SJR 36 and SB 824

Public policy is especially perplexing when it veers crazily away from what you thought you knew.  In high school economics, when studying principles of taxation, one learns that to be effective, taxes should meet certain criteria.  Many people would agree that equity or fairness is important.  An inequitable tax, over the long term, might become less and less effective as people turn away from it and ignore it or subvert it.  But equity is difficult to define and might be a matter of point of view.   Some may feel that an equitable tax is a tax that is the same for everyone – either a set amount or a set percentage.  Others may feel that it is fair for the burden to fall more heavily on those most able to afford it.  A third view is that a fair tax is a tax on someone other than yourself.

Another principle attached to the idea of fairness is a progressive tax.  A progressive tax is one already mentioned – a tax that falls more heavily on the wealthy and less heavily on those least in a position to pay it.  Progressive taxation is well supported in America and is based on two seemingly widely shared assumptions:  The poor need relief and protection from the burden of taxes.  The rich not only can afford a higher burden of taxation; their wealth and privilege oblige them to support the customer base, the body politic and the civic infrastructure that has provided the foundation and source of their good fortune.

In Oregon, the people have rejected a sales tax numerous times.  A sales tax is regressive – the opposite of progressive tax.  The poorer you are, the larger percentage of your income is spent on material things that would be subject to a sales tax.  A wealthy person may buy several houses or cars, luxury items, and things of every description.  But finally, they are not hungry any more; they can only drive one car at a time; or live in one house at a time; all their material needs are met and they still have some large fraction of their total income beyond what they need to live comfortably.  As a percentage of income, a sales tax falls far more heavily on a poor person than a rich one.

Oregon has a state income tax and, compared nationally, it is considered relatively progressive.  Some states have no income tax and rely on other, arguably more regressive, sources of income.  But Oregonians have made a number of choices, many in the name of broad tax relief, that have either been regressive in nature or have narrowed the revenue stream needed to fund the services that they have demanded through their habits or the ballot box.  Measure 5, which provided property tax relief, also provided a shock to the state’s revenue base from which it still has not recovered.  The Kicker provides that tax money will be returned if the money collected exceeds projected revenues.  Voter mandated criminal sentencing guidelines have resulted in a squeeze on every other part of the budget because of the necessity to provide for a rapidly expanding prison population.  There is a volatile mismatch between revenues and the demand for government services – schools, social safety nets, public health, public infrastructure.

In April, State Senators Mark Hass and Ginny Burdick and Representative Tobias Read  – Democrats all – introduced two proposals aimed at “starting a discussion” on broad tax reform in the state.  Senate Joint Resolution 36 would direct a state sales tax.  Senate Bill 824, among other things, would reduce the state income tax and provide a tax break for business investment – ultimately, a subsidy from taxes. These new initiatives, in effect, would establish a regressive tax, diminish a progressive tax, and provide an incentive for business investment, having transferred the cost of that tax break to low income earners.   Go figure.  I hope these overtures succeed in starting a discussion.  They at least provide a model for what is not equitable, fair or effective.