Tax Justice Digest stories about Oregon
Last Tuesday voters made their voices heard on a variety of tax related issues. In Washington State it appears that anti-tax radical Tim Eyman won another initiative battle. The passage of Initiative 960 makes it more difficult for the state to raise needed revenue, but does little to increase government transparency or encourage economic development. Opponents of the measure rightly say that I-960 will increase dreaded red tape and bureaucracy. Read an FAQ about the initiative from the Washington Tax Fairness Coalition here.
But in a victory for tax justice, an earlier Eyman initiative has been ruled unconstitutional. This 2001 initiative, I-747, capped state and local property tax collections at 1 percent each year, unless a higher increase was approved by voters. Be on the lookout for more on how Washington responds to the passage of I-960 as courts may get involved again.
Elsewhere in the Pacific Northwest, a ballot initiative to raise cigarette taxes and to use the funds to provide universal health care for children was defeated in Oregon, due in large part to the $12 million spent by RJ Reynolds and other tobacco companies to oppose it. Governor Ted Kulongoski, one of the initiative's key backers, has vowed to continue the fight for expanding health care.
To read about the outcomes of ballot measures across the country check out this report from the Ballot Initiative Strategy Center.
Over the past few weeks, three more states have taken steps towards helping low-wage workers and their families by means of the earned income tax credit (EITC). In Delaware, the Senate Revenue and Taxation Committee recently approved a measure that would make the state's existing EITC refundable, meaning that individuals and families who owe less in personal income taxes than the value of their EITCs would receive refund checks to help offset other taxes and to make it easier to make ends meet. In Oregon, Republican and Democratic members of the House Revenue Committee have put forward a proposal that would raise that state's EITC from 5 percent of the federal EITC to 12 percent. As the Eugene Register-Guard observes this proposal would help to achieve a vital goal - eliminating income taxes on working families living in poverty in Oregon. Lastly, the Louisiana Senate has passed legislation that would create a state EITC equal to 5 percent of the federal EITC. This report from the Louisiana Budget Project details the positive impact that such a credit would have.
Late last week, policymakers in Oregon established the state's first permanent rainy day fund, a significant step forward in improving fiscal stability in the Beaver State. Rainy day funds can be a valuable tool in helping states to weather economic downturns or other fiscal difficulties, as they set aside excess revenues during the good times to help bolster flagging revenues during the bad. The lack of such a fund was one of the factors contributing to the sizable cuts in spending that Oregon was forced to adopt in 2003.
At present, rather than setting aside surpluses to hedge against future deficits, Oregon is required under law to return any tax revenue that exceeds official projections by more than 2 percent to both personal and corporate income taxpayers, in the form of a rebate or "kicker." Projections from the Oregon Office of Economic Analysis issued earlier this month suggested that the "kicker" for the 2005-2007 biennium would amount to roughly $1.1 billion for families and individuals and to approximately $315 million for businesses.
Legislation signed by Governor Ted Kulongoski temporarily suspends the "kicker" for businesses with Oregon sales of more than $5 million and directs the $290 million that they would have received into the nascent rainy day fund. Businesses with Oregon sales below that threshold will still receive a "kicker" totaling $25 million, while the personal income tax "kicker" will go on untouched. The legislation also mandates that 1 percent of general fund revenue be deposited into the fund in all future years.
Still, as the Eugene Register-Guard observes, the legislation signed by Governor Kulongoski suffers from a number of shortcomings. With only a one-time infusion from the corporate "kicker", the rainy day fund will likely be too small to withstand a significant recession and may not be adequately replenished once it is used. What's more, the legislation leaves Oregon's "kicker" system intact over the long-run, a situation that will continue to impair the state's ability to invest in vital public services. For more on the need for — and the proper design of — state rainy day funds, see ITEP's Talking Taxes policy brief on this topic.
Some environmentalists argue that the total cost of fuel consumption needs to be increased, not lessened, by government policy. But even states that attempt to move in that direction are not necessarily going about it in a rational or efficient manner.
While the Democratic takeover of the House of Representatives (and apparently also the Senate) on Tuesday has has given new hope to advocates of progressive tax policies at the federal level, the results of ballot initiatives across the country indicate that state tax policy is also headed in a progressive direction.
In the three states where they were on the ballot, voters rejected TABOR proposals, which involve artificial tax and spending caps that would cut services drastically over several years. Washington State defeated repeal of its estate tax. Several states also rejected initiatives to increase school funding which, while based on the best intentions, were not responsible fiscal policy. Two of four ballot proposals to hike cigarette taxes were approved and the night also brought a mixed bag of results for property tax caps.
Taxpayer Bill of Rights (TABOR):
Maine - Question 1 - FAILED
Nebraska - Initiative 423 - FAILED
Oregon - Measure 48 - FAILED
Voters in three states soundly rejected tax- and spending-cap proposals modeled after Colorado's so-called "Taxpayers Bill of Rights" (TABOR). Apparently people in these three states had too many concerns over the damage caused by TABOR in Colorado.
