The (Portland) Oregonian newspaper on proposed tax increases on the Jan. 26 special election ballot
Of all times, of all things, the Democrats in the Oregon Legislature chose now, in the throes of one of the worst recessions in history, to make business an enemy. They chose this moment to pit business against schools, the private sector against public unions, employers against the jobless.
The two referrals on the Jan. 26 special election ballot - Measure 66 and Measure 67 - insist that Oregonians pick a side, to accept one lousy, harmful choice or the other. No, we won't do it. You shouldn't, either.
It didn't have to come to this. The Democrats who control the Legislature could have approved a modest and mostly temporary package of business tax increases with the full support of the Oregon Business Association, which represents many of the state's largest and most public-minded corporations.
Instead, Democrats bent to the demands of the most liberal members of their House caucus and approved an unwise and ill-timed package of corporate and personal tax increases that has infuriated virtually every business group and commercial sector in Oregon.
The Democrats who hold a supermajority of seats in the Legislature could have sent to voters a proposal to reform the tax kicker and allow the state to build a strong and durable rainy day fund to avert future revenue crises and address the most glaring problem with Oregon's system of public finance, its volatility.
Instead, the Democrats buried kicker reform and chose to fill a large hole in the budget by tacking more onto Oregon's already high personal income taxes - exacerbating the top-heavy volatility of the state's tax system. The self-described progressives in the House caucus further insisted that income tax increases on wealthier Oregonians - mostly business owners and professionals, otherwise known as employers - be permanent, not levied just long enough to get the state through its budget crisis.
The supporters of the tax measures bristle now at any suggestion of class warfare, but they are spending millions of dollars on advertisements claiming that the measures are not about you, but about them - those lucky few rich Oregonians not paying their "fair share." They don't bother to explain how paying one of the nation's highest income taxes amounts to skating on one's responsibilities.
This is ugly stuff, at an especially ugly time in Oregon. People are suffering, business is hurting, plunging tax revenues have ripped a $727 million hole in the state budget. There were, of course, no easy, pain-free and non-controversial ways for the Legislature to fill that hole and protect schools, public safety and other essential services.
But there were, and still are, better ways than Measures 66 and 67. Oregon doesn't have to tack a permanent increase onto the income tax that lands on the very people Oregon most needs to invest more in their businesses and their employees. It doesn't have to replace the absurdly low $10 minimum corporate tax with a new scheme that would force businesses with high sales volumes but no profits to pay up to $100,000 a year in minimum taxes even as they fight to cut their losses and hold on to as many jobs as they can.
Oregon doesn't have to further polarize its politics at the very moment the state ought to be pulling together to solve its very serious problems. Senate President Peter Courtney and House Speaker Dave Hunt keep telling us that they did everything possible last session to accommodate the interests and needs of Oregon business. Why, then, is there more anger and hostility in Oregon between business and labor, and between business and state government, today than at any time in recent memory?
The public debate over the tax measures has been framed by both sides as though there is no middle ground. You're either for business, or against it. For schools, or against them. The Democrats shouldered aside the Oregon Business Association, the Portland Business Alliance and other business leaders who have stood up, time and again, for schools, higher education and other essential government services. Now moderate, pro-education business leaders have been pushed into the same camp with the anti-tax, anti-government conservatives whose only interest is to slash the size of state government and spend ever less on schools and universities.
Oregon business leaders don't belong there. The ones we've spoken to in recent weeks have no stomach for the $727 million in cuts that Democratic leaders are promising if voters reject Measures 66 and 67. They have pledged to go to Salem during the upcoming February session to push for a smaller, mostly temporary package of tax increases that would help the state limp through its current crisis.
No one should be naive about the prospects for another significant tax package in the February session. Legislators would return to Salem just days after the election in no mood to consider more tax hikes. Yet Oregon's corporate taxes would remain low compared to those in most states and could and should be carefully and strategically increased, just as business leaders offered last year and say they would be willing to do again.
Yes, this is the start of an election year. Yes, Republican legislators would be reluctant to offer any votes in support of another tax plan. Yes, Democrats would not be inclined to run up the hill alone, yet again, waving the banner of higher taxes. And yes, any substantial tax increase would likely prompt anti-tax groups to pursue another referral to voters.
But the anticipated budget cuts would be deep and harmful. It's one thing to insist now that failure of Measures 66 and 67 must be met by cuts, and only cuts, and another to actually find the votes in the Legislature to slice into the bone of Oregon's public services. The Legislature could tap a few hundred million dollars still held in reserve, but it's likely that lawmakers still would be confronted with a deficit of $500 million or more. Schools, community colleges and universities make up more than half of the state budget; they could not and would not be fully shielded from the cuts.
Yes, that's a disturbing prospect. But such awful choices were not the only ones available to the Legislature last session, and they will not be the only choices in the February session. There will be other revenue options, albeit much smaller than this tax package. There will be myriad ways to reduce state spending, and some are less destructive to essential services than others.
The bottom line, though, is that the Legislature can do better than Measures 66 and 67, whether in the February session or in 2011 and beyond. Lawmakers can work closely with business to craft a careful, responsible increase in corporate taxes. They can refer kicker reform to Oregon voters and explain, this time with the help of business leaders, why it's vital that this state never again be caught with such a volatile tax system and so little in reserve.
Those are the measures that Oregonians should be preparing to vote on in the coming days. Instead, the Legislature has presented voters with accept-them-or-else tax increases that strike at the very businesses and employers that Oregon is depending on to lead an economic recovery, start hiring again and pay the wages that support state services.
That's not what Oregon needs. Vote no on 66 and 67.