Health Care Tax Would Hurt Middle Class

By Eric Fruits, Ph.D.

Many Oregonians are now spending as much on health insurance and health care as they are on their mortgage payments. The Oregon legislature recently passed House Bill 2391 (signed by Governor Kate Brown) that will spike these costs even higher.

The law provides $605 million in new funds to the Oregon Health Authority. The money is meant to fill the fiscal hole made by the state’s costly expansion of Medicaid under the Affordable Care Act (ACA). Most of the money will come from taxes on health insurance providers, hospitals, managed care providers, and insurance provided through the Public Employee Benefits Board (PEBB).

Two of Oregon’s largest insurance providers on the ACA exchange have been approved for double-digit premium increases: Kaiser at almost 15 percent and Providence at more than 10 percent. For a 40-year-old with a Silver ACA plan, that amounts to an increased cost of about $500 a year.

The law explicitly allows the new taxes on health insurance providers to be passed on to consumers. With these new taxes, that Silver ACA plan will cost about $625 more in 2019 than in 2018. It’s not just 40-year-olds who will get hit with the insurance tax. Nearly 12,000 college students who buy their own health care as a requirement of attending a public college will pay the tax. Small group employers—such as the local coffee shop, auto repair, or bookstore—will pay the new tax.

Taxes on hospitals will raise the costs of care across the board. Emergency room visits, surgeries, diagnostics, and even childbirth will be hit with this new sales tax on hospital services. The cost of these taxes also will be passed on in the form of higher deductibles and premiums. Even if you don’t go to the hospital, you will be paying the hospital tax through higher insurance prices.

Because of the tax on the PEBB, local governments and school districts will also pay higher prices to insure their employees. These higher costs will lead to further cuts in staffing and services. Oregon’s already crowded classrooms will almost certainly get more crowded as districts struggle to fund the PERS crisis and higher insurance costs.

Medicaid providers are also hit with the tax. Because they do not have the pricing flexibility of other providers, they will have a harder time passing on the higher costs to consumers. Instead, they likely will reduce payments to doctors, nurses, and staff. With reduced payments, these professionals may decide to get out of the Medicaid market, thereby worsening the current shortage of Medicaid providers.

The Oregon Health Authority reports it recently removed nearly 55,000 people from its Medicaid program, after the state found they no longer qualified or failed to respond to an eligibility check. State auditors said in May that each of these Medicaid enrollees costs Oregon, on average, about $430 per month, or more than $550 million a biennium. These new savings alone more than cover the legislature’s tax increases.

While nearly everyone will be hit with the cost of these taxes, Oregon’s middle-class families will be hit the hardest. The Census Bureau reports that more than half of Oregon’s uninsured are adults between the ages of 25 and 64 who are not in poverty. These middle-class Oregonians surely want health insurance but have been priced out of the market. According to estimates by the Kaiser Family Foundation, about half of the individuals buying insurance on the Obamacare exchange get no subsidies under the law. This has been called “the middle-class loophole of no help.” Adding the legislature’s new taxes will drive more of the middle class to take their chances with being uninsured. Is this really the state of health care we want for Oregon?

These taxes can be stopped. StopHealthCareTaxes.com is now collecting signatures to put Referendum 301 on the ballot, allowing voters to repeal about $320 million in new taxes on health insurance and health care. It would save the average household more than $200 a year in new taxes. Middle-class families will see even bigger savings. The referendum won’t stop the cost of health care from rising, but it will stop things from getting worse than they already are for Oregon’s middle class.


Eric Fruits, Ph.D. is an Oregon-based economist, adjunct professor at Portland State University, and Academic Advisor for Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article appeared in The Portland Tribune on September 21, 2017.

Time to Stop Forcing Union Membership

By Steve Buckstein and Kathryn Hickok

This week (August 20-26) is National Employee Freedom Week, a national effort to inform union members about their freedom to opt out of union membership if they choose and to make decisions about labor representation and the use of their union dues. The effort “empowers union employees with information to make the decision about union membership that’s best for them, including identifying non-union alternatives that better suit their needs.” An interactive map at employeefreedomweek.com lets workers in Oregon and other states find links to information helpful to those wanting more employee freedom. More than 100 organizations across the country, including Cascade Policy Institute in Portland, are affiliated with the annual campaign.

