Tax Reform

Is there a way to bring stability to Oregon's tax code? In an Oregonian op-ed, Portland developer John Beardsley suggests the following:

First, cut our very high state income tax to 5 percent on everyone, and lock the new rate into the Constitution so the politicians can't raise it without a vote of the people.

Second, approve a 5 percent sales tax on everything except food, medicine and utilities, and lock that into the Constitution as well.

Third, along with the sales tax, to ensure fairness, give every taxpayer a $500 individual, or $1000 per couple, annual income tax credit.

Fourth, establish a cost-of-living-restricted limit on state spending growth, with the requirement that in good times, when revenues exceed the limit, taxpayers will be refunded half of the excess with the other half invested in a rainy-day fund for bad times.

Read the rest of his argument. Discuss.

  • Aaron V. (unverified)

    Sales tax = regressive tax that hits the working and middle classes to a disproportionate effect, even with the exceptions for food, clothing, and medicine.

    If you want to lower the income tax, lower it by increasing the personal and dependent exemptions.

    A real estate transfer tax would be more transparent and much easier to collect than a sales tax, which burdens small business and is easy to evade by purchasing online (especially on eBay from out-of-state sellers).

    A sales tax would also hurt Jantzen Beach, because that place survives on Washingtonians evading Washington's ridiculously high sales tax.

  • (Show?)

    Aaron, you're right that a sales tax is regressive, but note that Beardsley suggests a $500 per person credit. Since that's a flat credit, it'll have a progressive effect. (It means a lot to a poor person, and not much to a rich one.)

    Is that enough of an progressive effect to offset the regressive sales tax?

    I don't know the answer; that's why I'm asking.

  • Mike Austin (unverified)

    While they are at it, they should tax all income equally. That would really make it fair.

  • (Show?)

    Kari, that supposes that everyone who pays sales taxes will file a state return, which of course is not true. You can't take a credit on taxes you don't have to pay.

    Beardsley helpfully shows us which path NOT to take.

  • LT (unverified)

    I will only support even discussion of a "spending limit" when the sponsors of the idea tell us where they intend to cut--specifically.

    And would this plan eliminate all other tax breaks in the system? Or aren't we supposed to ask such questions?

  • JHL (unverified)

    It may not be true that someone who pays a sales tax files a state return, but they're supposed to.

    If you're making purchases, you've got money from somewhere -- whether that's a birthday check from grandma or money from selling meth, you're still supposed to let Uncle Sam (and Cousin Oregon) know about it. (And if you're trying to live on income under that threshhold, you've got bigger problems.)

    I think the $500 credit idea is great. Maybe we'd get more people filing their returns after all.

  • (Show?)

    Torrid, if it were a refundable credit, that would give everyone an incentive to file. Free money, y'know?

    Not that we're trying to force everyone to file for the sake of filing - but that's the mechanism that you would use to distribute the funds that make the sales tax progressive.

    I'm certainly not sold on Beardsley's idea, I just think it's worth talking about.

  • Baloo (unverified)

    Second, approve a 5 percent sales tax on everything except food, medicine and utilities, and lock that into the Constitution as well.

    If you want to pay sales tax, move back where you came from. Us natives live free or die.

  • JHL (unverified)

    Well, Baloo... Why choose? It looks like Oregon's on the track to do both.

  • Garlynn (unverified)

    I don't really see anything in this proposal to like, anything that's more progressive than the existing system, or any explanation as to what the problem is that this solution will fix.

    In short, this seems like a neat way to cut taxes on the rich.

    Anybody care to prove me wrong?

  • JTT (unverified)


    How about cutting the income tax for students working their way through college? I paid 9% to the state while I was making next to nothing, working my way through college. You think that's progressive? Would I have much rather paid 5% income with a 5% sales? ABSOLUTELY. Why? Because everything I bought (except for the beer) would have been exempt, giving me a tax CUT.

    Should our tax structure be more progressive? absolutely! Is the current system good for working Oregonians? ABSOLUTELY NOT! Is the solution to tax the hell out of corporations and cross our fingers that they won't leave? You've got to be this global economy?

    For as much as the tax structure sucks in Oregon, whenever anyone brings up a proposal it seems like us progressives whine: "that's not good's not perfect". All the while Measure 5 passes, Measure 47 passes, Measure 30 fails, and TABOR looms on the horizon.

  • Robert Harris (unverified)

    What a ground breaking proposal. Mr. Beardsley proposes that we reduce his income taxes by half, increase eveyones taxes a little, except for the poor, and cap state spending.

    I've noticed that all tax plans have a common theme and I will now distill all tax proposals to a simple plan that we can all support.

    Lets raise taxes on someone else.

  • NewNAV (unverified)

    Well, here's why I left the Democratic Party. A proposal that increases funding for services and lowers everyone's aggregate taxes... but the extra-whiny Dems aren't for it because -- God forbid -- it doesn't cut taxes more for the poor than it does for the rich.

    Two words -- big picture. Services have been cut to the bone and are bleeding for money while we crowd classrooms and kick people off of OHP. And here's a proposal that will pump extra cash into the system while giving honest taxpayers a tax cut. But it's opposed on the grounds that it doesn't make the tax system more progressive.

    More people on OHP -- more dollars in classrooms... It makes the state more progressive!

    These are the same kids who, when their parents buy them an ice-cream cone, they only enjoy it until they see a kid with a bigger ice-cream cone.

  • Aaron V. (unverified)

    What's the difference between giving someone a $500 credit on their income taxes and making the first $10,000 in income exempt from the proposed 5% state tax?

    Someone who's proposing a sales tax has something up his sleeve, and his statement of "punishing success" is telling - he wants the income tax lowered, since it'll get you no matter if you're rich or poor, and you have no choice as to whether to pay it or not.

