Kulongoski: Leading a grassroots campaign for tax reform?

In the Sunday Oregonian's wide-ranging post-election interview with Governor Kulongoski, he argued for a grassroots campaign for tax reform and education funding.

Q: As you look off beyond the next legislative session, have you had a chance to think about what is possible during the next four years, your last time in public office, apparently?

A: Let me give you a hypothetical. The Legislature adopts the Education Enterprise, and all of my best dreams come true. The session ends. And the night it ends, I'm standing with the speaker of the House and the president of the Senate. I say, "We're here to collectively announce the creation of a new committee that will report back to us by Nov. 1 on the restructuring of Oregon's tax system to make it more fair, more stable. And it's a grass-roots effort."

And they come back on the first of November, when we announce a committee that this is going to be put on the ballot by initiative. We're not looking for 100,000 signatures; we're looking for 300,000 signatures. And I have a grass-roots movement and let the public buy into it.

This is not just about giving more money to government to go into the General Fund and have the politicians and everybody fight about it, but it is bringing stability and fairness to the Education Enterprise, to give you the opportunity and your children the opportunity to have the quality of life you want.

What do you think? Will you join that grassroots campaign? Is the time right - finally - for a restructuring of Oregon's tax system?


  • Russell (unverified)

    Oregon has been long overdue for a tax overhaul. Hooray for progressive change!

  • KISS (unverified)

    I hope it's not another screwing of the middle class as it is now. Sales tax is such a criminal way to soak the lower and middle class, seldom do the wealthy pay sales tax...they buy big ticket merchandise wholesale, hence no sales tax. Let us go back to corporate paying 50% of the burden.

  • (Show?)

    Why go for signatures?

    Just refer the damn thing to the ballot then start promoting it.

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    Collecting signatures is a way to build grassroots support for the initiative, and to identify potential supporters for future progressive initiatives.

    This is a great move by the Governor.

  • ANON (unverified)

    It is great -- but it is hypothetical.

  • Christy (unverified)

    Tax reform in Oregon is absolutely necessary. I wish the governor and all of us the best of luck in that effort... because we will need lots and lots of luck!

    I spent a fair amount of time going over the local tax measures on our ballot with some of my friends this election season and could not find a simple explanation of how our tax system works and why it sucks, especially here in Multnomah County. Does anyone know of good sources for learning about our current tax system? How about sources for how effectively the government spends its money, particularly in Portland and Multnomah County? One of my friends is convinced that the government cuts education spending so that voters will approve more spending and that the increased revenue is spent dubiously... I could not find proof that what she was saying was not true...(By the way, she is a good progressive.)

    Hard to reform our tax code when even fairly civically-minded folks such as myself don't even know where to find the facts in layman's terms.

  • Mike Schryver (unverified)


    One good overview to start with might be City Club's 2002 report, Tax Reform in Oregon.

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    Christy -- I'd also spend a bunch of time over at the Oregon Center for Public Policy. More info than you can safely read in a month, but it's all over there...

    You might even start with the blog ad they're running right now on BlueOregon.

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    Talk is cheap. However, if my cynicism proves unwarranted and this actually comes to something, I'll be among the first the start the push.

  • Garlynn (unverified)

    I'll back the governor on this one.

    But I still don't like the idea of a sales tax, and I never will.

    I'd much rather see a wholesale goods transfer tax -- that is, a tax on wholesale items that is levied somewhere along the wholesale supply chain, either at point of delivery or somewhere else.

    The point would be that items that get delivered via trucks or rail would be taxed, partially to pay for the impact of the fact of their delivery on the transportation system, and, perhaps, partially to help hold up the general fund.

    Consumers wouldn't see a point-of-sale tax, however. The price of goods would go up, where the market could bear the increase, but it would be up to businesses to pay the tax. Also, items not subject to wholesale delivery would not be subject to the tax (i.e. wines sold at a winery, beer sold at a brewery, chocolate sold at the chocolate factory, etc.).

    It would also make sense to raise the gas tax a bit, and index it to inflation. I know that Oregon has been studying the idea of switching from a gas tax to a mileage-based tax; however, I think that the good ole' gas tax is a better way to go for now, simply because it is the most efficient way to tax the consumption of fossil fuels. If people want to buy hybrids or ride their bicycles to escape this tax, great -- the state should be encouraging this behavior anyways. As a part of tax reform, the wholesale delivery tax mentioned above could help to offset any future lost revenue from general societal shifts away from petroleum usage.

    I've expanded on these thoughts here:


    Let's kick-start the brainstorming sessions now!!!

