Reaching Out to Investors (Really) In the Wake of Measure 66

Steve Novick

I feel absolutely horrible today about Ben Westlund. And his death has also brought the memory of the untimely loss of Bryan Johnston roaring back. Two men who proved, among other things, that “moderate” doesn’t have to mean wishy-washy milquetoast.

In their honor, and because of a conversation I had with a friend this morning, I’ll take a stab at being moderate myself. Here we go:

I think progressives need to reach out to Oregon’s investor community. I’m concerned that the Measure 66 / 67 fight might have soured some investors on Oregon. And I think we need to think about a capital gains tax break.

Yes, this is really me. I haven’t been abducted and brainwashed by aliens. I’m still proud of helping to pass Measures 66 and 67. But I am serious. Let me explain.

This morning I had breakfast with a guy I know who actually voted for 66 and 67, but who hangs out with investor types, the kind of people who invest in start-ups that might became job-creating traded-sector businesses. He said that the adoption of and the discussion around Measure 66, in particular, made them feel that they weren’t valued. They were willing to absorb a temporary tax increase, but when the Legislature made it partly permanent, they got the impression that nobody cared about people who invest in Oregon businesses. And some of them, my friend said, will leave, or have left, the state. Not because 0.9% of the amount they make over $250,000 is going to ruin them financially, But because they wound up not feeling valued.

Now, I did not think before, and do not think now, that there will be a mass exodus of rich people from Oregon. But I always acknowledged throughout the campaign that there would probably be a few who would get grumpy and leave. My friend has convinced me that that’s true. I think a lot of it is probably because of the way Salem lobbyists managed to sell a distorted version of what actually happened in the ’09 session, and I told my friend that, but he said it doesn’t matter: the perceptions are there.

That doesn’t mean that we repeal 66 and 67. At all. But if there are ways to make some of these folks feel more valued, we should try them out. If we can convince even a few of the few to stay, that’s a good thing.

I am reminded of the fight over PERS reform in 2003. Because of really unfortunate decisions the PERS board made in the 1990s, PERS costs were skyrocketing and something had to be done. But when the reforms were implemented, a lot of public employees felt that they had been personally attacked and disrespected. They didn’t all necessarily know everything about how dire the short- and long-term budget situation was, or how PERS fit into it. They thought the people in charge didn’t value them. (The fact that the reforms went beyond what the Oregon Supreme Court thought was even Constitutional didn’t help, of course, but I think people would have been pretty mad regardless.)

Now, some people were going to feel that way no matter what Governor Kulongoski or legislators said to them. But I bet that if the Governor had it to do over again, he would go on an extensive speaking / listening tour of public employee work sites to talk them through why reforms were necessary. That might have helped fend off the primary challenge he wound up with in 2006. I understand the pressures on the Governor in the fall and winter of 2002-2003; he had to put an administration and a budget together, flesh out his legislative agenda, etc.  But ideally, he would have worked in that speaking / listening tour.

I think progressives – elected an unelected – should try to do something like that with investor types now. I’ve heard, actually, that our legislators are doing direct outreach to business owners around the state – going directly to the business folks, not through their lobbyists. I think that’s great.

Because I am quite confident that even many rich, sophisticated investors and business folks really don’t know a hell of a lot about the state’s short-term, medium-term and long-term budget problems, or about how politically limited the legislature’s revenue options were and are. Without someone taking the time to walk them through that, some of them really are going to think that we were just out to get them. And some of them are going to turn away from Oregon, not invest in the Oregon start-ups they might otherwise have invested in. No, not enough to cause the economic catastrophe that the Measures 66 and 67 opponents warned of; not enough to make a big difference in the amount of revenue that Measure 66 will collect. But there will be a few. If through outreach we can make that few even fewer, we should give it a shot.

One thing that we could do is restore, in somewhat expanded form, a capital gains tax break that Oregon adopted in the ‘90’s and that then was allowed to lapse: A tax break for investments in Oregon-specific businesses.  As you may know, I have always been thoroughly opposed to an across-the-board cut in capital gains taxes. Mostly that would just mean that people who make money gambling in the stock market, creating no Oregon jobs at all, would get to pay a lower tax rate than people who have regular jobs have to pay. But I see nothing wrong with telling investors that if they invest in an Oregon-based business, they should pay a lower tax rate than if they don’t.