    Eventually, a rich person will reach the point of diminishing returns on their spending - there's only so much stuff you can buy! Likewise, a sales tax hurts a poor person from the first dollar spent.

    I would up the exemption on the state income tax to at least the Federal exemption, make it more progressive, and factor in a real estate transfer tax paid as part of any real estate transfer (including those between shell corporations), except for bona fide inheritances between actual persons.

    Oh no! Sten advocated a real estate transfer tax! Jack Bog is going to get me!

  • (Show?)

    It's not that it doesn't make the tax system "less progressive". It's that it makes the tax system more regressive.

    What "extra cash" do you think a sales tax is going to bring in?

    The really stupid argument for that is that all of the drug dealers will be paying taxes on their purchases, but if you think that's a significant amount of money, I'd like to see the proof.

    The other argument is usually that all of the tourists will have to pay taxes. But when was the last time you took extra money on your vacation so that you could pay sales taxes in another state? If you've got X number of dollars to spend while you're vacationing in Oregon, you're going to spend X number of dollars. If taxes take a portion of that, it means that the people you would have spent it with (hotels, restaurants, tour operators, gift shops at the seashore) will get less of your money, meaning their profits will likely be lower and that they'll pay less in taxes on their income to the state of Oregon. You see, the money they spend is already taxed as a part of the income taxes paid by the businesses they patronize. If the tax laws are enforced and if the business is profitable.

    Is a sales tax less volatile than an income tax as people keep claiming. Well, let's look at what Washington state's Department of Revenue says about their tax structure, which is more dependent on a sales tax than any other state in the country:

    All of Washington's taxes are volatile. Some of Washington’s taxes are more volatile than others. Sales & use tax and business and occupation taxes are more volatile than personal income.

    Then take a look at page 38 of this 2004 slideshow from WADOR

    The combined major state and local taxes in Washington (sales and property) start off at 15.7% for households with incomes under $20K and go down for every income category until people making more than $150K are paying 4.4% of their income in state and local taxes.

    The $500 rebate keeps getting tossed about. Has anyone run the numbers on it? Has anyone run numbers on how any of these tax proposals are actually going to impact both revenues and redistribution of the revenue stream?

    Or are we going to get another thread where people just say that taxes are difficult to understand and throw out half-baked ideas "wondering" if maybe they might work.

  • (Show?)

    Actually, raising more money for services on the backs of the poor isn't progressive. There are many of us who are "poor" who are not on OHP, don't get state services, etc. Up until I got my new job, we were bringing in $28K for a family of three. And we didn't use any more state/federal/local services than the average person.

    So this idea that higher taxes on the poor is ok because they're going to get extra services out of it is 100% bull shit. I'm sorry, but it is.


    You'd have also paid taxes on shampoo, toilet paper, soap, shoes, clothes, food you eat out (including the food in the cafeteria), etc. It may still end up being a small tax cut for you, but having lived in a state for 22 years that had sales tax, I can tell you that for many of the working poor it's actually a tax increase.

    Take Westlund's proposal for example. It shows a decrease only if you have a decrease in property taxes. Since most poor people rent, they would see no decrease. They actually end up paying a larger percentage of their wages in sales tax than those at higher income levels and more taxes overall than they do currently.

    I do like the idea of the tax credit-- but there also needs to be some major reductions in the credits and deductions already there (can anyone say yachts). A $1000 credit would have meant we'd have gotten the $797 in taxes we paid last year back in addition to $203 more.

  • JHL (unverified)

    I think that a lot of these ideas are still workable, and no... Westlund's idea is not perfect -- but it's the best I've seen thus far.

    Jenni is right to be checking out the tax credit idea. I think that makes the system more fair. But it's not BS to suggest that services and taxes aren't related... a poor person paying an extra $10 per month to gain an extra $1000 in OHP coverage... that's tangible.

    Anyways, it needs work -- but I think it's on the right path.

    Darrel -- Westlund's data is from the Oregon Legislative Revenue Office. You cite data from the Washington State Department of Revenue, but spurn data from it's counterpart in Oregon?

  • (Show?)

    It's BS to act as if all, or even the majority, of poor people who will be paying more taxes will get more services. That's just not true.

    Yes, some poor people will end up with more services. But that is likely a small population out of all the low income people. The only way you're going to effect a huge number of these people is with universal health care. Many of of us are sacrificing every month so we can buy health insurance from employers. There are no state services that are going to help us-- even the programs to help you pay for your insurance state you have to be without insurance for a certain number of months.

    Stating poor people will get more services in order to justify them paying a greater percentage of their income in taxes than those at higher incomes is just a way for people to feel warm and fuzzy about passing along taxes to the people who can least afford them.

    Yes they'll ony be paying $10 for an extra $1000 in OHP service-- but that's $10 they can't afford. I'd rather that $10 be paid for someone making a heck of a lot more money.

  • (Show?)


    Where in Westlund's data does it address families who make less than $35K? I don't see a link from his page on SB382 to the LRO report he's referring to. And I don't see an SMS for SB382 on the LRO page for 2005. Have you seen it? Because all I see is Westlund's data, not Oregon's. And yes, I do think historical data from a state with a sales tax as it's primary source of revenue is more reliable than projections of possible changes to a tax structure, no matter where it comes from.

    The chart on Westlund's site shows a savings at every income level. It also predicts a billion more in revenue. I'd like to know where that's supposed to be coming from. Because it's not coming from trees.

  • Terry (unverified)

    C'mon people. Beardsley's proposal is supply-side Reaganomics all the way --pay less, get more. Listen to what he says:

    "My motive isn't more funding for state programs; ... If we can create this kind of economic environment, funding for services such as schools, health care and public safety will take care of itself."

    Or simply read my post.