  • LT (unverified)


    I do agree about brainstorming, and think we should have a lot more open public discussion of the tax system DURING the legislative session and not just do the init. at the end. Educate the public about how the system ACTUALLY works rather than just the spin we've been hearing all these years!

    I happen to like SB 382 from 2005--sounds more balanced and well thought out than anything I have heard in a long time.

    On your specific proposal about point of sale:

    Isn't your proposal like "the equal tax" of a previous decade?

    I recall when that was on the ballot and a friend who worked in big box retail asked what I thought of it. My response was this: "Suppose your store sells frozen french fries. The potatoes are grown and then sold to the company that cuts, freezes,and packages them. That company sells them to a distributor and the distributor sells to your company which ships them to your store. Someone in Receiving does the paperwork when the frozen potatoes are delivered to the store. " I think the equal tax was something like 2%, so I said something like "the farmer pays 2% when he sells to the food freezing company, the food freezing company pays 2% when selling to the distributor. The distributor pays 2% when they sell to the company. Does the company then pay 2% when they deliver the frozen french fries to the individual store? My point is this: which of your friends at work will end up doing the paperwork when those frozen french fries arrive, and is that really the best tax system?".

    My friend said she'd never thought of it that way, and after much thought I think she voted against it.

    My point is this: ideas that sound good in theory sometimes fall apart upon implementation, and that is why it is important to have lots of open public debate during a session rather than gambling it all on the wording of a measure which may have unintended consequences.

  • billijane (unverified)

    I would try to avoid, at all costs, the term "and let the public buy into it" when talking about grassroots, from the bottom up political causes.

    I'd be careful of the wording on issues and how they are presented to the public.

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    What about the other "grassroots" campaign for tax reform headed up by elected officials?

    Senators Westlund, Deckert, Morse, and Rep. Schrader have been doing bipartisan (Westlund would say "tripartisan" with a wink) public forums about re-introducing legislation next year, based on SB 382. Westlund has a web page devoted to it (including a link to the full text of SB 382.)

    Any guesses of whether Kulongoski plans to work with these guys, or develop something in parallel that would compete with this plan?

    I must say, I was very impressed with the work they've done, and with their ability to explain it to the public. My one concern is that I don't fully understand how it would shift the existing tax burden, but I expect they will find a better way to explain that as time goes on.

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    Re: last comment, here's the PDF file of their PowerPoint presentation from Kurt Schrader's site.

  • Dave (unverified)

    The majority of Oregonians will see this as another "Conversation with Oregon" which was no more than an attempt to sell a sales tax to voters. A sales tax has failed 9 times and will again. We need to spend our time on tax reform that has a chance to pass such as corporate tax reform.

  • Eric (unverified)

    Why send an initiative to the voters? It is not the public's job to reform the tax code - it is the people we have just elected into office's job to do so. That is why we voted them in - to do thier job and not send it to the public just becuase they would rather have a nice lunch at a nice restaraunt than debate tax code. I am tired of having to decide items that is the legislature's job to decide. Do your jobs and don't pass it on becuase of tee-times at a golf course.

  • Sally (unverified)

    A sales tax is automatically considered "regressive," but as per usual there is no note here that Oregon's income tax, which kicks in to maximum 9 percent level at a pitiful $6,250 annual income, is regressive: to virtually all intents and ends a flat tax. The only tax proposal the Governor has clearly made is yet one more cigarette tax, a tax which also rests heavily on an economic and social underclass, hardly a "noble" or in my mind "progressive" way to pay for medical services for all the state's children.

  • LT (unverified)

    Good for you, Eric! Why send an initiative to the voters? It is not the public's job to reform the tax code - it is the people we have just elected into office's job to do so. That is why we voted them in

    Serious tax reform should come from many public hearings with lots of input, not from a "take it or leave it" measure whose wording may have flaws.

    There will be those who say "we tried balancing the budget using a surcharge on income tax and it was defeated by the voters" but that is only half the story.

    Would Measure 30 even have gotten on the ballot without the help from Dick Armey and his national group? Reporting at the time said otherwise. Last session the motto was "the voters have spoken on Measure 30" implying no discussion of tax restructuring allowed.

    Well, 2006 voters turned down Meas. 41 and 48 along with most other measures. So don't tell me the anti-taxers control the political climate!

    We pay legislators a salary to solve problems. They should earn their pay.

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    Oregon's state tax structure is in fact one of the 3 or 4 most progressive in the country. Oregon's system of exemptions, exclusions and deductions produces a personal income tax design that combines the best aspects of a flat tax and a progressive income tax. If you don't know that, you haven't looked at the numbers. It is also one of the most (top 5) income elastic systems in the US. The difficulty here is that highly progressive, high-growth tax sources are also necessarily highly volatile. Oregon's corporate income tax has more difficulties than its personal income tax: the existing system of apportionment gives far too much latitude to corporations to manage income recognition and our high marginal rates give them too much reason to do so. So we end up with an excessively volatile corporate income tax that doesn't throw off as much revenue as it should. However, high volatility per se is only a problem for government if the state cannot use savings and debt to smooth out spending growth.

