Tax Reform and the Governor's Race

Russell Sadler

Ben Westlund, a former Republican state senator collecting signatures to qualify as an independent candidate for governor, stopped in Medford for a “meet and greet” last week. The gathering was organized by Bill Bartlett, who can be described as a moderately conservative Republican, and Ashley Henry, a liberal former Democrat who recently reregistered as an independent.

When asked if he planned to deal with a state that is operating on borrowed money, Westlund’s answer was "comprehensive reform to the tax system." That translates to making the income tax more progressive, raising the minimum corporate tax rate, and a 5% sales tax among other things.

If Westlund's fiscal program sounds a bit like Kulongoski’s or Ron Saxton’s it is because all three candidates recognize that Oregon’s tax system has been so distorted and unbalanced by piecemeal initiatives over the last 20 years that any tax reformer has few options left.

No governor can pass tax reform alone. It requires three-fifths of the Oregon House and Senate -- new supermajorities imposed by initiative. Any tax reform plan requires a consensus and a Republican-dominated House refuses to join any consensus. The House Republicans are content to borrow and spend while refunding nonexistent “surpluses.” Any Republican who objects is bullied into submission or driven from the party as Westlund was.

But even new legislative majorities may not be enough to overcome the growing abuse of the initiative.

The Oregon legislature is constitutionally prohibited from deficit spending. It must raise as much money as it spends, either by cutting appropriations, raising taxes or borrowing.

Voters using the initiative are exempt from this restriction. The budget-busting increases in state spending over the last 20 years have not been produced by the legislature, but by the voters passing initiatives.

Ballot Measure 5 in 1990 increased state spending by billions of dollars by reducing locally raised property taxes and substituting state income tax revenue, but failed to raise any new revenue to pay for the shift. Ballot Measure 11 in 1994 imposed mandatory sentences for certain crimes that required new prisons, but failed to provide any new revenue to pay for any of it.

And there is no end in sight. One measure likely be on the ballot this November limits increases in state spending to population growth and inflation. It is sponsored by the same Don McIntire behind that tax-burden-shifting Measure 5 in 1990.

The other dangerous initiative, financed by Loren Parks (who no longer even lives in Oregon) automatically couples exemptions in the Federal Tax Code to exemptions in the Oregon Tax Code, further depleting the Oregon treasury.

If voters approve both of these initiatives, it will not matter who is elected governor or which party controls the legislature. Republicans are not be realistic about the need for tax reform. Democrats will not support draconian budget cuts.

State Treasurer Randall Edwards has made it clear that Wall Street bond underwriters are unwilling to loan Oregon any more money secured by future tax revenues. Oregon will be unable to pay its bills with no prospect of borrowing the money to replace the “surpluses” it has given away. The result will be continued political paralysis.

  • KISS (unverified)
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    I find the phrase Tax-Reform to be so incredulous. The deep meaning is tax the middle and lower class and give a skate to the corporations. We need no gigantic reform. We need to make corporate pay their fair share...not too many years ago taxes were about 50/50 now they are born by the individual to about 3/4's. Corporations that pay no income tax [ Yup, it really really is true] should be taxed at a higher corporate tax than those that pay a income tax. $10.00 corporate tax is so obtuse..an insult. Yet, they are the one's clamoring for better education..oxymoran in the making.

  • askquestions1st (unverified)
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    Russell -

    Frankly, your recent posts increasingly focusing on your support of Westlund and really read like you quickly becoming less of a critical thinker and essayist that you try to present yourself as, and much more of a propagandist who misuses language to deceive.

    You title your post "Tax Reform and the Governor's Race" and include a lot of pseudo-analysis of our current civic condition. However, you cleverly insert this blatant Shrub-style "up is down" language-inverting falsehood at the strategic framing point of your argument:

    When asked if he planned to deal with a state that is operating on borrowed money, Westlund’s answer was "comprehensive reform to the tax system." That translates to making the income tax more progressive, raising the minimum corporate tax rate, and a 5% sales tax among other things.