“Right to Work” states are states in which union membership may not be enforced as a condition of employment. Workers may choose to join a union or not, without fear of losing employment, salary, benefits, or seniority. Workers in the 22 states that are not yet Right to Work, such as Oregon, do not have full freedom to opt out of union membership. However, they do have the right to become agency fee payers, to identify as religious/conscientious objectors, or to require that their dues not be used for political purposes. According to National Employee Freedom Week’s website, “many employees are thrilled to learn that alternative professional associations provide better benefits and professional development opportunities for a fraction of the cost of union membership.”

Last year a survey of union members and union households found that about two-thirds nationwide agree that if members opt out of paying all union dues and fees, they should represent themselves in negotiations with their employer, an option known as “Worker’s Choice.” By the same margin (66.9% to 33.1%), Oregonian union members support Worker’s Choice, too. Worker’s Choice would end the so-called free-rider problem (really a forced-rider problem) commonly touted by union leaders, who argue that labor laws require them to continue representing workers even after they stop paying all dues and fees.

Oregon labor law is similar to that of many states that don’t allow individual workers to represent themselves if a union has organized their workplace. But now we know that most Oregon union members want this to change. They want workers to be able to represent themselves, and they don’t want to force unions to represent these non-dues-payers.

You would think the unions would be all over the Worker’s Choice solution, but they aren’t. Unions want to be forced to represent all workers because under current labor law, states like Oregon that don’t have Right to Work require that non-union members still contribute the non-political portion of dues to their unions to cover bargaining and representation costs. The unions want the money, pure and simple. Of course, they also wanted compulsory political dues, but in 1988 the U.S. Supreme Court Beck decision gave all workers the right to opt out of those, thanks to now-Oregonian Harry Beck’s decades-long battle to preserve his free speech rights. He tells his story at oregonemployeechoice.com.

A case heard by the U.S. Supreme Court last year (Friedrichs v. California Teachers Association) could have freed all public sector workers nationwide from paying compulsory union dues based on the argument that such compulsion violates their First Amendment rights to free speech and free association. Before the case could be decided, Justice Antonin Scalia died, leaving a four-four tie vote in the Court. This resulted in upholding a lower court decision denying ten California public school teachers their rights to be free of union compulsion.

This union compulsion brings to mind the well-known statement by Thomas Jefferson:

“To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical.”

That is what the Supreme Court left in place—the right of public sector unions to compel workers to fund the propagation of ideas they disbelieve. It remains for future court decisions, or other political efforts, to end union compulsion in Oregon and nationwide. Until that happens, National Employee Freedom Week will continue to bring this injustice to the attention of union members and the public.


Steve Buckstein is Senior Policy Analyst and Founder at the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. Kathryn Hickok is Publications Director at Cascade. A version of this article originally appeared in The Portland Tribune on August 24, 2017.

Let Parents Wield School Spending Power

By Kathryn Hickok

Are we missing the trees for the forest in Oregon school funding and education reform debates?

Media reports, school districts, and political leaders usually focus on the big picture: reaching a 100% high school graduation rate so all children have the best chance in life. That’s a great goal. Frequently lost, however, is the fact that every child is an individual. The focus of real-life Oregon parents is helping their kids reach their potential in light of their specific needs and gifts.

These two perspectives shouldn’t be at odds. In fact, the second could drive the first―if more parents were empowered to make meaningful choices for their children’s education.

According to the National Education Association’s Rankings and Estimates report for 2016 and 2017, counting local, state, and federal funding, current expenditures per Oregon student in Average Daily Attendance are estimated to be $13,230, more than 33 other states. Adding in spending for capital outlays and interest payments, that number increases to $14,911 per student.

Yet, the National Association of Education Progress reports that only 34% of Oregon fourth-graders tested “proficient” in reading in 2015; and Oregon has the third-worst high school graduation rate in the country.

No one disputes the need for improvements to public schools. But children who need help today—first to learn the basics (like reading and math) and then to graduate from high school—should get the help they need now. What we ought to do is give Oregon students the power of choice to find their own paths to success.