My good friend Chuck Sheketoff says that the Oregon capital gains provision didn’t work, didn’t generate much if any additional investment in Oregon businesses. The friend I had breakfast with today says that the law was interpreted in an incredibly narrow way and was therefore much less meaningful than it could have been. Maybe he’s wrong; maybe no such thing will ever make a darned but of difference. But I don’t see the harm in trying. If nobody uses it, it won’t cost us anything. It won’t cost a lot of money under any scenario, because the vast majority of capital gains will still come from people investing in the broad-based stock market. But it might help spur a bit of extra investment in Oregon-based businesses. And it might reassure those investors my friend know that we do value them.

It’s kind of like the single sales factor, another issue (among very few) where Chuck and I are on opposite sides. Conceptually, I agreed with Nike and Intel that the corporate profits tax should be based on a company’s Oregon sales, and they shouldn’t pay more because they have property and employees in Oregon. Why punish a company for having employees and property in Oregon? If they have employees and property, they’re paying income and property taxes. The actual single sales factor legislation was problematic because it was a net revenue loss that we could not afford: They should have raise the rate to offset that. But the concept was sound. To the extent reasonably feasible, we should have a tax code that collects taxes from businesses based outside of Oregon that make money here, and encourages the creation of businesses based in Oregon. Same with capital gains: If we collect a lot of money from people who live here but make their money gambling in the stock market, while giving a break to people who invest in Oregon-based businesses, why not? 

Again: I know that taxes are generally not a big factor in business location decisions. I don’t think they’re generally a big factor in personal location decisions either. If they were, there wouldn’t be so many rich people in New York and California.

But again: If even a few investors are going to leave, and we can do some things to convince a few of the few to stay, why not? 

By the way, my friend this morning was a huge fan of Ben Westlund. Who supported Measures 66 and 67, but still – according to my friend – was working with and had the respect of my friend and his friends. 

  • Old Ducker (unverified)

    WooHoo! We R #1!!!!!!!!!!!!!!!!!!!!!1

  • The Unrepentant Liberal (unverified)

    Gosh, I didn't know we hurt their poor little feeling. Who knew they were so sensitive?

  • Bob Baldwin (unverified)

    A few observations:

    We need to stop talking about making these changes with the intent of budget neutrality. First, that avoids the fact that we need additional revenue. Second, hitting "neutral" is to fine a target; we always end up positive ("broke the promise") or negative, and forcing budget cuts.

    Second, tax breaks tied to additional investment should require actual evidence on a specific case basis, and not allow for pulling out as soon as the breaks are gone. Allow them as an "offset" 3-5 years after the investment. If it's a real business, and not a tax dodge or a transient enterprise, 3-5 years shouldn't be a big deal.

    Third, a fair bit of the angst over PERS "reform" came from the fact that custodians and other lower-paid folks got lumped in with the "examples" of highly-paid administrators.

    Also, "some people" people inside the ball game felt Teddy K bought Tony C's vote in committee with a seat on the Employment Appeals board (and the 70k salary that Board seat pays). Just sayin'...

  • (Show?)

    Old Ducker: WooHoo! We R #1!!!!!!!!!!!!!!!!!!!!!1

    I'm not at all surprised you're celebrating us being the most depressed city in the nation, Old #^@ucker, as it is a triumph of conservative policy in this state. Yes, Oregon has one of the worst drug and alcohol treatment services in the nation, because of the penny foolish pound foolish right wing policies that stripped all the cash out of those programs.

    What is darkly amusing is that the article you link to points that out rather directly.

