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between a rock and a hard place, the final chapter

January 14, 2010

While the discussions I had about Measures 66 and 67 on MyOregon didn’t really go anywhere (besides a couple more worthwhile contributions by VastRightWing), I had a much more enjoyable discussion on Facebook with my libertarian-leaning friend, James. He started off with the comment:

I gave you my personal take on this – I do genuinely believe that the State of Oregon has a budget deficit and like all of us, they must take a pay cut. That means cutting government programs.

However, I firmly believe that they target the high profile things first with paycuts because they can get the biggest sympathy vote. They can “cut the fat” like the rest of us without cutting off the arm. They’re telling us all they can do is cut off the arm.

It’s typical government propaganda.

The Oregon tax system is messed up. Oregon badly needs a sales tax but will never have one; we cling fervently to our status and I don’t see that will ever change. Drop the income tax like Washington, go sales tax – I’d vote for that (and have).

To me the sales tax is the ultimate in fair tax. It’s a consumption tax – the more you buy, the more you pay. Who buys the most? The rich. Who will pay more? The rich. But not because they make more; because they BUY more.

I realize the argument that sales taxes hurt the poor but there are ways around this, the most obvious being that you don’t tax the things that the poor buy the most of (groceries).

While eating my Cheerios before work, I replied:

A.) You make some good objections, but cutting programs will hurt the people that depend on them. If you cut social programs for elderly care, for example, who’s going to take care of them? If you cut school programs and social workers, then [you’re] hurting kids and their education. If you cut the DEQ, as one person suggested, that will negatively impact the the environment and workplace safety ,

There are not easy answers because many of these programs are important, even essential. We could do those things, but the question is, should we?

B.) It’s not the government’s fault that Oregonians have voted down a sales tax 9 times.

C.) According to a study done by the Institute on Taxation and Economic Policy, which focused on Washington’s tax structure, data suggests that sales taxes are regressive because “they fall more heavily on poor people, who typically spend nearly all their money on everyday necessities.”

Exempting things like food and medicine can ease the burden, but it doesn’t fix the problem. Poorer people still tend to spend all of their income, living paycheck to paycheck, and are unable to save very much.

Plus, fairness is a pretty subjective thing.

Later on, James countered my three points with:

A) It just goes to prove my point. Those are high profile things that people care about because no one wants to hurt the kids, the environment (in Oregon) or the elderly. Just because you have to reduce spending does not mean that you have to cut the programs. You can cut unnecessary administrative overhead, reduce the layers of the bureaucracy, etc. The first response is always to cut teachers because they don’t want to reduce their jobs/expenses. Knowing several teachers, there is a lot of waste in the system that could be eliminated without having to cut teacher jobs.

B) I never said it was. In fact, I believe the opposite. Oregonians themselves are at fault. They constantly vote it down and will forever I think. It’s a point of pride at this point.

C) If may not fix the problem but it does virtually eliminate it. Necessities are food and medicine. Sales tax isn’t paid on rent, electricity use, etc. Sales taxes to me are consumption taxes; you pay more if you use more. With removal of taxes on food and medicine, you eliminate a lot of unnecessary tax burden on the poor. Taxes are, by their nature, a burden on everyone. With a sales tax structured similar to Washington (I’ve been poor in Washington), it ensures a more stable tax base. It also simplifies the tax system itself, which is a huge bonus for everyone.

I do agree with you, however, that fairness is subjective. I do not believe it is fair to fleece the rich – they already pay their fair share (if not more) of taxes. There’s no need to tax them more. I’m not willing to pay a larger percentage of my income in taxes, why should they have to simply because they’re successful? I find it appalling. I will be voting no on 66. But I’m not sure yet on 67. I do think a $10 minimum corporate tax is pathetic and everyone can afford to pay a minimum of $150. I will have to research the other point regarding C-corps though to see how burdensome that is.

And despite the fact that I’m getting pretty burned-out talking about taxes, I managed one last reply.

In response to A, all I can say is that education, human services and public safety take up the majority of the state’s General Fund, and most of that is spent on salaries and benefits for public employees.

The way I see it, reduced spending means something’s got to be reduced in terms of services. Since most of the money goes to public employees who provide these services in the form of their wages and benefits, that’s what usually gets put on the chopping block since the state can’t run a deficit. Plus, the state is always growing, and more people means a greater need for services, regardless of how well the economy is doing.

I imagine that the state could reduce some of its overhead without hurting essential services, but I sincerely doubt that administrative overhead is the main problem. I’ll even concede that some public funds are used to shield public employees from normal economic cycles, but I think that’s a good thing in certain cases, e.g., kids don’t need less education just because the economy is bad, or less protection from abuse (as in the case of social workers); our need for police protection doesn’t just go away when state revenues fall, etc.

But if you honestly think the government’s just using kids and the elderly get its way, what more can be said? We’ll just have to agree to disagree, I suppose.

In regard to B, I wasn’t implying you said that. I was simply making the point because Measures 66 and 67 are what we’re talking about here. You’d mentioned “government propaganda” and the fact that Oregon’s tax system is a mess, and I was just trying to make the point that it’s not entirely the government’s fault.

It was the citizens who passed Measure 5, which reduced property tax rates and shifted much of the responsibility for funding public schools to the state’s General Fund. It was also the citizens who rejected a sales tax 9 times. In my mind, the government’s just trying to do the best it can with what it has.

Finally, in response to C, the study I mentioned earlier suggests that exempting food and medicine doesn’t “virtually eliminate” the problem of sales taxes falling more heavily on poor people. In fact, it concluded that even though Washington exempts food and medicine from sales taxes, it still has the most regressive tax system in the country, mainly because of its heavy reliance on sales taxes.

The study found that people earning less than $20,000 a year In Washington paid 13.1% of their income toward sales and excise taxes, and 17.3% including property taxes. People making between $99,000 and $198,000, on the other hand, paid just 5.1% of their income toward sales and excise taxes, and only 7.6% including property taxes. And the top 1% (those making $537, 000 or more) paid an unbelievably low 1.8% in sales and excise taxes, and just 2.9% including property taxes.

You might think that sales taxes are the “ultimate in fair tax,” but I think the numbers speak for themselves.

So after careful study and debate, I’ve decided to grudgingly support both measures, but it was definitely not an easy decision for me to make.

To me, it isn’t about whether or not I think these measures are fair, it’s about whether more people will be hurt if they pass or fail. In the end, I came to the conclusion that the percentage of people who’ll be negatively impacted by these measures if they fail is far greater than if they pass, and I gave the government the benefit of the doubt that they’ll spend the money wisely. I just hope I made the right decision.

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