    Later you continue with the propagandistic technique of inverting the truth to attempt to make Westlund look like a victim:

    Any Republican who objects is bullied into submission or driven from the party as Westlund was.

    Westlund left the Republican Party. And to all appearances he in part failed simply because he does not have as much ability as a leader as he would like to hope.

    If you were actually writing about the theme suggested by your title, you would examine his actual tax proposal:

    Westlund's tax program, unless he has changed it recently in response to getting called out as being a Shrub style "misrepresentor", is far from progressive: Greater tax savings on a percentage basis for higher income earners than lower income earners (regressive) - 5.6% for $125K earner, 3.8% for 33K earner (0.4% increase for 35K earners if one assumes they are less likely to own their own home and benefit from his property tax reduction), reduction of corporate tax burden (regressive), capital gains tax caps (regressive), suspension of inheritence tax (regressive), sales tax (regressive). Blue Oregonians can read it for themselves here if they just don't like the tone of this comment:

    http://www.westlundforgovernor.com/issues_taxreform.php http://www.westlundforgovernor.com/documents/SB382.pdf

    This is Westlund's own presentation of his tax plan, not mine (as of the date of this post, in case he changes it). Also read the fine print carefully for yourself to see if his supposed "property tax relief", which is the sole "progressive" part of his tax platform, really doesn't offer much to the working age poor or lower middle class citizen who can't afford to buy a home and realize his property tax savings.

    Russell, if you have some serious analysis to add rather than just promulgating thinly veiled campaign propaganda for Westlund, you might turn up some numbers on this: If the theory is that income tax revenues drop during downward segments of economic cycles (ie. taxes reflecting the amount of money people have to spend), how do sales tax revenues actually fare during downward segments of economic cycles (ie. the taxes on the amount of money people actually spend)? We know Ben finesses this particular point by demagoguing that he will recover lost mystical, unquantifiable "lost income tax revenue" from consultants and criminals that he lumps into one category as dishonorable citizens and tax cheats. However, is it that he actually believes folks will actually continue to spend beyond their means to make his tax plan?

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    What's fascinated me so far throughout this race--and it hasn't even really begun--is that an independent candidate plans on trying to win by convincing voters for the 100th time that we need a sales tax. Usually the independent is the one who is bold enough to propose the ideas that voters DO want, but that the legislature is too corrupt or gridlocked to provide. People don't usually take strong medicine from doctors they don't know, however.

    Of course Sadler is right about the dangerousness of the TABOR initiative, however.

  • Allen (unverified)
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    """while refunding nonexistent “surpluses.” """ Aren't you forgetting a couple of minor things? Like the voters and the kicker law itself? Even is every legislator were a Democrat they would still have the voters keeping the kicker law, prohibiting a sales tax and stuffing M30 (tax increases) down their throats. So what is your plan to take more money from the voters? Attack the intitiative process no doubt.

  • askquestions1st (unverified)
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    This particular statement also bears further comment:

    Any Republican who objects is bullied into submission or driven from the party as Westlund was.

    If Westlund has leadership potential, he wouldn't be driven from the Republican Party. He would leave it and do the hard leadership work of forming a new party. Like Teddy Roosevelt did when he formed the Bull Moose Party. There is important value for our representative democracy in forming a party around an articulated set of governing values and running on those values.

    As torridjoe aptly points out: Usually the independent is the one who is bold enough to propose the ideas that voters DO want, but that the legislature is too corrupt or gridlocked to provide. This highlights how Westlund really may not have well thought out ideas about leadership and is really just being more reactive, with perhaps an exaggerated sense of his own ability to make a contribution thrown in. (Not that my personal view matters, but it is important to second Russell's and torridjoe's warnings about the danger and utter stupidity of TABOR.)