    Leslie Storm, director of an Oregon suicide helpline, is scrambling to find shelter for a cash-strapped 52-year-old man who says he will hang himself by the end of the week. The man, who could not work for a couple of months because of a medical condition, told Storm that he is behind on his rent and his roommate plans to kick him out Feb. 26. ...[T]he recession has forced state governments to cut back on social services designed to help people in physical, mental, and financial stress at exactly the time when demand for those services is greatest, says Susan Byrne Lee, president and chief executive officer of Mental Health America of Northeast Florida. ... But even before the crisis, suicide rates were higher in certain parts of the country, especially in the Intermountain West including Montana, Nevada, Colorado, Wyoming, and Oregon, and lowest in densely populated states such as New York, Massachusetts, and New Jersey. It is unclear why this is the case, but researchers believe that people in more rural states might have less access to care, tend to be more isolated, and have ready access to guns.

    "Less access to care" is one way of putting it. But a more accurate one is the way Representative Grayson put it: "The Republican health care plan is Die Quickly".

    Nothing is more quick than suicide, eh, Old #^@ucker?

  • (Show?)

    I would be happy to join the conversation and I agree that it is useful for those of us who were M66/67 proponents to extend an olive branch. My sense, however, is that it is too early for substantive discussions. The bruised feelings need some time to heal. The question is whether there are non-tax issues where there is common ground that could be used as a vehicle to work together which might then lead to discussions on taxes. I have no immediate suggestions, but may be a little brainstorming will get us there.

  • (Show?)

    Best post ever Steve. Good ideas, braod picture, solid psychology. Although I have serious doubts, based on behavior, that the governor would have been even vaguely interested in this one:

    But I bet that if the Governor had it to do over again, he would go on an extensive speaking / listening tour of public employee work sites to talk them through why reforms were necessary.


    Do you think it would help if the DPO made "fluffer" a permanent paid position and had one at the ready to assuage any critically important bruised egos?

  • j. loewen (unverified)


  • RDurig (unverified)

    Washington and New Mexico solved the Education issues. The made mandatory services get funded first. Oregon funds it last, and then claims it's escential.

    I guess by thier actions it proves, talk is cheap.

    On beeing nice to business, I own business. Don't be nice to us, Yes my friends are very angery, and a couple went out of busines in this downturn, and yet a couple are very hurt, and often yes, they blame government. So what! Succesfull business have learned to stop the BS and do the right things for the right reason.

    With that said, Yes many beleive as I do, that 66-67 basis or reasons was policly motivated, and when DEM or REP does that, over time the real truths come out, it does great harm to everyone, espcially the ones doing wrong.

    Yes, we need to do whats right for the right reason, it works.

    If schools and needed services are so import, as 66- 67 claims, then WHY arn't they funded first!!!!!!

  • Bob Wiggins (unverified)


    I am an "investor type." You shouldn't waste too many cycles on concern for my feelings.

    I would strongly support a broad-based capital gain deduction for Oregon, but I can't get all that excited about what I think you're proposing. By the time the legislature and Department of Revenue get through with it, it won't drive any economic behavior, but will serve as a small windfall for the few taxpayers who happen to meet the requirements of the benefit.

    I think you underestimate the level of understanding many business people have of Oregon's budgetary and economic situation. I would be far more enthusiastic about the legislature addressing fundamental structural problems with the cost of providing governmental services in this state than a tax gimmick to make me feel better.

    Bob Wiggins

  • LT (unverified)

    Steve, all due respect, but I have to take issue with this:

    "I think progressives need to reach out to Oregon’s investor community. "

    OH! Every investor in this state thinks like every other investor in this state?

    I wrote a blistering email to our local paper over a column generalizing about "the business community". Really--does the new bakery a few miles from our house think about politics the same way as the locally owned business supply store downtown, the people who run chain stores, NIKE, INTEL, etc?

    Where is the evidence?

    Anyone considering running for any office (Steve is mentioned elsewhere on BO) should consider this. Some people are tired of being lumped into groups by people whose jargon often talks about the _community.

    That is as stupid as saying "independents believe....".

    Do people really register NAV or some small party just so pollsters, pundits, etc. can lump them into groups and say no one in the category thinks for themselves?

    Or is that inside rhetoric and anyone objecting to the jargon is just a political outsider who should shut up because "everyone knows" the secret to political success is putting all voters into groups and never noticing individuals?