For lower-income parents, the stakes are high. Nearly half the children born into poverty will stay in poverty as adults. Key to changing that outcome is an education that leads to high school graduation and future employment. Unlike parents with greater means, who can move to another neighborhood or pay out-of-pocket for private schools, lower-income parents often find their children trapped in public schools that do not meet their kids’ needs. Education Savings Accounts could change that.

Six years ago, Arizona became the first state to pass an Education Savings Account (ESA) law for some K-12 students, and it recently expanded eligibility to eventually include all Arizona children. Florida, Mississippi, and Tennessee also have ESA programs limited to certain students, such as those with special needs.

An ESA is analogous to a limited-use debit card for qualifying education expenses. It gives parents who want to opt out of a public school a portion of the per-student state funding to spend on their child’s education in other ways. ESAs can fund a wide variety of education-related expenses, including tuition, tutoring, and supplemental materials. Money not used in one year can be rolled over for future education expenses, even college.

But if ESAs let parents spend education funds outside the public school system, would ESAs drain money from public schools? Not necessarily. Schools are funded by local, state, and federal money. ESAs would be funded by only part of the state component. The amount of the ESA deposits is negotiable and would be the biggest driver of their fiscal impact.

Legislators can design an ESA program so that it would be revenue neutral to public schools, or even create a net increase per student who remained in the system. If students leaving public schools took less funding with them than would have been spent if they had remained, schools could reduce their class sizes without a negative impact on per-student funding.

No one can craft a school system that meets every child’s needs. Statistical data analysis and bureaucratic goal-setting can’t ensure that any particular child makes it to high school graduation or excels in a career. But most parents are keenly aware of their own children’s needs. Giving parents power to find the right fit for their kids would make a world of difference, as any parent knows.

Focusing on the forest (the public school system), Oregon is missing the trees (kids). We should expand the role of parents in achieving better educational outcomes for their children. We’ve tried everything else. Parental choice is the future of education reform, and Education Savings Accounts are a fiscally responsible policy solution that can give all kids options now.


Kathryn Hickok is Publications Director at Cascade Policy Institute, Oregon’s free market public policy research organization. She is also Director of Cascade’s Children’s Scholarship Fund-Oregon program, which provides privately funded, partial tuition scholarships to Oregon elementary students from lower-income families. A version of this article originally appeared in The Portland Tribune on July 18, 2017.

Oregon’s new minimum wage law will hurt the people it aims to help

By Lydia White

Just prior to Oregon’s July 1 minimum wage* increase from $9.75 to $11.25 (Portland Metro Area), a team of researchers from the University of Washington produced a study, published by the National Bureau of Economic Research, that measures the effects of Seattle’s $13 minimum wage. In just nine months, Seattle wages rose substantially, from $9.47 in 2014, to $11 in 2015, to $13 in 2016 (an increase of 37.3%), and again to $15 on the first of this year.†

Unique to this study is a data set collected by Washington’s Employment Security Department which tracks hours worked in addition to earnings, making this particular study the first of its kind. Washington and Oregon are among four states that track these data.

The study‡ found that the city’s mandates resulted in 5,000 fewer jobs around Seattle. The average low-wage employee saw 3% higher hourly wages, but 9% fewer hours worked, resulting in a net loss of $125 per month. For low-income households especially, an annual loss of $1,500 is significant.

Jacob Vigdor, one of the study’s authors, said, “Traditionally, a high proportion of workers in the low-wage market are not experienced at all: teens with their first jobs, immigrants with their first jobs here.”

Wages are prices, or market signals, that indicate the value of labor productivity employees create. Low-skilled, low-paying jobs provide the opportunity to acquire knowledge and experience they were previously without, setting up workers for their next, potentially higher paying jobs. Henry Hazlitt, author of Economics in One Lesson, wrote:

“The more the individual produces, the more his services are worth to consumers, and hence to employers. And the more he is worth to employers, the more he will be paid. Real wages come out of production, not out of government decrees.”

The least skilled are further disadvantaged when artificially high price floors are implemented. As described in the UW study, when the cost of employing a worker exceeds the value that worker creates, employers are forced to reduce hours or eliminate positions within their business by laying off employees, who are often replaced by automation. These alternatives harm low-wage employees.

