File photo of the Oregon Capitol in Salem
Bradley W. Parks / OPB
Oregon funds government expenses largely through the income tax, but there are other taxes and fees that feed the state’s budget. Social and racial justice advocates say the overall tax burden falls much more heavily on low income and working class people and hits BIPOC communities especially hard. The Oregon Center for Public Policy has created a presentation to explain not only the effects of the tax system but also the 19th and 20th century history of racism that led to the policies that remain in place today. Juan Carlos Ordonez with OCPP joins us.
The following transcript was created by a computer and edited by a volunteer.
Dave Miller: From the Gert Boyle Studio at OPB, this is Think Out Loud. I’m Dave Miller. For more than 20 years, the Oregon Center for Public Policy has advocated for a more progressive tax system, arguing that low and moderate income Oregonians are being harmed by the state’s policies. In a recent presentation, the Communications Director for OCPP Juan Carlos Ordonez went further. He says that even though Oregon’s tax policies are explicitly race neutral, they actually maintain and even deepen racial inequality. Juan Carlos Ordonez joins us now to walk us through his arguments. Welcome to Think Out Loud.
Juan Carlos Ordonez: Hi Dave. Thanks for having me on the show.
Miller: So your focus is on Oregon, but your analysis is national in its scope and goes back a century or more. I want to start with one of the things you focus on: the supermajority, meaning that 3/5 of Oregon lawmakers in each chamber have to vote in order to pass a tax increase. What is the origin of laws like this one?
Ordonez: Yes. And maybe before I get into the origin, I think it’s important to note that this supermajority requirement in the area of taxation, it’s a pretty rare thing. I mean, when it comes to passing legislation normally, majority, the majority rule is the standard. But this is a deviation. It’s very rare and very anti-democratic at the same time, it cedes power to the minority. So when you go back in history and to see where the first state to enact a supermajority requirement in the area of taxation, you end up going back to the deep South at the dawn of the Jim Crow era, at the start of legally enforced segregation. And to make a long story short, the state of Mississippi in 1890 enacted, put in place a supermajority requirement in the area of taxation into its Constitution at the behest of wealthy plantation owners who wanted to basically shield themselves from taxes during the era of Reconstruction, multireligious, multiracial legislatures began for the first time ever paying for basic public services for the free black population and poor whites as well. But the backlash that ensued in the overthrow of Reconstruction led to the Jim Crow era and part of that can be reflected in the supermajority requirement being added to the Constitution.
Miller: So that history goes back 130 years. But Oregon voters didn’t approve supermajority requirements until 1996. The clear intent was to make it harder for lawmakers to increase taxes. How do you make the case that this supermajority is a racist policy, meaning that it’s specifically one that disproportionately affects people of color?
Ordonez: Well, it is a structure that disproportionately disadvantages people of color. And let me just say that I am not making the case that Oregon voter’s knowingly approved of a tax policy rooted in our racist past. But what I’m saying is that they, that the majority of voters approved of a policy that historically has served the interests of the most privileged in our society. Back in the time of the Jim Crow era, it was wealthy plantation owners. Today it continues to serve that role of serving the interests of the wealthy white elite in our state.
Miller: How much of what you’re talking about here is specifically tied to the fact that a number of communities of color in particular, black and latino Oregonians are more likely to be poor than white Oregonians. I mean, is that the key to this analysis?
Ordonez: That is a big factor for sure. I mean, we, when we look at the tax system, we have to step back and recognize that it doesn’t exist in a vacuum. It exists at a time when there’s vast economic inequality by race, a vast wealth gap. Communities of color are much more likely to have lower incomes, higher poverty rates, lower rates of homeownership, at so many different levels, there’s vast economic inequality by race. And so the tax system cannot be racially neutral because it operates within this highly inequitable reality. And our tax system right now is basically helping entrench and sometimes even deepen those racial inequalities.
Miller: Limits on property taxes enshrined by Oregon voters in the 90s at two different times, Measures 5 and 50, they’re another piece of Oregon’s tax policy that you point to, What do you see as the important history here and the important current life.
Ordonez: Yeah, the first constitutional property tax limits that we see also begin in the deep South at the dawn of the Jim Crow era. So they share a very similar history with the supermajority requirement. And it was again, a way to protect wealthy plantation owners from property tax increases at that time. Today, the property tax limitations that we have in Oregon’s Constitution again serve the most well off in our society to the detriment of the vast majority of Oregonians, but especially Oregonians of color. In terms of the property tax system is the main way that local governments fund local services like libraries, parks and recreations. A lot of it still goes to our public schools, so that makes it harder for local governments to fund those key services that create quality of life for everyone. It would do and having those most robust public services would help us address racial inequities.