  • toast (unverified)

    Is there a way to bring stability to Oregon's tax code? In an Oregonian op-ed, Portland developer John Beardsley suggests the following:

    WTF? Can't a progressive blog field it's own tax ideas that don't starve the state government, give a giant tax cut to the wealthy, and make progressive elements look like a welfare check?

  • JHL (unverified)

    darrel --

    I can see where the source of Westlund's data could be misleading...

    See, under the charts where it says "Source: Legislative Revenue Office"... I'm guessing it means that the source of the data is the Legislative Revenue Office. Dunno. Just a guess.

  • (Show?)

    I know several of us looked at the income levels shown, calculated the %s on them, and then applied them to income levels below $35K. All of them showed that not only would these people pay a higher % in sales tax than those at higher levels, they'd also pay more taxes than they do now.

    The figures also show savings at the $35K income level, but many of these people don't own their home-- they rent. With home prices as high as they are, this will become more and more common. These people also see higher taxes than they do now because the listed property tax decrease would not apply.

    It's fairly obvious by looking at the numbers that the additional revenue will most likely come from those making under $40K per year.

  • (Show?)

    Toast writes...

    WTF? Can't a progressive blog field it's own tax ideas that don't starve the state government, give a giant tax cut to the wealthy, and make progressive elements look like a welfare check?

    OK, let's hear it. Start here.

  • toast (unverified)


    Unfortunately, I specialize in snark. What you need if you want a tax plan is a wonky economist or business administration professor who is willing to sit down and crunch the numbers without making a glaring oversight or miscalculation that you could drive a monstrous yacht through. I'll give you an outline though:

    First off I wouldn't reinvent the wheel. I'd start by comparing the total tax liability of different income categories in all 50 states. Let's assume Oregon wants to be somewhere in the middle in terms of progressiveness and in terms of total tax revenue. Look at the tax plans of states that fit the bill and look into ways you could match their results with and without a sales tax. Are states that fit the bill having financial difficulty? Do they provide adequate services? Do a lot of people live in cardboard boxes? Adjust accordingly.

    Then since we are a thinking progressive blog, maybe we ought to consider the effects and consider the long term. Are we happy with Oregon's current economic growth rate (irrationally exuberant?) ? Are we happy with Oregon's sprawling suburban developments, relative lack of urban redevelopment, and increasing average commute times? Are we happy with our current health care? If gas prices go to 6 or 10 dollars a gallon will our economy survive? Will we have farmland, wetlands, beavers, ducks, clean water, and clean air in 130 years? Will we have accessible open space? Will we have living space and work space that we actually want to be in? 130 years might sound like a long time. I use it because that's how long my families been in Oregon and when we think about sustainability it's really a drop in the bucket.

    Taxes sometimes are used to direct and manage a growing community. At least consider it.

    If you are thinking about a sales tax, at least look into how it works in other states. How are the funds distributed? Will this encourage communities to strongly favor box stores over apartment complexes? Is this a good thing in all places? Will we see communities like Vernon or New Rome in California? Is this a good thing?

    A tax reform / tax relief plan marketed by land developer is probably going to be one that helps land developers. Maybe it's not worth fighting. Something like it is going to be what passes anyway since pseudo-anarchist libertarian sound bites (anti-tax, pro-property rights, blind faith in the invisible hand) have increasingly dominated the Oregon dialogue since I last lived here in the 1990's and campaign finance reform has yet to be invented as a concept in the beaver state (40,000 and 25,000 dollar donations for governor?? -- now there's an opportunity for a progressive ballot measure that starts at the grass roots).

    However, I stand by my previous snark.

  • Karl (unverified)

    In the economy we have now, incomes for working people are down. The "ownership society's" income is up. Instead of increasing taxes on the poor (sales tax), we need to raise the taxes on those who profit from this economy. We could start with unearned income. An increase on capitol gains would be good, but I'm leery of a real estate transfer tax because it could really be a hardship when a time of dropping values comes. We could also increase tax on dividends. I'm not sure how to do it state wise, but i would sure like to get some of the outrageous profits from the oil,insurance & pharmaceutical companies and spread the wealth around a little.

    Whatever we do, if we can't stop the globalization, free trade, cheap labor, corporate race to the bottom, services will be more and more difficult to provide as we become more stratified and progressively poorer and poorer as a state and nation.

  • (Show?)

    I can see where the source of Westlund's data could be misleading...

    See, under the charts where it says "Source: Legislative Revenue Office"... I'm guessing it means that the source of the data is the Legislative Revenue Office. Dunno. Just a guess.

    Are you just purposefully dense, JHL? It's this kind of dishonest response that makes me suspicious of pretty much everyone on the sales tax side of the argument. What are you hiding?

    I said that Westlund's page didn't have a link to the LRO (Legislative Revenue Office) report he's citing numbers from. I haven't been able to find the economic impact statements at the LRO (Legislative Revenue Office) web page for 2005 (, either. Senate Bill 382, which Westlund has posted on his site, doesn't appear to have a staff sumary, fiscal impact statement, or revenue impact statement posted at I wrote that -- although I assumed you could expand LRO to Legislative Revenue Office on your own -- in my post.

    So I'll ask again very slowly: Have you seen the actual reports Westlund is citing from? Do you know where to find them? And yes, I contacted Westlund's office to ask about them as well.

  • Robert Ted Hinds (unverified)

    Beardsly fails to mention why the individual sales tax is so high in Oregon, and that is because the corporate tax rate is among the smallest of all 50 states and Oregon remains one of the few states without a sales tax.

    The problem with any state solution to individual taxation is that any state that enacts it will suffer competitively unless federal taxation is enforced appropriately. Currently the IRS has no teeth to pursue wealthy individuals and private companies that shelter income in off-shore bank accounts. That means going after the political donor class in society, which few politicians have the courage to do. The tome on the subject is David Cay Johnston's "Perfectly Legal", which describes the ways in which the super rich in society escape taxation.

