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Altaf Rahamatulla on January 14, 2010 - 1:56pm
In 2009, Oregon lawmakers approved HB 2649 and HB 3405, a balanced approach to dealing with their fiscal problems that included increased taxes on the wealthiest state residents and corporations. These revenue increases were combined with lowered taxes for people receiving unemployment insurance benefits, offering tax relief to many families.
But right wing anti-tax forces were able to get the issues on the ballot for a vote on January 26--as measures 66 and 67. With other states around the country likely to be considering tax proposals this session, implementation of these revenue increases in Oregon would bolster progressive tax efforts around the country.
Oregon still faces a $4.2 billion biennium budget deficit for FY 2010 and 2011. Lawmakers were forced to cut over $1.7 billion in funding for vital programs in almost every area in FY 2009 and 2010, including K-12 education, Medicaid, and public assistance. As progressive tax reform would generate over $700 million for the state, failure to ratify these revenue increases would only exacerbate the budget crisis in the upcoming year. As Chuck Sheketoff, Executive Director of the Oregon Center for Public Policy (OCPP), explains, "[a] 'no' vote is trouble. Should opponents prevail, the corporate minimum tax would remain at $10. Taxes would go up for the unemployed. The flow of federal dollars into Oregon’s economy would shrink. And in all likelihood, the legislature would be forced to cut further education, public safety and health and human services."
Progressive Tax Reform Best Response to Fiscal Crisis: As we detailed last year, progressive tax increases are a far better alternative to massive budget cuts. The latter can cause extensive damage to the economy by reducing consumer spending, exacerbating job losses, and hurting working families who rely on public services. Additionally, progressive tax reform does not have the detrimental economic impact that opponents often cite. In fact, several states that raised taxes on the wealthy experienced higher economic growth than other states and did not see an out-migration of wealthy residents. Just in 2009, Connecticut, Colorado, Delaware, Hawaii, New Jersey, New York, North Carolina, Rhode Island, and Wisconsin instituted either a permanent or temporary reform of personal income taxes. Over 10 states considered or enacted business tax increases to help deal with budget deficits last year as well.
Oregon Measures a Modest Step Towards Making the Wealthy Pay Their Fair Share: Measure 66 will increase the marginal income tax rate on individuals earning above $125,000 and joint filers making above $250,000 to 10.8 percent. For single filers making $250,000 and couples earning over $500,000, their marginal tax rate would increase to 11 percent. This would only impact 2.5 percent of Oregonians. The top rate would permanently fall to 9.9 percent for income over $250,000 for joint filers and $125,000 for single filers in 2012. Additionally, the measure exempts the first $2,400 of unemployment insurance benefits from taxation in 2009, providing tax relief to over 270,000 Oregonians. Considering all state and local taxes, the richest Oregonians will still be paying a smaller percentage of their income in taxes than working and middle class families. Accordingly, the measure is only a modest step towards a more equitable tax system.
Partly in an effort to restrict tax avoidance, the main provision of Measure 67 is the implementation of new minimum taxes on corporations. In particular, the measure would raise the $10 corporate minimum tax for the first time since 1931 to $150. Overall, 97.5 percent of all business in the state would either pay the new minimum tax or see no tax increases. In 2013, the changes would only impact businesses making over $10 million. Even if measure 67 is approved, the state would still have the lowest corporate taxes on the west coast and the fifth lowest in the nation.
Despite affecting only the richest individuals and corporations in the state, Measures 66 and 67 will generate over $700 million in the upcoming fiscal year. These slight changes to the tax structure will go a long way to protect vital social services that Oregonians deserve.
Public Support for Progressive Tax Reform: The public overwhelmingly supports these progressive tax increases. A poll released on December 30, 2009 found that 55 percent of Oregonians support the two measures, 38 percent oppose, and 7 percent are undecided. Scott Moore, spokesman for Vote YES for Oregon, remarked, "[t]he key message coming through is, these measures are better than the deep cuts to services everyone cares about. And they're better than broad-based tax increases that affect the middle class."
Major organizations support the effort, including: AARP Oregon, American Federation of Teachers, Children First for Oregon, Oregon AFL-CIO, Oregon AFSCME, Oregon Alliance for Retired Americans, Oregon Council of Police Associations, League of Women Voters of Oregon, Oregon Nurses Association, Oregon State Fire Fighters Council, SEIU Oregon State Council, and several others.
Measures 66 and 67 are likely to be a bellwether for efforts by advocates around the country to enact balanced revenue increases that safeguard funding for essential public programs and protect working and middle-class families who have borne a disproportionate share of the pain caused by the economic downturn.
Center on Budget and Policy Priorities - Recession Continues to Batter State Budgets; State Responses Could Slow Recovery
Center on Budget and Policy Priorities - Spending Cuts Vs. Tax Increases at the State Level: Is One More Counter-Productive than the Other During a Recession?
Center on Budget and Policy Priorities - Tax Measures Help Balance State Budgets
Fiscal Policy Institute and Center for Working Families - Back on Track
Institute for Taxation and Economic Policy - Who Pays?
Oregon Center for Public Policy - A Step Towards Balance
Oregon Department of Revenue - Measures 66 and 67
The Pew Center on the States - Beyond California: States in Fiscal Peril
Progressive States Network - Taxing High-Income Residents: Better than Budget Cuts, Better for Economic Growth
Vote YES for Oregon - Measure 66 & 67: A Break for the Unemployed