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between a rock and a hard place

January 12, 2010

Oregonians are faced with a tough decision this January with Measure 66 and Measure 67, and to be honest, I don’t really like my choices. A no vote on both will hurt public sector employees (as well as shorten the school year and cut social services), while a yes vote on both will potentially hurt private sector employees, especially those who work for C-corporations with high volume sale but low profit margins. Either way, it’s the working class who’s probably going to feel the pinch in the long run.

But trying to get accurate information about the potential effects of each measure in order to make an informed decision hasn’t been easy. Both sides are really going all out with their ad campaigns. The proponents, for example, constantly portray Measure 67 as simply an increase in the corporate minimum tax, but they often fail to point out that it also creates a new tax on gross sales for C-corporations. As Carol VanHouten explains: “Measure 67 says that C-corporations will pay the greater of the income tax on their net Oregon taxable income OR a minimum tax computed as a sliding-scale percentage of their gross Oregon sales.”

I’m fine with the increase in the corporate minimum from $10 to $150, but employers who’ll be affected by the tax on gross sales won’t simply absorb the tax increase themselves—they’ll either pass the increase onto the consumer by raising prices or make up for them by cutting employee benefits, bonuses, hours or employees.

The opponents, on the other hand, are making all kinds of wild claims, such as: “Politicians increase personal and business taxes to pay for their higher spending, including $259 million to fund state employee salary increases.” However, according to Jeff Mapes from the Oregonian, “… state employees will not receive any cost-of-living increases in the 2009-11 budget and they must take between 10 and 14 unpaid furlough days. The state also deferred step increases for one year. The net of those changes is a $27 million pay cut for state workers.” But what else would you expect from a group who calls themselves “Oregonians Against Job-Killing Taxes”?

As for the measures themselves, 66 would basically raise the personal income tax of individuals making over $125,000 and households making over $250,000, while 67 would raise the corporate minimum tax, corporate income tax (gross sales or other revenue minus deductible business expenses) and certain filing fees. I’m most likely going to vote yes on both, but I’m definitely not happy about it, mainly because I think Oregon’s tax structure is a mess. In my opinion, Oregon relies too heavily on personal income taxes for revenue, which makes up about 87% of the state’s General Fund (corporate income taxes account for just 6%). On top of that, in 1990 voters approved Measure 5, which reduced property tax rates and shifted much of the responsibility for funding public schools to the state’s General Fund.

Due to the recession and the state’s high rate of unemployment (including underemployment), however, state revenue has declined significantly leaving a $4 billion hole in the state’s $15 billion 2 year budget. But the money needed to fund things like firefighters, police, teachers, social services, etc. still has to come from somewhere. Unlike the federal government, the state doesn’t have the luxury of running a deficit, so it has to have a balanced budget. And rightly or wrongly, the Oregon Legislature has decided that the needed revenue should come from the people who they think can most likely afford it while so many other Oregonians are out of work or underemployed.

For its own part, the Oregon Legislature has already cut $850 million from the 2007-09 budget and $2 billion from the 2009-11 budget while using “state reserve funds and federal dollars where possible.” The state has also had to layoff social workers, teachers and other state employees. Not only that, but they’ve been forced to shorten the school year while packing even more kids into already crowded classrooms. Less revenue means more cuts, less days and even larger class sizes.

As far left as I am on the political spectrum, I don’t like the idea of raising taxes in the middle of a recession, but I like the idea of laying off more teachers and social workers even less, especially considering how badly they’re needed right now. And despite what some of the measures’ critics are saying, I don’t think it’s just fear mongering on the part of the Oregon Legislature, I honestly think the state’s in real trouble; and if we don’t find a way to fix it, we’re going to end up just like California. Measures 66 and 67 may not be the perfect solution, but frankly, I think it’s better than the alternative.

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