Tax Code Sunsets and the Dawn of Majority Rule

Chuck Sheketoff

With a sunset, a recalcitrant minority cannot hijack our democracy when it comes to curbing tax code spending.

The recently concluded Oregon legislative session demonstrated that there is an effective tool for reining in out-of-control tax subsidies and loopholes — the sunset provision. A sunset establishes a date by which a law automatically expires.

Sunsets help put our fiscal house in order and restore majority rule — democracy itself. That’s why the next legislature should sunset all forms of tax code spending that currently have no expiration date.

Ever since Measure 25 became law in 1996, the legislature has been hamstrung to control costly tax subsidies and loopholes. Under Measure 25, “bills for raising revenue” require a three-fifths majority vote. Legislation that would end or reform tax subsidies and loopholes often is wrongly labeled as a bill for raising revenue. Thus, a small minority of senators or representatives can block an effort to curb wasteful or inappropriate spending stemming from the myriad of tax deductions, exemptions and credits embedded in our tax code.

But with a sunset, a tax expenditure automatically ends by a certain date and can be scaled back from that date forward by a simple majority vote. With a sunset, a recalcitrant minority cannot hijack our democracy when it comes to curbing tax code spending.

Two years ago the 2009 legislature used a three-fifths vote to add sunsets to all tax credits — just one of several types of tax expenditures — that did not have sunsets. The 2009 legislature also directed future legislatures to always include a sunset when creating or renewing a tax credit spending program.

The 2011 legislature learned the value of sunsets. They let some tax credit spending programs expire and with simple majority votes, they scaled back a few and revamped ineffective or inefficient ones. In doing so, revenue that would otherwise have been spent on wasteful tax credits instead could be used to fund education, health and human services and public safety.

While the 2009 legislature’s sunsetting of all tax credits was an important accomplishment, they didn’t finish the job. They failed to sunset the plethora of other tax code spending, such as tax exemptions, subtractions and deductions that continue each year unabated, regardless of whether they make sense.

Take just two examples of subsidies that make no sense and have no sunset date. The senior medical deduction disproportionately subsidizes wealthy seniors for their health care costs while providing almost no benefit to low-income seniors. Similarly, the mortgage interest deduction — whose price tag has doubled in recent years — helps only about 13 percent of taxpayers earning less than $40,000 per year, even though that group represents more than half of all Oregon taxpayers. Meanwhile, it subsidizes owners of multiple homes and million-dollar mortgages.

Legislative efforts to reform these misdirected subsidies are practically dead on arrival, so long as lawmakers know that a small, obstinate minority can block reform.

Much has been said about how the 2011 legislature tackled some prickly issues in a bipartisan manner. But make no mistake: the 2011 legislature’s ability to curb some tax code spending would have been impossible had sunsets not restored majority rule in those decisions.

In the 2012 session, the legislature ought to use their much-touted camaraderie to place sunsets on all other forms of tax code spending — deductions, subtractions and exemptions. The sunsets will allow a bipartisan majority to control that spending and make democracy shine.

Oregon Center for Public PolicyChuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at

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    I think we should eliminate all subsidies for everyone. I don’t like specific groups and special interests lobbying congress so that their industry is somehow given an advantage over their competitors. I think the best way to do this is through the “Fair Tax”, a revenue neutral change (no more or less total federal taxes) that replaces all federal income taxes (including the alternative minimum tax, corporate income taxes, and capital gains taxes), payroll taxes (including Social Security and Medicare taxes), gift taxes, and estate taxes. And replaces them with a single national consumption tax of 23%. This is like a sales tax, but only applies to "new" goods and services (where the tax hasn’t already been applied to that good, so a used car wouldn’t be taxed). Taxes up to the poverty line ($21,660) are tax free to everyone and refunded in a prebate of the money that would be spent (and an additional $3740 tax free per child). If you make 20k a year, you pay 0 taxes. So say your a family of 2 adults 1 child that makes $40k a year (about 10k below average in us), your first $25,400 is tax free, and so the rest ($14.6k) is taxed at 23% for $3,358 in taxes (paid as you purchase items). Now this is only if you buy all new goods and services. If you buy used goods, or save/invest your money you are not taxed on that at all. Most poor people I know of tend to be fairly thrifty and buying a used product is something they do on a regular basis, if they buy 14,600 worth of used products, they pay 0 taxes, but even if they don’t their tax rate is only 8% (the current federal minimum tax bracket is 10%, and this couple would be in the 25% tax bracket). None of this even gets into all the saving on the employer side of the equation allowing employers to give higher wages, and sell products for cheaper (causing people to have more buying power with the same number of $s). I’m sure a similar system could be done in oregon as well.

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    Chuck, support of sunset reviews of all tax expenditures could go hand-in-hand with sunset reviews of all entitlements.

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    Nice dodge Chuck, not the budget, the actual entitlements themselves.

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      Not really a dodge. Most of the entitlements contained in the Oregon state budget are mandated by the federal government.

      To the extent that Oregon has budgetary flexibility (for example, on the Oregon portion of Medicaid funding), that's subject to biennial budget review.

      But no, the Oregon Legislature can't change federal law on the Medicaid program itself.

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