  • Rose Wilde (unverified)

    I can see your point, Steve, especially since people don't negotiate well when they feel they don't have a foundation of mutual respect.

    However, I can also see the impact of all of the attacks on public employees and our unions. Clearly some who opposed 66 and 67 blame public unions for passing those measures -- and since my union organized many activities to pass the measures, it is fair to say that unions had a big role in passing those measures. And, of course, as a public employee, I did have an economic interest in passing those measures that prevented cuts that no doubt would have impacted public employees.

    But, most of the public employees I know are still working with double the caseloads they are supposed to have. It is tough work, for which we are only sometimes thanked (and often blamed for enforcing the many rules set by state and federal governments). So, a reconciliation that lessened the attacks on public employees, too, would be a win-win as I see it.

  • (Show?)

    Oregon's overall tax system is already asking less from the wealthiest than it asks of anyone else and that's one of the reasons the legislature chose the small permanent component of the personal income tax.

    Every time I look at that chart and recall that the leg repealed the homeowner's and renter's rebate, have kept our earned income credit at a low level, repealed the general assistance program for the poorest of the poor who are disabled and unable to work, kicked tens of thousands off the Oregon Health Plan. . . I could go on . . I feel like the legislature doesn't value the weakest among us. But I don't take that feeling and try to make the system worse as proposed by Novick.

    The last experiment with cutting the income tax on capital gains was a miserable failure -- and it had nothing to do with how it was implemented.

    Novick's "friend" ignores the fact the Legislature kept alive BETC, which transfers millions of dollars of tax credits primarily to the wealthiest among us, including venture capitalists.

    As noted here, and here Oregon's economy does well when the economy does well - even with our income tax on capital gains and it makes little sense for a state to think that behavior will change with a change in tax on capital gains.

    The "we're going to leave" refrain reminds me of the old joke about the three guys caught by cannibals who tell the three that they are each going to die and that they are going to use their skins to make canoes. Then the cannibals give each cf the guys a choice of how they want to die. The first says "give me a gun" and puts it to his mouth and fires. The second says "give me a gun" and puts it to his temple and fires. The third says "give me a fork" and starts stabbing himself all over while yelling "screw your canoes."

    Oregon's a great place to live, work and raise a family and grow a business. What Oregon needs now is an adequate rainy day fund so vital public services can be provided during downturns and tax increases can be kept to a minimum. That's where Novick and his friend ought to be putting their energy.

  • rdurig (unverified)

    Hi Rose

    your quote "Clearly some who opposed 66 and 67 blame public unions for passing those measures -- and since my union organized many activities to pass the measures, it is fair to say that unions had a big role in passing those measures."

    Yes of course we know you as a public employ have a right to get the most our of your job. That's called capitalism.

    The state, the employees, the union have a right to gain more funding for them selves, but they also have an equal right to be honest, and transparent, especially to whom they work for.

    It's was the many claims that we need more $ or we cut essential services. that was a misrepresentation that's the source of people's real anger, and they do have deep anger.

    The parties involvement claimed that they need the funds but:

    G spent

    1) $700+ milllion on a cell phone network for only state workers 2)Three days after the vote spent 2 billion on PERS. 3)Spent up 2 billion on Green Jobs.
    4)Plus rumored grand daddy of waste Humans Services. 5) State worker have better benefits than the private sector, higher pay, and better job security. 6) Very large new building projects.

    We put schools last in the funding, on purpose, after so many wasteful programs, I just mentioned well over what many think is 5-7 billion dollar range of pure pork.

    The schools were last at the feed bag, because those in power know, the voter do support their schools, and we could raise taxes even if it cost jobs, and it did, and will.

    While the private sector took it biggest hit in many people's lifetimes, some people lost their business, funds, house, and workers.

    The last 5 State biannual budget has grown over 12% annually in real dollars. A simple fourth grader can see their was no cuts, but just a movement of funds, out of essential services, we called it a shell game in grade school, like schools, I believe lost 2-400 million.