    A comprehensive retail goods and services tax or value-added tax wouldn’t substantially reduce the volatility of Oregon state revenue (aside from a small portfolio effect). Fortunately, it turns out that a first dollar rebate, which would make such a tax less regressive, wouldn’t have a significant volatility effect. But why substitute a poorer tax for a good one?

    This takes us to fixable problem number 1: the kicker. Even if we had a rainy day fund we couldn't fill it. Moreover, without some kind of rule governing spending growth, we'll probably continue with our manic-depressive state spending policies. If we had a sound rule governing the maximum allowable rate of expenditure growth, we could also worry a lot less about using debt to smooth it out.

    Fixable problems two through four go to the system of local taxation, which is now entirely subject to state regulation, and where we have big problems. Here, I would focus on four solutions: 1. Return to the levy system in effect prior to Measure 5. 2. Return to the assessment system prescribed by Measure 5. 3. Make residential property taxes on homes owned by people who do not itemize their income taxes and do not have mortgages as convenient and cheap as for those who do. And 4. Stabilize state aid to local school systems, so the state contribution doesn't fluctuate with the business cycle, but grows at a fairly steady rate.

    -- Fred Thompson Grace and Elmer Goudy Professor of Public Management and Policy Atkinson Graduate School of Management, Willamette University


  • Kris Nelson (unverified)

    Yes, Fred, not only has M5/50 distorted our assessment system it has also shifted tax burden from high value sites to low value sites as found in a '99 study of property taxes in Salem. If we used a spending cap based on personal income growth, as Washington legislation proposed, we can efficiently recover a greater portion of the unearned value in sites (economic rent), which our 50-50 property tax under M5/50 restricts. As Harrisburg and 19 other Pennsylvania towns have done for decades (www.urbantools.net ), we can slash the tax on buildings and compensate on sites. It collects the publicly created value, as when zoning, annexation, or growth boundary expansions cause windfall gains in site values.

    This split-rate property tax, according to Milton Friedman, is the "least worst." Why? There's no deadweight loss to the economy (drag due to disincentive effects inherent in sales, value added, income, payroll, etc. taxes), it's stable, efficient (virtually no fraud and low collection/enforcement costs), and, perhaps to his chagrin, very progressive.

    Last session, SJR 1, a Sen. Revenue Comm. bill, received one hearing and bipartisan support. It proposed a Constitutional amendment to enable cities to tax improvements less and sites more. When phased in over five years, it effectively expands the tax base while causing infill and redevelopment. The conventional property tax screams SPRAWL, since it allows underutilized/vacant sites to be held so cheaply (look at downtown Portland!). But we should also look at other resource-based taxes: depletion allowances on water, air emissions, maybe timber, etc. Check out Alan Durning's book Tax Shift for a concise look at these. Let's start planning a sustainable economy while we evaluate taxation options.


    Kris Nelson Principal, Geonomics Consulting

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    Hi Kris, You are absolutely right IMHO about the benefits of moving to a site based property tax assessment scheme. So was Henry George and William Simon U'Ren, author of Oregon's constitutional provisions for initiative,referndum, and recall. So your proposal meets the test of workability, I am less certain about its practicability. Best, Fred

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    Citizens for Oregon's Future , www.fororegon.org, is no longer in operation but the web site still has good info in plain English on where tax dollars go, etc.

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    Another good idea, which has real problems but points in the right direction was proposed on a Blue Oregon stream earlier this year entitled repeal Measure 5 by John Napolitano (May 4, 2006).

    "For residential property such as your average single family house, we should have a homestead exemption for the first $50,000 of assessed property for the primary residence of the taxpayer. The next $250,000 of assessed property value would be taxed as they are today, with the same limits on maximum tax and on the increase on assessed value. For the assessed property value above $300,000, we should go to the pre Measure 5 system. This means that a family living in a modest $100,000 home would see their property tax cut in half, a family in a median $250,000 home would see a 20% property tax cut, and people living in $500,000+ homes would pay more than they do today. Second homes would also pay more."

    This would be messy and difficult to figure out, but the revival of the HARMs program across the board is attractive. Thought should also be given to increasing the first dollar exclusion from the state personal income tax to $15K-$25k and indexing it. Both of these changes would cost the state money and both would increase revenue volatility, but I think in a good cause.

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