Property Tax Caps:
Arizona - Proposition 101 - PASSED - tightening existing caps on growth in local property tax levies.
Georgia - Referendum D - PASSED - exempting seniors at all income levels from the statewide property tax (a small part of overall Georgia property taxes. (The Georgia Budget and Policy Institute evaluates this idea here.)
South Carolina - Amendment Question 4 - PASSED - capping growth of properties' assessed value for tax purposes. The State newspaper explains why the cap would be counterproductive.
South Dakota - Amendment D - FAILED - capping the allowable growth in taxable value for homes, taking a page from California's Proposition 13 playbook. (The Aberdeen American News explains why this is bad policy here - and asks tough questions about whether lawmakers have shirked their duties by shunting this complicated decision off to voters.)
Tennessee - Amendment 2 - PASSED - allowing (but not requiring) local governments to enact senior-citizens property tax freezes.
Arizona's property tax limit will restrict property tax growth for all taxpayers in a given district. South Dakota's proposal was fortunately defeated. It would have offered help only to families whose property is rapidly becoming more valuable, and those families are rarely the neediest. Georgia's is not targeted at those who need help but would give tax cuts to seniors at all income levels. The Tennesse initiative, which passed, is a reasonable tool for localities to use, at their option, to target help towards those seniors who need it.
Cigarette Tax Increase:
Arizona - Proposition 203 - PASSED - increase in cigarette tax from $1.18 to $1.98 to fund early education and childrens' health screenings.
California - Proposition 86 - FAILED - increasing the cigarette tax by $2.60 a pack to pay for health care (from $.87 to $3.47)
Missouri - Amendment 3 - FAILED - increasing cigarette tax from 17 cents to 97 cents
South Dakota - Initiated Measure 2 - PASSED - increasing cigarette tax from 53 cents to $1.53.
While many progressive activists and organizations support raising cigarette taxes to fund worthy services and projects, the cigarette tax is essentially regressive and is an unreliable revenue source since it is shrinking.
State Estate Tax Repeal:
Washington - Initiative 920 - FAILED
Complementing the heated debate over the federal estate tax has been this lesser noticed debate over Washington Stats's own estate tax which funds smaller classroom size, assistance for low-income students and other education purposes. Washingtonians decided it was a tax worth keeping.
Revenue for Education:
Alabama - Amendment 2 - PASSED - requiring that every school district in the state provide at least 10 mills of property tax for local schools.
California - Proposition 88 - FAILED - would impose a regressive "parcel tax" of $50 on each parcel of property in the state to help fund education
Idaho - Proposition 1 - FAILED - requiring the legislature to spend an additional $220 million a year on education - and requiring the legislature to come up with an (unidentified) revenue stream to pay for it.
Michigan - Proposal 5 - FAILED - mandating annual increases in state education spending, tied to inflation - but without specifying a funding source. The Michigan League for Human Services explains why this is a bad idea.
Voters made wise choices on education spending. The initiative in California would have raised revenue in a regressive way, while the initiatives in Idaho and Michigan sought to increase education spending without providing any revenue source. Alabama's Amendment 2 takes an approach that is both responsible and progressive.
Income Taxes:
Oregon - Measure 41 - FAILED - creating an alternative method of calculating state income taxes.
Measure 41 was an ill-conceived proposal to allow wealthier Oregonians the option of claiming the same personal exemptions allowed under federal tax rules and would have bypassed a majority of Oregon seniors and would offer little to most low-income Oregonians of all ages.
Other Ballot Measures:
California - Proposition 87 - FAILED - would impose a tax on oil production and use all the revenue to reduce the state's reliance on fossil fuels and encourage the use of renewable energy
California - Proposition 89 - FAILED - using a corporate income tax hike to provide public funding for elections
South Dakota - Initiated Measure 7 - FAILED - repealing the state's video lottery - proceeds of which are used to cut local property taxes
South Dakota - Initiated Measure 8 - FAILED - repealing 4 percent tax on cell phone users.
Kiplinger reports that business are expected "to mount pitched battles to defeat" TABOR-esque spending tax cap initiatives in Maine, Michigan, Montana, Nebraska, Nevada, and Oregon. In fact, there's a concerted effort forming in Oklahoma that is actually being lead by business groups. The Chairman of Tulsa's Chamber of Commerce was even quoted as saying that TABOR would be a "train wreck" for Oklahoma.
Once again, the public is learning that tax funded corporate economic incentives don't really work. In Oregon, right after Georgia-Pacific received a property tax break that will amount to $15 million over 15 years, the company turned around and announced that it was laying off 130 workers. Chuck Sheketoff over at the Oregon Center for Public Policy puts it the best, "[i]t's payoffs for layoffs". On the other side of the country, AAA Mid-Atlantic demanded that Delaware grant the company tax incentives if the state wanted them to move there. The twist? AAA Mid-Atlantic already made the decision to move to Delaware before they demanded the tax incentives - Delaware simply paid AAA Mid-Atlantic to do something it was already going to do. For a more in-depth analysis of AAA Mid-Atlantic's scheme, check out this report by New Jersey Policy Perspectives.