Additionally, employers are less likely to take a chance by hiring an unskilled worker and instead will search for only the most qualified candidates. Since teenagers are naturally less skilled due to lack of work experience, these policies create higher youth unemployment. A study last December by Cascade Policy Institute examined these and other “unintended consequences” of the minimum wage on youth.

Instead of, or in addition to, cutting costs of labor, employers increase prices of their goods or services. Consumers may choose to forgo such products or reduce their levels of consumption, in turn decreasing the need for labor. When the price of goods inevitably catches up to the employee’s higher wages, they find the purchasing power of their earnings has diminished.

Furthermore, large businesses can more easily absorb wage increases by operating within thinner profit margins or relocating to a region with a lower minimum wage. Local mom-and-pop stores don’t enjoy that same flexibility and must close their doors. With less competition, larger businesses have more power to raise prices.

When economists warn against the costs associated with the minimum wage, it’s not to protect greedy capitalists; it’s to protect both the worker and the small business owner from being priced out of the market.

For the benefit of all Oregonians, political leaders should learn from our northern neighbors and create an environment that doesn’t punish low-wage workers and the businesses that employ them. They can start by repealing the state’s onerous minimum wage law.


*Oregon’s and Washington’s minimum wages vary depending on region, population, benefits, tips, and business size. The minimum wages discussed here refer to those of Seattle and the Portland Metro Area.

†The latest 2017 increase was not included due to incomplete data.

‡The study used a “relatively conservative” $19 per hour low-wage threshold to account for the spillover effect of “miscoding jobs lost when they have really been promoted to higher wage levels….”


Lydia White is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article originally appeared in The Coos Bay World on July 10, 2017.

Are Smartphones in Class a Problem or an Opportunity?

By Steve Buckstein

To hear some teachers talk, you would think before smartphones became ubiquitous in their classrooms that every student sat politely and paid attention every minute of the day. Of course, anyone who was ever a student knows the messy truth about this assertion. So, a little perspective may be in order, both about the evolution of the telephone and what should be the evolution of our educational system.

It wasn’t too long ago that if our parents or grandparents wanted to make a phone call from home, they would pick up the receiver and ask the monopoly “phone company” operator to place their calls. Later, how glorious it was that we could use our rotary phones to spin out our own calls, even long-distance ones if we could afford the high per-minute costs. Then came digital phones, and finally cell phones became affordable to the masses. But even the early cell phones had limited uses.

You may not remember, but none of us had any cell phone apps before 2008, because there weren’t any. None. Imagine: All you could do on your cell phone before 2008 was make calls, maybe text, and maybe connect to the World Wide Web on a slow Internet connection.
Just nine years later, more than two billion people worldwide use apps on their smartphones. You may have dozens of apps on your phone today and, even if you only use a handful of them regularly, that’s a world away from what it was like before 2008. Lots of things are a world away from what they were like before 2008—except for public education.

Consider the children in our schools today. Many of them have never known a world without smartphones and their apps. Rotary telephones, even landlines, are likely just historical oddities to them. Much of their world is new, except the way we adults try to educate them. First, we assign them to a school based on their ZIP code; then we sit them down in rows, in a classroom with kids their same age, all in front of one teacher lecturing about some subject they may or may not find interesting and relevant to their lives.

We say that we want our kids to learn how to take advantage of technology, take STEM courses, and be prepared for the new careers awaiting them. So why do we see their use of that technology every day in school as a problem? They’re not paying attention to the teacher! They’re watching their screens instead of sitting politely in rows listening to the math lesson at 10 am, or the history lesson at 2 pm. The very technology that we want them to be able to use in their careers is enabling them to tune out the lessons we think they need to learn now before entering those careers.

We know that they’ll likely find value in many of these subjects later in life; but if they can’t learn those lessons in ways that are relevant to them now, they may never learn them at all; or they may learn them too late to avoid painful life experiences between now and then.

As the nation’s largest teachers union recently documented, taxpayers pay nearly $15,000 every year for all the costs associated with each student attending Oregon public schools—more than in 33 other states. Rather than let a smartphone costing a few hundred dollars get in the way of any student’s $15,000 education, we need to find ways to let it supplement or enhance their learning experience.