    Personally, I agree with the founding fathers that there should be no individual income tax and all taxes should be paid by enterprises and businesses. Essentially, the cost of doing business in the USA and a state is incorporated into the cost of the products or services that business produces, resulting in much the same as a sales tax. However, the amount of taxes paid by an individual would be proportionate to consumption and, assuming anti-trust laws are upheld (which they are not being upheld), largely discretionary beyond the point of autonomous income, or what we all must spend just to exist.

    The only thing that Oregon could do unilaterally without significant losses among other variables, would be a graduated and targeted state luxury tax. For example, a Cadillac STS would have less luxury tax than a Cadillac Escalade, because the Escalade takes more parking space, weighs more on infrastructure, pollutes more, etc. Another example would be to adopt the Scandinavian model, in which public fines for speeding, parking violations, etc., are scaled according to your income/wealth. This would boost public revenues and help to eliminate what media mogul, David Geffen, famously called, "Fuck you money." That is the extent to which being rich enough to absorb the cost of improper conduct exempts you from the law.

  • Robert Harris (unverified)

    A little tangential, but yesterday a local mayor told us that one reason Oregon communities haven't bent over for Walmart is because we don't have a local sales tax.

    In states with local sales taxes, cities are largely funded by their collection. So when any large volume store is looking for a location, the municipalities will do what it takes to get them cited within their borders. Oregon on the othere hand just sees a Walmart as any other commercial use, their tax base isn't increased just because of massive sales of product. So City's here look for businesses that will deliver new jobs with livable wages, compliment the existing economic base, fit in with surrounding uses, and attract other caluable resources to the community.

    Apparently Walmart hasn't had the experience of being asked about which of those qualities it may bring to a community.

    So, if a state sales tax is considered, we may want to include a provision addressing local sales taxes and whether they should be permitted or allowed.

  • MsBlue (unverified)

    What Beardsley didn't mention specifically in his article, but has been included in every state tax reform proposal I've seen that adds a sales tax is a cut in Oregon capital gains tax. It is in Westlund's SB382 and in Morse's proposal, and we should be fighting to keep it out. Income from seeing ones investment advisor quarterly is already taxed well below income from actually going to work every day, because no payroll taxes are paid, and the highest federal income tax rate on unearned income is but 15%. There is great pressure to reduce that capital gains and dividend tax rate at the state level too. We should be making sure that progressives just do not buy into any plan that includes that give away to the wealthy. Yesterday the R's got the federal rate on investments set at 15% until 2010! And the AMT issue addressed for only 2 years. That will add to the pressure in Salem to reduce Oregon's investment tax rate, and some Democratic legislators are buying into it.

  • Madam Hatter (unverified)

    JHL wrote: It may not be true that someone who pays a sales tax files a state return, but they're supposed to.

    If you're making purchases, you've got money from somewhere... you're still supposed to let Uncle Sam (and Cousin Oregon) know about it.

    This is not true. What about those on assistance? I'm not sure about Social Security or SSI, but TANF recipients don't pay taxes on that income. What about alimony and child support - are they taxed?

    (And if you're trying to live on income under that threshhold, you've got bigger problems.)

    EXACTLY! That's the point of the whole discussion isn't it? Sales tax isn't such a big deal unless you are low-income. So the fact that these folks have "bigger problems" means we should just disregard the effect a sales tax would have on them?

    I think the $500 credit idea is great. Maybe we'd get more people filing their returns after all.

    This really confuses me. Who are all these non-filers who will decide to change their ways for a lousy $500? The local meth dealer? The recipient of grandma's birthday check? The only tax cheats who'd be swayed by $500 would have to be those for whom that amount of money would mean something. Do you imagine there's some huge contingent of low-middle class tax cheats out there? I doubt it.

  • (Show?)

    Ben Westlund's staff very helpfully faxed me the LRO (that's Legislative Revenue Office to you, JHL) documents his site refers to earlier this afternoon. Apparently, they include elements that were not produced specifically for SB283 in its current incarnation (some of them date from 2003 and 2004), so they didn't have them in electronic format. I look forward to examining them.

    As an aside, this weekend we're in the middle of our annual visit by a woman my wife met while she was at school 25 years ago. P is 49, developmentally disabled, and lives on an SSI check of $468/month. She lives in subsidized housing, where the rent is set at one third of her income. That leaves her $312/month for bills (some of her utilities are covered), food, Oregon Health Plan payments, transportation, etc. In other words, a little over $10/day. The only time she gets to leave town is when her sister buys her a train ticket to visit us. She doesn't pay taxes, she won't be getting any return-based credit of $500. But she's still going to have to pay sales tax on the non-exempt items she buys. And there are literally thousands of people like her in Oregon.

    Sure, after you exempt groceries, utilities, health care and other non-sales tax items the amount P might pay per year is pretty small, but even that little bit bites when you're living on $10/day.

  • (Show?)


    Exactly! Because low-income people still have to buy soap, shampoo, toilet paper, cleaner, etc. And I'm sure they'd also like to be able to buy the occasional fast food item, a pizza, etc.

    The table on Westlund's site proved that a sales tax hits low income people harder than those with higher incomes. All it takes is a quick bit of math to see the % of income spent on sales tax is higher at lower income levels than it is at high income levels.

    People around here seem to act like $100 or $200 a year isn't that much-- but for those at the low income levels, that could mean not being able to buy enough food. Or having to buy cheaper, fatty foods instead of more expensive fresh fruit & veggies. Or not be able to afford their medication.

    As someone who had been in this very situation the last few years, this is a huge issue to me.

  • LT (unverified)

    Darrel and Jenni--

    Any plan being discussed now will not survive the legislative process exactly the same as is being discussed now.

