Come Tuesday, Oregonians will be voting on whether to raise taxes on high-income earners and on corporations that haven't seen an increase in the $10 minimum for corporate taxes since 1931. Foes of the two ballot referenda, Measure 66 and Measure 67, call them class warfare. Democrats in the state legislature backed it to raise $733 million in revenue at a time when the state budget, like so many, is suffering from the effects of recession, which includes vast numbers of people out of work. At 11%, the official jobless rate in Oregon ranks it in the top 10 states for unemployment.
As Camden Town wrote in a too-little-noticed Daily Kos diary last week, the tax battle has pitted rank-and-file liberals and elected Democrats against the editorial page of the daily Oregonian's new Orange County, Calif., publisher and groups such as Oregonians Against Job-Killing Taxes.
The Wall Street Journal reported Sunday:
The twin ballot measures are serving as a gauge of anti-business populism and highlight a nationwide debate over whether to fix state budgets by targeting the affluent. But they are also fueling resentment of "tax and spend" legislators, as well as public-employee unions whose members are enjoying job security at a time when thousands have lost their jobs.
On the "yes" side is a coalition of teachers unions and other public-sector employees, joined by many charities who say they fear massive cuts to schools, hospitals and antipoverty programs if the measures don't pass. ...
On the "no" side are business groups and antitax activists. One prominent opponent is Nike Inc. founder and chairman Phil Knight, who dubbed Measures 66 and 67 "Oregon's Assisted Suicide Law II" in a recent letter to the Oregonian, the state's largest daily newspaper.
Both sides have plenty of ammunition, and both largely agree that Measures 66 and 67 are before the voters now only because in 2003 Oregonians rejected state tax reform that would have raised taxes across the board. That vote caused schools to shut down a month early and made Oregon the butt of ridicule in a week's worth of Doonesbury comics
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The anti-tax forces claim that Measure 67, the corporate tax proposal, could cost the state 70,000 jobs a year. The advocates reject that claim.
If the voters say "yes," S-Corporations, LLCs and LLPs, the vast majority of corporations in the state, would see their minimum income tax rise to $150 a year, no matter how big their profits. Owners of these kinds of businesses pay personal income tax on any profits. C-corporations would either pay the new minimum of $150 or 7.9% on their profits, whichever is greater.
If Measure 66 passes, it would raise Oregon's top personal income tax rate from 9 percent to 10.8 percent on an individual’s income between $125,000 and $250,000, and to 11 percent for everything above $250,000. State income tax on the first $2,400 of unemployment benefits would be eliminated. According to the state's Legislative Revenue Office, only about 3% of Oregonians would pay the higher tax. While critics complain that the state has the fifth highest personal income tax per person in the country, Oregon has no sales tax, and, overall, it ranks 41st in taxes per person.
Much of the rationale for the tax measures being on the ballot emerge from the fact that Oregon is looking at a $4.2 billion revenue shortfall for its two-year budget (2009-2010), 10% of the total. That puts it in about the middle of the 48 states with budget problems.
Without federal assistance from another stimulus bill or by other means, a prospect with large political obstacles, many states face major cuts or tax hikes in the coming two years. The Center for Budget and Policy Priorities has been following the matter closely:
• New gaps in 2010 budgets. An increasing number of states are struggling to keep their 2010 budgets in balance as the mid-point of the fiscal year approaches. Because revenues have fallen short of projections, mid-year shortfalls have opened up in 39 states — some of which have already addressed them — totaling $34 billion or 6 percent of these budgets.
• These new shortfalls are in addition to the gaps states closed when adopting their fiscal year 2010 budgets earlier this year. Counting both initial and mid-year shortfalls, 48 states have addressed or still face such shortfalls in their budgets for fiscal year 2010, totaling $193 billion or 28 percent of state budgets — the largest gaps on record.
• Additional large gaps for 2011. States’ fiscal problems will continue into the next fiscal year and likely beyond. Fiscal year 2011 gaps — both those still open and those already addressed — total $97 billion or 16 percent of budgets for the 39 states that have estimated the size of these gaps. These totals are likely to grow as revenues continue to deteriorate, and may well exceed $180 billion.
• Combined gaps of $350 billion for 2010 and 2011. These numbers suggest that when all is said and done, states will have dealt with a total budget shortfall of at least $350 billion for 2010 and 2011.
Conservatives, as well deficit hawks among the Democrats, which now may include the White House, are not eager to pass any more stimulus or relief for the states. Although this coming Friday's report on the gross domestic product will undoubtedly show significant growth in the 4th quarter of 2009, most economists expect that no quarter in 2010 will match it. If states are forced to lay off large numbers of workers to meet their shortfalls, it will add another brake on any economic expansion.
Most states are heavily dependent on regressive tax systems that depend on levies which punish the poor and let the wealthy skate. If the weren't, the current budget crunch would not be so bad. Oregonians can make their tax system slightly more progressive tomorrow by approving its two ballot measures. But a more progressive tax rate won't solve all of Oregon's or other states' revenue problems. For that, a stronger economy is needed, and, in the short run, more federal assistance.