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Reject state tax hikes – fix the system

Our Opinion

Tax increases approved by the 2009 Oregon Legislature, and now embodied in Ballot Measures 66 and 67 have serious, if not fatal flaws.

If approved by voters in the Jan. 26 special election, they will deliver a blow to private-sector employment in Oregon during the worst recession since the Great Depression. They will increase the volatility of the state's budget. And they will delay a requirement for Oregon to once and for all confront its repeated budget woes by implementing long-term budgeting and meaningful spending and tax reform.

Voters should reject these poorly timed and harmful measures and send legislators a firm message that Oregon can and must do better.

The tax increases are proposed to fill a $733 million gap in the 2009-11 state budget that supporters say endangers public education, health care services and other important state-funded programs. We agree these programs are vital, but support for Measure 66 and 67 is based on the faulty assumption that only higher earning Oregonians and corporations stand to pay if these taxes are approved.

This logic can withstand scrutiny only if you believe that public-sector jobs are inherently more valuable than jobs in the private sector. Measure 66, which increases the top tax rate by 20 percent on higher-income individuals and families, and Measure 67, which increases taxes on corporations, would take $733 million away from the private sector and give it to the public sector instead, protecting government jobs while jeopardizing private-sector employment.

Misleading campaign

While we believe that supporters of Measures 66 and 67 are well intended, we are disappointed with their campaign. They have intentionally minimized the impact and the permanency of these measures on individuals. They have consistently ignored the danger these measures pose to Oregon's economy. And the proponents' campaign has wrongly painted the state's business community as being uncaring about the needs of schools and health and human service programs.

In our view, the reasons for rejecting these measures are obvious, and include:

• Timing. Oregon's unemployment rate at the end of October remained at 10.7 percent. These measures would siphon hundreds of millions of dollars away from the very people and businesses who create most of the jobs in this state. We believe the economists who say that millions in new taxes will create thousands of lost jobs.

• Increased state budget volatility. Oregon's problem for decades has been its reliance on the income tax as the main source of revenue for public services. Measures 66 and 67 are permanent income tax hikes and would do nothing to level out the boom or bust cycle of public funding that plagues this state.

• Lack of fairness. Measure 67 assesses corporations as much as $100,000 in taxes regardless of whether they make a profit. Many corporations in Oregon cut their expenses deeper than they ever thought possible as they coped with falling sales during the current recession, and they are continuing to lose - not make - money. We believe corporations should pay more, but it is bad economic and tax policy to require businesses that operate in the red to fork over tens of thousands more in taxes. Their only option will be to lay off more employees, buy fewer goods and services from other businesses or simply shut their doors.

• Deceptive campaigning. Measure 66 proponents repeatedly make the claim that their target - Oregonians who make more than $125,000 (or $250,000 for joint filers) - would see only a 1.8 percent increase in taxes. But those same supporters also know that statement to be untrue. These high-income individuals - two-thirds of whom own businesses and combine their business income with their personal income for tax purposes - would actually see a 20 percent increase in their top level of taxation, from a 9 percent rate to a 10.8 percent rate.

Legislature has options

Despite flaws in Measures 66 and 67, voters will be tempted to support them because they fear the cuts in public services - something legislators have promised would happen if the measures fail. But Oregon has alternatives. When the Legislature meets in February, it can make plans to tap into cash reserves held by state agencies. It can use what's left of rainy day funds. The governor can declare a budgetary state of emergency and reopen negotiations with state employees to secure further reductions in personnel costs.

One very fair measure would be to require state employees to pay a small portion of their health care insurance costs. If state workers were required to pay what the typical Oregon public school teacher pays for those same benefits, it would save the state as much as $130 million a biennium.

By utilizing such measures, by enacting temporary, smaller revenue measures and by finding additional ways to save money, Oregon can balance its $733 million budget gap without putting businesses and private-sector jobs at risk. This state's citizens and its leaders then must turn to the larger question of how to provide stability for the future.

The tax increases represented by Measures 66 and 67 are not well-conceived. They are poorly timed. And they are inequitable. Voters should reject them and tell legislators to find the right way to protect public services.