars and trailers)
Personal property for personal use: $725 million (this refers to the fact that the property tax doesn’t apply to your clothes, furniture, appliances, etc.)
Strategic Investment Program: $128 million (this is the tax break for capital-intensive companies like Intel, not applying the property tax to all their capital investments, which I probably would have voted against when it was adopted but have gradually been convinced that it probably has helped generate and retain actual good jobs – Chuck would probably disagree with me and say Intel would be here anyway. But anyway, this is in fact a corporate tax break. If Bill is going to take it on specifically I would listen to his arguments)
Farm land: $183 million (assessing land used exclusively for farming at its farm value, not its potential ‘development value’)
That’s the over-$100 million list. Does that look like a target-rich environment to you? The progressive way to go after those things would be to means-test the hell out of them. But can you imagine the hit pieces on any legislator who “voted to cut the home mortgage deduction, tax pension income, tax Social Security benefits, tax Medicate benefits, tax capital gains on home sales …”? Sure, you could explain that you were just means-testing those things. But you’d be taking a hell of a risk. (And I’m not sure at what level of income the means-testing would have to kick in to raise $2 billion.)
If Bill Bradbury is willing to take that risk, and is planning to ask legislators to take that risk with him, and is willing to say so, then I might not agree with him, but I would applaud his courage. But so far, as far as I have seen, Bill has shied away from doing that. I think he’s said he would eliminate the mortgage interest deduction for second homes, which is good, but how much does it raise? I haven’t seen an estimate recently.
As some of you know, I am absolutely obsessed with letting people know where our tax dollars go. I think we’d have much more rational political debates, and we would shift the entire political spectrum to the left, if more Oregonians were aware of the simple fact that most of their state and local tax dollars go to education, health care, and public safety.
I think it’s also important that we know where the tax breaks go. The fact is that the vast majority of the tax expenditures AREN’T big fat corporate tax breaks garnered by sleazy lobbyists for their clients. I wish it were otherwise. I wish I could rail against the $2 billion in sleazy corporate tax breaks that we could eliminate tomorrow if the Legislature just had the guts. Life would be easier.
But I can’t. Because there AREN’T $2 billion in sleazy corporate tax breaks that we could eliminate tomorrow if the Legislature just had the guts. If there were, the Legislature that was gutsy enough to pass Measures 66 and 67 would have already done the job.
I can’t cheer for Bradbury’s $2 billion plan, not because I don’t like Bill Bradbury, not because I don’t want to get $2 billion for schools, but because – to quote the slogan of the Oregon Center for Public Policy – facts matter.
By Steve Novick
March 15, 2010
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