    But if you don't like sales tax, suggest something better than SB 382. At least it is in writing which is more than proposals like "we need to raise corporate taxes and end the kicker" are.

    What I like about Westlund's approach is his attitude of: Support my plan Come up with a better one Or defend the indefensible.

    Nothing passes without the votes to do so. But does that mean SB 382 can't even be debated?

    How do you feel about debating whether to overturn the 10 year old experiment brought to us by those folks in the 1995 legislature?

             <b>       House Joint Resolution 14

    Sponsored by Representatives BAUM, MARKHAM, Senator JOHNSON; Senator STULL SUMMARY Proposes amendment to Constitution to require revenue raising measures to pass each house of legislature by three-fifths vote. Refers to vote of people at next general election.

    None of those legislators is still in office.

    Can we have a more positive discussion than "here's what is wrong with a sales tax"?

    Why not ask candidates where they stand on revisiting Measures 5, 47/50, and whatever number HJR 14 from 1995 was?

    Or are we stuck with the current system the rest of our lives no matter who we elect?

  • (Show?)

    I never said it would end up being the same as it is now. However, the fact remains that a sales tax is regressive and is harder on those at lower incomes than it is higher incomes. And right now it seems that it's the front runner in all the plans that are being pushed-- even Kulongoski has said he supports it (yes, he at first said a consumption tax, but was later asked if he meant a sales tax, and he said yes).

    The people at the low end of the income scale were hit really hard by the state's downturn in the economy, and they have yet to recover. Increasing their tax load will only make it even harder for these people to survive. Our tax system isn't the progressive already, we don't need to make it even worse.

    I've made some suggestions along the way, but tax reform isn't my strong suit. I'm much better in other areas the legislature will be looking at in the next session.

    I don't think we're stuck with the current system no matter what. I think the current system needs some huge changes, including some of the deductions/credits removed from the income tax system, getting rid of the kicker, increasing the corporate minimum, overturning the new rules regarding only taxing a corporation on their sales in the state (which may lead to Intel paying only $10 in taxes), etc.

    But just because I can't some up with a tax plan, that doesn't mean I can't point out what's wrong with plans like a sales tax or areas we need to fix. Not everyone's going to be an expert in tax reform, but leaving their views out just leaves us in the same place we've been for years.

  • (Show?)

    LT, I'm not sure why pointing out that the sales tax is going to create a burden on the poorest members of the population doesn't give you pause about it's adoption. That, to me, seems as if it's an indefensible position right there.

    And I'm not sure why you think that SB382 doesn't raise corporate taxes. The extra billion dollars in Westlund's proposal has to come from somewhere, after all. You can't reduce the tax burden on every taxpayer and still bring in more revenue.

    In fact, according to the very sketchy numbers on how the $6.11 billion figure for a biennium was arrived at, under Westlund's plan the increase in revenue seems to be largely a result of sales and use taxes paid by businesses.

    I've got a plan. Adjust the income tax rates to match the increase in revenue that SB 382 provides. All individual taxpayers get the same amount of PIT reduction. Business income taxes increase to make up the reduction and the extra billion. Everyone ends up paying essentially what they were going to under Westlund's plan, except there's no need to create a new tax collection structure (the income tax system's already in place), and people who would otherwise end up paying sales taxes but not getting a tax credit for it because they make too little money to file can continue to make it on their $10/day. That seems a lot simpler.

    I'm all for revisiting Measure 5 and other anti-tax measures, but since the discussion here included a sales tax proposal, and a sales tax is one of the most regressive forms of taxation. I like to take the stand of "First, do no harm", then worry about the cure.

    I don't know why you felt that anyone was stifling debate of SB 382. But you can't really debate something you aren't provided information about. What's on Westlund's site is very incomplete and has no supporting data. Even the LRO report -- 10 disparate pages cobbled together from material over several sessions of the Legislature, apparently -- leaves a lot of questions, but I commend his staff for getting it to me so quickly.

  • LT (unverified)

    Thanks for responding. What's on Westlund's site is very incomplete and has no supporting data. Maybe so, but does any other candidate site have even that much detail?

    I am not sure sales tax is the best answer. But I don't see SALES TAX in neon lights in SB 382, I see an attempt by 4 sponsors (3 of whom I know and respect) to write a balanced tax reform plan but one that the Senate failed to discuss publicly in 2005.

    YES, I KNOW, A POORLY WRITTEN SALES TAX COULD BE REGRESSIVE! So would a poorly written tax reform of any other kind! I've had friends who say they have great ideas for restructuring the tax system, and in some cases those great ideas included a small, well crafted sales tax. If someone doesn't like those ideas, fine. But lets have a serious discussion.

    And unless someone as famous as Westlund comes out with a plan with at least as much detail, I think his plan deserves debate.

    Yes I know sales tax can be regressive. So can the current income tax and property tax and all sorts of other things. I just don't see how "but look, there is a sales tax in SB 382, that isn't good" is a solution to anything.

    I just don't think we know that (for instance) items bought in a grocery store would be subject to sales tax. Until a bill is written in the next session, I don't assume (as it seems some have here) that only meat from the butcher case and fresh produce would be considered exempt food. How do we know that a sales tax would not apply to meet, produce, canned tomato sauce, cheese but would apply to a frozen pizza? It could be written to apply no food at all, or to restaurant meals but not takeout, or to restaurant meals incl. takeout but nothing in a grocery store but alcohol, tobacco, printed material (like books and magazines) etc. And it could be written to exempt grocery store soaps and other items of daily life.

    I don't know a way other than sales tax to make sure that tourists and those in the underground economy pay for the services now paid for mostly by income tax payers. Is it wrong to want to tax such people just because it might involve some sort of sales tax?