    Yes the private sector does not believe the state can or better yet, won't do the necessarily evil, to make itself efficient. And like when Cheney and Bush, I could feel the rage, when Cheney and Bush misreperesedted themselves In Iraq, and we knew they did it purposely for (there own) hidden agenda. They hurt us all.

    The rage, people feel now, I believe is even stronger, believing the state, the state workers, and their union were and still are out misrepresenting the facts, and they did it purposely for (there own) hidden agenda.

    They're mad because government used schools, the kids, my children education as bait, a cheap ruse, the area they claim is most essential, To gain strength for their union, for the party, and most of all their power over money.

  • steve Novick (unverified)

    LT makes a very good point: There is no uniform "investor community." My bad. I guess I could have said "investors who are not simply right-wingers but who were disgruntled about Measure 66, wherever they might be found."

  • Zarathustra (unverified)

    This morning I had breakfast with a guy I know who actually voted for 66 and 67, but who hangs out with investor types, the kind of people who invest in start-ups that might became job-creating traded-sector businesses. He said that the adoption of and the discussion around Measure 66, in particular, made them feel that they weren’t valued.

    rw and I tried to tell you that for three months, but I guess we aren't the right people.

  • mrfearless47 (unverified)


    Where was $2 billion spent on PERS? That's the 20 year cost, of employer rate increases beginning in 2011 and that's only if the stock market doesn't continue on its present course. It could be less; unlikely more.

  • (Show?)

    Given the substantive majority who passed M66 and M67, and given that the vast majority of companies who might be slightly touched by those measures are located in areas where that support is most concentrated, I'm not at all sure that there needs to be any real movement on this issue.

    To reiterate, these measures are already temporary, except for a small sliver of a tax rate increase from businesses who make more than 10 million dollars a year) which are dedicated to a rainy day fund. So why would we ever want to pass some additional tax expenditure of extremely dubious benefit?

    Remember that Oregon still has one of the the lowest business taxes in the nation, and that hasn't helped our economy one whit - it's only damaged it by harming our infrastructure.

    Fundamentally Steve, I think you're falling into what I'm starting to call "The Obama Trap", a liberal belief that conservatives are somehow reasonable underneath it all, and that if you give them something, they'll reciprocate.

    Frankly however, that is a dubious proposition. Right wingers are locusts, caring not one whit for the health of the species, or the planet, and will never act reasonably. Remember how shocked and saddened the President was after seeing all the banks he'd just saved lobby so hard for no financial reform at all?

    The lesson, I think, is simple: we have to deal with conservatives as they actually are, not as we would wish them to be. Investors aren't driven by highminded patriotism, but by where they can get the best returns for the market that they're in. And in general, businesses whose business model can tolerate nonexistent third world infrastructure has already moved to China, Mexico, or what have you. Oregon needs to compete on quality, and that requires taxes necessary to generate the kind of human and physical capital to support high value-added businesses.

    In short, Oregon is suffering because we've already had far too many tax giveaways with nothing in return. It not only damages our State budget, but makes all the good-actor businesses wonder why they have to pay disproportionate support for the ones who bought lobbyists.

    I'm a moderate Democrat. But I say no.

  • RDurig (unverified)

    Hi Mrfearl47

    I was hoping for the same thing, that it was 10 years

    No the cost were charged to the state over a two year biannual budget.

    Maybee you could help me Mrfear, In my trade In a fiduciary, always working to take conflict out of systems, to not take sides, I know in politics it hard, Why won't both sides be civil and try to do what's best.

  • (Show?)

    People are ambulatory, but they are not nearly as mobile as money. Why is it that Oregonians pay about as much in state and local taxes and fees as their neighbors but our state and local governments collect less? One answer is that it is advantageous to recognize income (both personal and corporate) in other states that have lower tax rates.

  • Garage Wine (unverified)

    So ... the Legislature is the guy with the fork?

  • rdurig (unverified)

    Big, no, very large, no, elephant sized fork and we have been cooked!!

  • LT (unverified)


    Would love your comments on this editorial, incl. whether you think you were quoted out of context.

    Does everyone in this state belong to a "side" which they follow unquestioningly?

    <h2>Or could the January results perhaps have involved individuals who thought for themselves?</h2>

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