    In a state that has embraced VBM, which we are now seeing is not the solution to low voter participation, and may embrace non-partisan primaries as the wrong solution to our failure to make representative government --- which inherently includes party affiliation as the way to avoid factionalism --- work well right now, perhaps we can all recognize the relevance of the last quote in this story (not that I view US Today as a particularly informative source for anything except perhaps for exact quotes by informed commentators):

    Growing number of voters ignore primary elections http://www.usatoday.com/news/washington/2006-07-16-primary-turnouts_x.htm

    In any given year, primary turnout will not predict general-election turnout," says Curtis Gans of American University's Center for the Study of the American Electorate ... Still, he's concerned the no-shows have devalued the importance of voting."We essentially have gotten rid of the religion of civic duty," Gans says.

    I don't see how a candidate who takes off on his own and mobilizes a band of followers around him rather than some set of (honestly) articulated governing values really speaks to that problem.

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    When I read Russell's Sunday column in the Medford Mail Tribune I thought his column was about exposing the pattern of the high cost of the initiative process. He clearly exposed Republicans for their support of shifting costs to the State. Further he noted the hypocracy of the Republicans and the McIntire crowd for turning around and blaming the State for rising costs, when they in fact, it's the initiative process that has crippled Oregon's ability to support K-12 education, among many many programs.

    Russell wrote, "The budget busting increases in state spending over the last 20 years have been produced NOT by the legislature, but by voters passing inititives." He goes on to note that Measure 5 increased state spending by BILLIONS by reducing locally raised property taxes. Russell sited Measure 11 which imposed mandatory sentences for certain crimes that required new prisons but failed to provide revenues to pay for them. Once again the State has to dig into it's already limited coffers to pay for Measure 11.

    Now McIntire wants to limit state spending to population growth and inflation. It's just like Measure 5 again, shifting everything to the State.

    Saxton and Westlund participate in the shell game by not accepting the responibility to stop blaming the State for rising costs. They would be stronger candidates if they informed Republicans of all stripes how the initiative process has hurt Oregonians.

    Kulonoski, left holding a bag full of deficits when he took the his first term of office worked hard to pump more money into the state through aggressive recruitment of new and relocating businesses. When Posters here blame Ted for this and that..I suggest they look at the drain in their bathtubs. Ted fills the tub as best he can while the inititive process pulls the plug draining what little money gets put in. I think Russell was writing more about finding the plug...(correcting the initiative process) than supporting canidates.

    Thanks Russ, for yet another well written article.

  • s (unverified)
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    Mr. Sadler has played on this theme before: "a state that is operating on borrowed money." I do not believe this is true and I, again, challenge him to defend the claim. He later acknowledges: "The Oregon legislature is constitutionally prohibited from deficit spending." But he then asserts that operations can be funded by borrowing. Outside of bonded debt for capital improvements, debt for operations would amount to deficit spending (unless it was short-term, only within the biennial budget cycle).

    Sadler is absolutey correct in his assessment that voter-approved initiatives have imposed mandatory costs on the state in such an uncoordinated manner that it has limited the options for true tax reform. However, his eagerness to join the chorus of those trying to turn the Republicans' "tax-and-spend" canard against the Democrats, to an equally pernicious mantra of "borrow-and-spend" characterization against the Republicans, doesn't get much traction in this state's capitol.

    If I am wrong about state borrowing for operations (which Mr. Sadler previously asserted amounts to approximately $100 million per year), then I want to be corrected. Until then, I remain skeptical and critical of any discussion making such a claim.

  • JTT (unverified)
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    Saxton and Westlund participate in the shell game by not accepting the responibility to stop blaming the State for rising costs.

    Paulie- do you have absolutely any basis whatsoever to say this about Westlund? Saxton, I can understand, but Westlund? I've heard Westlund speak a couple of times and the only "rising costs" he's talked about are the costs of health insurance and higher education...not the "rising cost" of government. In fact, I think he campaigned against Measure 5 and 47...and has always been doing battle against Sizemore and McIntire.

    So I'll ask again, do you have any basis for your comments? Or did you think that imitating Karl Rove would get you somewhere?

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    In fact, I think he campaigned against Measure 5 and 47...and has always been doing battle against Sizemore and McIntire.

    Got a source for that? Measure 5 passed in 1990, about six years before Ben was in politics, though his bio is relatively skimpy on the years from 1974 to 1996.

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