Miller: You’ve also brought up the mortgage interest tax deduction as another example, as really a national example. This is an enormously powerful piece of tax policy that, for people who don’t know, lets homeowners deduct from their taxes the interest they’re paying on their mortgages. It’s basically a tax break for people who are wealthy enough to be able to buy a home in the first place. What does this tax break look like to you through a racial equity lens?
Ordonez: So it’s important to understand that the mortgage interest deduction is Oregon’s biggest housing subsidy. It costs the state of Oregon about a billion dollars every budget period, which is huge. I mean, nothing comes close in terms of how much money we spend on housing as the mortgage interest deduction and the mortgage interest deduction exacerbates racial inequality in two fundamental ways. First, we already sort of touched on the fact that because of the whole history of racial oppression and exclusion, people of color tend to have lower incomes. And it’s the result of public policies, we need to understand why people of color tend to have lower incomes. So when you look at the distribution of who gets the benefits from the mortgage interest deduction, the bulk of the dollars flow to the most well off. So it’s sort of crazy to think that we have our biggest housing subsidy is primarily benefiting the most well off, those who least need help. And in that, that’s one way in which it fundamentally disadvantages people of color. The second reason has to do with the history of home ownership in our nation. And of course, to benefit from the mortgage interest deduction, you need to be a homeowner. So when you look at the history of housing policy in our nation, and in our state, I mean, it goes back to Oregon even before Oregon was a state when we were a territory and the federal government was giving away free land to white settlers coming into the Oregon territory. This was land, of course, that was stolen from native peoples. We can also, and also a pivotal moment in housing policy history is the period of the New Deal era from the 1930s through the 1960s, when the federal government embarked on a vast array of programs to increase home ownership, and it was a very successful program that increased homeownership, but it was limited by and large for white Americans. People of color, especially black Americans, were excluded from all these housing benefits and subsidies. And that helps explain why today there’s a vast difference in terms of homeownership, homeownership rates between white Oregonians and Oregonians of color, and there’s a vast difference. So, when you think about the fact that our biggest housing subsidy is benefiting homeowners and at that, wealthy homeowners, you know that it’s a policy that exacerbates racial inequality.
Miller: So the central concept that we’re circling around for all of this is that when there are pre-existing racial inequities, a policy that’s colorblind could end up exacerbating those inequities. So what does this mean in terms of tax policy you’d like to see? What would a tax policy that does take race into account look like in ways that would be not just just, but legal?
Ordonez: That is a great question. I think that the ultimate goal here has to be to make our tax system be ultimately based on ability to pay. If you look at our tax system today, it asks proportionately more of lower income folks and people may think about, well, why is that? Well, because when you add up all state and local taxes paid here in Oregon, so we’re talking about the personal income tax, property taxes, excise taxes like gasoline and tobacco and all other taxes that Oregonians pay at the state and local level, what you end up is with an upside down tax system, a tax system that asks proportionately more of those at the at the bottom than those at the top.
Miller: And in other words, even if high income Oregonians are paying way more overall in taxes, you’re saying that as a percentage of their income, they’re paying less than low income Oregonians in general?
Ordonez: That’s right. Their overall tax rate when you add up all state and local taxes, that those at the bottom pay is a higher rate than those than the very richest. So, it’s a regressive tax system and so the goal would be, and this can be done in a very race neutral way. We don’t need to mention race in the policy changes that we make is to make our tax system ultimately right side up, make it progressive, make it ultimately based on ability to pay. That would go a significant way in addressing some of the race, some of the big racial economic inequalities that we have right now.
Miller: I mean, we do have a progressive income tax system. So what specifically, we have about a minute left, but what specifically would you like to see?
Ordonez: I would say a mildly progressive income tax, but certainly higher tax rates at the top would be one place to start, closing tax loopholes that benefit the most well off, cutting taxes at the lower end of the, for lower income folks. These are some of the changes that would help turn our tax system in a progressive direction in a way that it’s based on ability to pay.
Miller: Juan Carlos Ordonez, thanks very much for joining us today. I appreciate your time.
Ordonez: Thank you, Dave.
Miller: Juan Carlos Ordonez is the Communications Director for the Oregon Center for Public Policy.
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