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Total Tax Makeover

Pete Springer/OPB

Oregon lawmakers are planning for more cuts and looking for more cash as they face the worst predicted budget shortfall in decades. Possible hikes in taxes and fees are under discussion, on things from beer to gas to car registrations.

Income tax provides the vast majority — around 70 percent — of Oregon’s budget. Several bills proposed to raise more revenue now would increase taxes on people earning six figure salaries. Another would introduce what most policy makers say is still against Oregonians’ DNA: a sales tax!

Salem watchers give low odds to the sales tax proposal. After all, it’s been suggested before. And a bipartisan task force on revenue restructuring decided not to back it in its final recommendations, after a poll showed it would fail with voters as usual. Co-chair Lane Shetterly explained a lot of the task force’s thinking in an online chat late last year. Here’s part:

I have supported the sales tax in the past, and believe a well-structured sales tax (or other type of consumption tax) could have advantages over our current revenue system. Having said that, the task force recognizes that a sales tax has been rejected by voters — by wide margins — every time it has been proposed, and current voter attitudes do not show any warming to the idea. So rather than propose something voters would almost certainly reject, we focused on other options that we thought would improve our revenue system and gain public support.

Nonetheless, his task force co-chair, Republican Senator Frank Morse, is sponsoring legislation that includes a sales tax. His vision: add a 5 percent sales tax, cut the capital gains tax in half, and substantially reduce Oregon’s income tax. He says the burden on people with low incomes could be offset by a bigger earned income tax credit and rent relief. He predicts the whole package would create jobs and lower the tax burden on people who currently pay taxes because a sales tax would pull money from people who aren’t taxed now.

Last month Morse told me the state is not well served by its current system. He said:

My background was in business, and I enjoyed the opportunity to be a chief executive officer. I believe the fundamental responsibility of leadership is to build a foundation. And that foundation, it has to be stable, it has to be adequate, and it focuses on finance. And I believe as a legislator that’s probably one of our fundamental responsibilities. How do we build a foundation for this state that will carry it forward for decades and decades and minimize these valleys that we go through by increasing the stability of our revenue system, and that will actually create jobs and stimulate the economy. That’s my passion and that’s my interest. But oh is it so hard to have that discussion in this legislative process.

Meanwhile, across the Columbia, Democratic Senator Rosa Franklin wants to lower the sales tax and introduce an income tax in Washington, which many people there are as allergic to as Oregonians are to a sales tax. (She also encourages constituents to play around with the tax code themselves. It’s a little messy, but kind of fun!)

What do you think? Is it time for a total tax makeover? Would you benefit or be hurt by a sales tax? What if your other taxes dropped? Do you believe legislators who suggest that? Why are Oregonians against a sales tax and Washingtonians against an income tax? What are your ideas for stabilizing state budgets in the long run?


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