Why we need tax reform in Oregon.

The Oregonian: Jefferson Smith and Jody Wiser talking taxes

Oregonians have this reputation of hating taxes because of this perpetual habit of voting down tax reform legislation. Why is Oregon, (especially Portland, the heart of Oregon) one of the most liberal states when tax reform is virtually impossible?

Two measures did pass in the House this fall, to be voted by Oregonians on January 26th: Measure 66 and 67.

Basically, measure 66 and 67 raises taxes on the top 2.5% by 1.8% for couples who make over $250,000 and raises the tax minimum on businesses from $10 to $150. Corporations that make a profit about $250,000 will have a tax of 1.3%.
These two measures determine how Oregon will fund its public services. Over 90% of Oregon’s budget goes toward public services like healthcare, public safety, education and etc. Education receives the most funding of them all.

All these public services are experiencing cuts during these economic times. These cuts become deeper when federal matching funds as well as stimulus money are cut too because the less money Oregon puts toward its public services the less federal funding Oregon will get.

Oregon currently has one of the highest unemployment rates in the country, at 10.7%. This is in correlation with a state that has one of the lowest business tax rates, and no sales tax. If history tells us anything, it’s that when there are huge tax cuts it is followed with a Boom–Then a bubble, and a crash. This is the same pattern associated with the infamous Bush tax cuts on the wealthy. When taxes are high, businesses (especially small businesses) focus less on profits and more about increasing the value of the business.

I used to run a small business — a commercial film production company.

Every time we took a dollar out as personal income, it instantly turned into 50 cents.

If we didn’t really need the money, that was an incentive to keep it in the company and to find ways to spend it that took it out of the taxable profit column but increased the value of the company.

High taxes create an incentive to reinvest profits into long-term growth.” – Larry Beinhart

Would raising the minimum tax on corporations hurt small businesses?
No, 2/3 of businesses in Oregon are small businesses (making a profit under $250,000). That means 2/3 of businesses’ taxes will increase by $140 annually.
Sole proprietorships will continue to pay $0 in taxes.
The 1.3% increase in business tax only applies for the profits over $250,000 a C corporation makes. For example, let’s say a C corporation has a profit of $260,000. That $10,000 above $250,000 will be taxed ($130). In 2013 this tax will decrease to 1%, so that C corporation would only be paying $100, which if you ask me is still ridiculously low, but hey, take what you can get, right?

Now that we’ve talked economics, let’s talk about education.

I’ve recently joined Stand for Children, and I’m currently the SuperIntendent’s Student Advisory Council’s representative for my high school in the Portland Public School district. My school district has one of the smallest school years in the country. The reason? We just can’t afford to have a longer school year. Of course, we can’t afford not to. One can assume that I kinda care about education, (and in future posts I will explain the importance of education on a global level as well as a local one).

The tax revenue that will come from these two measures (if they are passed) is an estimated $733 million dollars. If these are not passed public services will lose–not only the current cuts Oregon is taking–but also an additional $727 million. For my school district this will be a cut of $23 million funding, and relating that to my high school (with a population of 1460) we would lose around 7 teachers and a 2 week shorter school year.

That’s not to say that our ridiculously large classroom sizes will just grow even larger.

This brings us to the first question, why is such a liberal state so opposed to raises on taxes on people who can pay for it, for public services, especially education?

Well, it’s all about the lack of Oregonians participating in the elections.
80% of Oregonians do not have children that are currently attending a public school, (they either have no children, or their children are going to college or have already graduated).
And the estimated average voting age in the special elections in January is 70 years old.

The people who are voting in the elections are people who do not need to care for education because they are not directly affected by it.

In reality taxes on everyone would hurt the lower and middle class especially in times when public services are limited, however measure 66 and 67 will not raise taxes on everyone. Only corporations and the top 2.5%, and these taxes will go toward public services that will actually help lower and middle income families.

And education. This special elections in January will not only determine how Oregon funds its public services, but also determines how Oregon invests in its future; the students. Afterall, McCain and Obama both said that we cannot “mortgage our kids future” if we hope to improve this country. Well, we can’t do that if we want to pull Oregon back together.

Further readings:
Measure 66 & 67 failure would mean heavy cuts in affordable housing by Israel Bayer
Money to burn: Measure 66 & 67 by Amanda Waldroupe
Why the Economy Grows Like Crazy Amid High Taxes by Larry Beinhart
Larger classes may mean more dropouts by Bill Graves

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One response to “Why we need tax reform in Oregon.

  1. A major reason the classrooms are so large is because school districts are forced to support more than one teacher per classroom under the generous PERS agreements the state set up. Research the amount that goes to PERS and you will begin to understand why education is in such a precarious predicament.

    This is why Oregon now has different PERS retirement tiers. The state was going to go broke if we kept up the generosity of the first tier. However, we still have to pay for the first tier of retired public employees for the next thirty or so years, bad economy or not. Crowded classrooms are only one symptom of PERS generosity.

    I am not saying PERS is the fault of everything, but I am saying raising taxes is not the solution for everything, nor are “low” taxes the fault there is a shortfall in education. The legislature makes choices where to spend tax dollars.

    It is convenient for the legislature to hold education hostage because it is near and dear to the hearts of everyone that wants a good future for our state. Education should be one of the first things funded. Instead, it is always held up at the last moment like a carrot to keep the tax horse trotting a little further.

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