    Any system should be as simple as possible and provision should be made before it passes to educate the public (which means debating the issue in public outside the capitol and not doing closed door negotiations like in 2005) with an eye to defeating a possible planned referendum by groups like CSE/Freedom Works. And yes, that means explaining which side means what (in the case of Measure 30, petitioners winning meant the surtax did not happen and thus the budget went out of balance)and explaining over and over until everyone understands that if the legislature passes a balanced budget and an outside group gathers signatures, that is NOT a legislative referral.

    Why is the tax burden greater on individuals than on corporations--would the anti-taxers like to explain that? Are the petitioners all Oregonians or funded by a national group? During the Measure 30 debate there were promises that if the petitioners prevailed there would be all sorts of jobs but if the other side won jobs would disappear. To use the old Ed Rollins line, that "was not always on message with the truth".

    Kim Thatcher of CSE (rode Measure 30 into the House) literally ran away from me when I asked her in the fall of 2004 "What do you say to the person who was unemployed the day of the Measure 30 election and is still unemployed. That should not be allowed to happen. Those who come up with schemes like the Measure 28 and 30 nonsense should be exposed for the game players they are.

    A good start would be debating all current tax breaks to see which are worth keeping (no, ending tax breaks is not a "tax increase" to many people who never qualified for these breaks), exactly how the current system works, and ways to fix it. Higher income brackets should be discussed, higher corporate taxes, but also other kinds of restructuring. And the possibility of increasing revenue as well as more audits (incl. public school budgets) should be part of the mix.

  • Marvin McConoughey (unverified)

    I won't vote for a sales tax, even though it likely would save me money overall. I will defend the "indefensible". Our imperfect tax system is in being, has been largely adapted to by citizens, and has the virtue of being a two-legged system rather than three. A new tax layer (leg) brings significant overhead costs that cannot be eliminated.

    Claims that a sales tax can be designed to not be regressive are more hypothetical than convincing. It is impossible to correctly analyze what spending is a necessity for which taxpayers. For some, a new suit is crucial to job hunting; for others it is luxury good. Some must have a cell phone for employment, others don't need one, and so on.

    A further flaw is that proponents of a sales tax seem primarily concerned with extracting greater overall tax revenue from the Oregon economy rather than to create a more rational tax system. The topic of a higher tax burden has yet to receive a major economic study demonstrating that it would create a higher standard of living for Oregonians.

    If the state can demonstrate that we citizens will be better off by paying higher taxes, a good place to start is with the 376 pages of tax expenditures. And even that vast list is incomplete. So far, the governor and legislature have shown a marked unwillingness to reduce the volume of tax expenditures.

  • (Show?)

    Well, I thought pointing out the flaws in his plan, talking about who it would hurt/help, etc. was debating the plan. Sorry. I guess only those who agree are debating, and those of us who disagree aren't.

  • LT (unverified)

    Jenni, You miss my point--I was not trying to be a debate killer, just trying to get beyond "sales tax hurts poor people". I am not convinced that it is impossible to craft a tax reform proposal including a sales tax which will make poor people (some of whom own their homes, by the way) better off than things are now. I AM convinced that leaving revenue options off the table makes compromise harder.

    The actual wording of SB 382 includes this:

    SECTION 99. { + Food products. (1) There are exempted from the taxes imposed by the Sales and Use Tax Law the gross receipts from the sale of and the storage, use or other consumption in this state of food and food ingredients. (2) The exemption under this section does not apply to prepared food. + } ``` Debate over the meaning of Section 99 is appropriate. There has been a dysfunctional legislature with regard to hearing bills in the last few sessions. But back when the system involved many open public hearings, legislators would have had open public debate on the definition of "food and food ingredients" and "prepared foods".

    There have been some intelligent things said on this blog. But too much debate here doesn't address why, for instance, SB 382 isn't a valid response to Beardsley whose column started this.

    I appreciate the level of detail in SB 382. I'm not sure I would support the final version that would come out of committee, but I believe the discussion should be more specific than "sales tax hurts poor people".

    And more than that, I remember 20 years ago when there were debates among Democrats about whether a sales tax should be considered or if it was pure evil. Those who were very anti-sales tax seemed more interested in killing a sales tax than in proposing an alternative. I don't see how that helped this state or the things progressives care about. And if the insults (yes, there were those who hated sales taxes who insulted those who engaged in open discussion of various sales tax proposals) drove some people out of politics in the late 1980s, those people were not around in 1990 to work on Democratic campaigns or work on defeating Measure 5.

    I am not convinced that no poor person would ever be able to afford shampoo or a pizza if SB 382 were passed----I just want to see the details openly debated by candidates for legislature and Gov. For instance, if Brading defeated Minnis, which of the various tax reform proposals would he support?

    How does that translate to "only those who agree are debating, and those of us who disagree aren't."?

  • (Show?)

    You were the one that stated I think his plan deserves debate. I said I thought we were already debating it.

    Very few poor people do indeed own their homes. A small percentage do, with the majority of them that do typically fall into one of two categories-- seniors who have already paid off their mortgage or those living in very, very cheap mobile homes. You may also have a few who have been left/given a home by a relative. You'll find more of these people in the rural areas of the state where home and land prices aren't what they are in the metro areas.

    But generally, is very difficult for someone making $30,000 or less to own a home. We've been trying for quite some time, and it's virtually impossible to get a mortgage that is enough to buy a house-- even with our VA guarantee. And unlike most people at our income level, we have $0 in credit card or student loan debt.

    So typically property tax refunds are going to do very little for the average low-income person. Where they're going to see the biggest help is in lowering their income tax and/or additional credits.

    And I think we're being a lot more specific than a "sales tax hurts people." Not too long ago, we had a discussion on sales tax and I got very specific using Westlund's plan-- I showed how the numbers worked on various income levels. I didn't see any sense in repeating all the numbers once again.

    Debating section 99 is good, and several of us did that on a previous thread. Most states specify what prepared foods means-- it'll say whether or not frozen foods are exempted, items from the grocery store's bakery, etc. When it's not specified, that usually means that frozen dinners, pizzas, etc. at the grocery store are indeed taxed. The items that aren't taxed include meat, frozen/canned/fresh veggies and fruits, pasta, rice, etc.

    Many poor people literally have to watch every single penny if they want to be able to buy the basic necessities. Having dealt with a sales tax for most of my life, I can tell you that plenty of times we had to choose between a food item or something like shampoo or toilet paper-- and it was because of the sales tax. You'd be surprised how quickly sales tax can add up on your weekly grocery shopping. Our reciepts clearly showed how much total sales tax you paid, so it was easy to see how big that number could get without you even realizing it.

    In reality, it's going to be just about impossible to create a revenue package that includes a sales tax and doesn't hurt poor people without some kind of up-front exemption for low-income people. And the only way to do that is to give them some sort of card to show stating they're exempt. Of course this means humiliating yourself everytime you go shopping. It's bad enough the looks you get from people when you use the Oregon Trail Card (as they inspect every item you bought). Give people a card that exempts them from taxes, and it'll be worse. And of course you have the problem of people selling/renting their card out to others, allowing others to use it, etc.

    Even a tax credit at the end of the year wouldn't work. For starters, those who don't have any taxable income don't file. Those making under a certain income, and therefore paying no state taxes, also don't file. Secondly, you have to wait until you get your rebate to have that money back. So it eats up a portion of your spending money all year, and you don't get it back until the following year.

    Having dealt with a sales tax, and many discussions in Texas about getting rid of it, raising it, lowering it, etc. where I was able to hear many experts in the field debate it out, I just don't see how we can have a sales tax and it not harm low income people.

  • (Show?)


    I'm not sure how you keep missing this point, but the problem with a sales tax is that it starts out regressive. It's not that it's regressive if it's "poorly-written", it's that studies of tax structures show that a sales tax is regressive in any of its existing forms in the United States and abroad.

    If you've got an example of a non-regressive sales tax anywhere in the world, I'd be more than happy to see it. But the sales tax proposal in SB 382 will hurt poor people. That's not an opinion, that's simple fact borne out by studies of tax systems conducted by governments that depend on sales tax revenue. If you choose to ignore facts, that's your prerogative. You're "not convinced that it is impossible to craft a tax reform proposal including a sales tax which will make poor people ... better off than things are now." I'm not convinced that it is possible, I'd be willing to look at any examples you, Westlund, or someone else can point to.

    As for poor people owning their own homes, according to the Legislative Revenue Office, the most regressive portion of the current Oregon tax system is the local property tax. According to the Oregon Tax Incidence Model Research Report, households on the lower end of the income spectrum pay about 8% of their income in local property taxes (on average) which rapidly drops to less than 4% at about $25K and continues to shrink to just about 2% at $240K. I'll give Westlund's plan credit for low-income property tax relief, but not if it's taking away money from somewhere else.

    I think shampoo and pizza should be some of the details "openly debated by candidates for legislature." Why don't you?

  • (Show?)


    According to the Oregon Tax Incidence Model, about 30% of people in the under $15 income group own their homes outright, and another 20% have a mortgage. It's the 2nd largest percentage of free and clear ownership in any of the income categories in their data. The largest is in $15K-21K and it's about 35%.

  • (Show?)

    Like I said, those have to be people that fall into one of the following categories:

    1. are older and paid off their mortage back when their income was higher
    2. the home was given/left to them, such as by a family member who passed away
    3. they own mobile homes

    At $15K, you can only get a mortage for about $60K, if you're lucky. That's not going to buy a house-- it'll buy an older mobile home.

    We've been looking to buy a house for a few years now, and at $28K income it's been impossible to buy anything other than an older mobile home (pre-1988 when they started being more regulated and are called manufactured homes) in a park where you have to rent the lot you're on.

    The reason why many people at the higher income levels don't own their homes "free and clear" is because many added on second mortagages. Most people I know who are at the $50-120K range put second mortgages on their homes within the past 8 years or so when the economy got bad. Those at the lower income levels often don't have enough credit and/or equity in their homes to be able to do that.

    Here in the metro area, you're going to have a lot more low income people living in apartments. Once you get into more rural areas, the rental options are often few and far between-- you don't see a lot of big apartment complexes out there. That's often where you get a number of the low income people who own their homes.

    It'd be interesting to see how many of those "home owners" actually live in mobile homes. I know that there are a good number of large parks in the poorer areas of SE Portland and Gresham.

  • (Show?)

    I should note that $60K could probably buy a home outside of the metro area. I've been searching for homes pretty regularly over the past several months, and the only ones we found that cheap were mobile homes in a rental lot or a tiny 1 bedroom home half the size of our current apartment (which is pretty small already)-- which had a lot size only slightly larger than the house. And they all needed tens of thousands of dollars worth of work.

  • (Show?)

    Do you happen to have a link to an OTIM that is more recent than March of 2001? That's the only one I was able to find, and of course we all know that the economy started tanking right about that time. So I'd be interested in seeing more recent numbers.

    I did notice that home ownership in the lower income levels was under 50%, but it jumps to 70%+ in the higher income levels. And that renting is nearly 50% at the lower income levels (some people are listed as "other," which likely means they're people living with others, homeless, etc.), but in the single digits at the higher income levels.

  • (Show?)

    So far as I'm aware, that's the most recent publication on OTIM, Jenni. But then I just looked it up yesterday myself after following some other references to it. The report I found was the announcement of the model's completion; I don't know how much the basic assumptions have changed since that took place.

    Another useful report with more recent data (although not all of the same categories) is LRO's "2006 OREGON PUBLIC FINANCE: BASIC FACTS". I don't have the URL handy, I downloaded it the other day and saved it to disl.

  • LT (unverified)

    Believe it or not, there are people who have second mortgages on their homes and these people may be older and/or were recently laid off and so their financial situation changed.

    Seems to me that generalizations like Like I said, those have to be people that fall into one of the following categories: 1. are older and paid off their mortage back when their income was higher 2. the home was given/left to them, such as by a family member who passed away 3. they own mobile homes

    are as wrong as Minnis saying "the voters have spoken on Measure 30" as if the votes for legislators (in a higher turnout election) don't count.

    Debating theory is one thing. Winning legislative elections and governing is something very different.

    And there are 36 counties in this state, some of which have very different demographics and economic statistics than Multnomah County.

    I hope Rob Brading and all the other high quality challengers realize that when they are elected to the legislature they are there to make decisions from the point of view of the whole state, not just the way things are in their home county.

  • (Show?)

    I never said there weren't people who were recently laid off who had second mortgages. The numbers we're having to go with are from 2001, so the people likely had higher incomes back in 2001 than they do now. The report came out in March, 2001, which means it was done before the majority of layoffs in the state.

    And no, those aren't just generalizations. That information comes from several years worth of reading papers and reports, hearing speeches and talks on the topic, and knowing people who are in those income levels. Although I did leave one off-- those who had higher income levels when they bought their house, but for various reasons now are at a lower income (health reason, lay off, etc.).

    The fact is if you're only making $15K per year, there is a limit to how large of a mortgage you can get. Believe me, I know it-- we've been trying to get a house and our income level is higher than that.

    So those who are at that income level and have a home will typically fall into a handful of situations-- they had a higher income when they bought the house than they do now, the house was left/given to them, the value of the house is extremely low.

    And just because I mostly talk about Multnomah County doesn't mean I don't care about the rest of the state-- it means that Mult Co is the county I know the best. And my thoughts and opinions on topics don't mean that the candidates feel the same way-- I'm not a candidate, nor do I represent one. What I have to say here represents no one but myself.

    BUt the fact is that I'm not someone in a higher income level making assumptions about those at lower income levels. I'm not someone who was at lower incomes a decade or two ago, and has lost sight of what it's like to be low income.

    I grew up in a family that was low income for much of the time. Because of health problems, we've been below 133% of the federal poverty level for most of the time we've lived in Oregon. I know what it's like to be poor. I know what it's like to not be able to buy food for your family. I know what it's like to be stuck in an apartment because our only other option is buying a 1976 mobile home in a park. I'm not outside looking in, I am one of these people.

  • (Show?)

    As a wonky business school professor who has crunched some of these numbers, I am inclined to say that if one's goal were sustainable state spending over the long term, Beardsley's proposal makes reasonably good sense. Frankly, however, I don't think substituting a 5 percent consumption tax for part of the income tax and giving every taxpayer a $500 individual, or $1000 per couple, annual rebate, would make much difference in terms of total yield (maybe a little less, depends on the design of the consumption tax), volatility (it would reduce it somewhat because of portfolio effects), or fairness (hard to say -- I haven't crunched those numbers in over 15 years). See State Fiscal Management: What Practitioners can Learn from Risk Management Theory at SSRN.

    One point of fact, Oregon doesn't have a low corporate income tax rate, quite the contrary. What it has is low corporate income tax revenues. There is good chance there is a relationship here.

  • (Show?)

    The problem is how we allow corporations to calculate their "income" for tax purposes.

    And rather than making the system better, the legislature made it wore this last cycle. Now they get to exclude even more of their income from taxation.

    Getting to pay $10 on billions in revenue, just because you sold less than $100 million actually in the state, is just wrong.

    I'd like to see our legislators explain to a low income family why they have to pay hundreds in state tax, while a corporation brings in billions and only has to pay $10.

  • (Show?)

    One point of fact, Oregon doesn't have a low corporate income tax rate, quite the contrary.

    So, explain to me how PGE paid $10 last year?

  • (Show?)

    How did PGE pay $10 last year? I don't know. Last time I looked they were a subsidiary of corp with large carry over losses, but I don't know their current status. For the most part, corporations (and individuals who can do so) will find a way to recognize income (profit) where tax rates are low and avoid recognizing income where rates are high. Hence, jurisdictions with low corporate income tax rates tend to collect more revenue from corporations than jurisdictions with high corporate income tax rates. As a general rule, economists aren't very enthusiastic about corporate income taxes, primarily cause we cannot figure out who pays them. Are they they shifted forward to consumers (in which case they are probably regressive in their incidence) or do they stick where they are (in which case they are paid by shareholders, who are thus subject to double taxation)? I think the evidence is that they are paid moslty by the owners, but then I think that is also mostly true of property taxes. Regardless who pays them, Oregon would probably be better off with lower corporate income tax rates.

    This is definitely not an appeal for special tax breaks for business. Ordinary taxpayers, are the ones who fill the gap between incentives for business and state spending. Oregon would no doubt have better governance if it would stick to a simple tax system that is broad and fair, and then compete with neighbouring states by deciding how high or low to set their overall tax burden. The corporate kicker is a marvelous example of a nasty tax gimmick IMHO.

  • (Show?)

    If higher corporate tax rates means lower revenue, what were we doing that brought us higher corporate tax revenue as a percentage of all tax revenues? Or what are we doing now that has produced such an imbalance between corporate and individual burdens?

    And I call BS on shareholders being subject to "double taxation." Shareholders are not the company; the company is the company. If corporations are persons, you can only be one person at a time--and if the corporation is a person that pays taxes, then when it distributes dividends to its shareholders, it is distributing them to OTHER people. Thus are the shareholders only taxed once, when they receive income from the person known as AT&T, or Microsoft, or Love Sac. Supply siders want to have it both ways on that one.

in the news 2006

connect with blueoregon