As one high school teacher put it in an Atlantic magazine article on this subject last year,

“If educators do not find ways to leverage mobile technology in all learning environments, for all students, then we are failing our kids by not adequately preparing them to make the connection between their world outside of school and their world inside school.”

One systemic way to think about how smartphone technology can enhance learning is through Education Savings Accounts. Unlike school vouchers that act more like the rotary telephones of the school choice world, ESAs act more like the smartphones of that world, complete with countless apps that can help students learn virtually any subject, often at a fraction of the cost associated with traditional brick and mortar schools.*

While vouchers only let parents pay for private school tuition, ESA funds may also be used for other approved educational expenses, such as online learning programs, private tutoring, community college costs, and other customized learning services and materials.

Also, while voucher funds all go to private school tuition or are lost to the families, funds remaining in ESA accounts each year may be “rolled over” for use in subsequent years, even into college. This creates incentives for families to “shop” for the best educational experiences at the lowest cost, as well as incentives for schools and educational programs to price their services as low as possible, not as high as possible as might be done under a voucher program.

The bottom line is that, while smartphones in school can be a distraction, they can also pave the way to better, more efficient use of educational resources. It is up to us as adults to harness their power for good instead of just bemoaning their power to distract.


* To see how Oregon’s former State Treasurer sees smartphones undercutting the entire economic model of higher education (and by inference K-12 education), watch this 59-second video.


Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization. This Commentary is adapted from a portion of the author’s written and oral testimony at the Oregon State Senate Education Committee’s Informational Hearing on Education Savings Account bill SB 437 on June 13, 2017.

 

Freedom in Film: Shane (1953)

By Kathryn Hickok

“That’s the trouble with this country. There ain’t a marshal within a hundred-mile ride.”

Considered by many to be the greatest Western of all time, Shane (1953) is a Father’s Day-worthy classic about a young boy’s relationships with his father and a mysterious gunslinger. A tale of the era of cattle drivers, the open range, and gunfighters settling disputes, the visually stunning Shane was filmed on location near Jackson Hole, Wyoming.

Alan Ladd plays Shane, a man with a past who works as a farm hand for Joe Starrett (Van Heflin) and his wife Marian (Jean Arthur). Starrett is the unofficial leader of seven homesteading families, who want to put down roots and create something bigger than themselves―a future built from hard work and devotion to each other. They want to build a town, with “a church and a school,” a place where people can come and raise families.

The settlers’ vision of civilization conflicts with the desires of the cattle barons, who want to keep the range open. The barons reject the settlers’ claims to private property, stampeding through plowed fields and fences to terrorize people into giving up and leaving. When the barons resort to lawless violence, the homesteaders’ last chance of winning is Shane.

Starrett and Shane are each men of courage, self-restraint, and high ideals. They seek prudent, honorable solutions to the settlers’ problems; and in different ways they need to work together to survive. Shane celebrates individual initiative, creativity, free enterprise, and the classic opportunity of the American West.

But it is also clear that no one succeeds alone. Joe and Marian Starrett are a team. Their farm is only possible because they have each other, as Joe points out with loving pride. Their family also needs neighbors. The farmers rely on each other for moral and physical support and protection. The rights of individuals are only secure as long as honest people defend them. And the whole community needs the act of selfless courage that only Shane can pull off.

The lawless days gradually give way to civilization; but only through the courage of homesteading families determined to turn the Wild West into a peaceful, self-sufficient, hard-working community. The Starretts’ young son Joey idolizes Shane, but Shane steers him away from the false glamour of the lone ranger. When Shane rides off into the sunset, he tells Joey, “You go home to your mother and father and grow up to be strong and straight.” As Shane exits, the day of the gunfighter is over. The family now guards the range.


Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Oregon program at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article was originally published in August 2013.

Oregon Legislature Should Give Kids a “Ticket to the Future” Today

By Kathryn Hickok and Steve Buckstein

Derrell Bradford has spent his adult life passionately advocating for education reform through parental choice. Bradford grew up in poverty in southwest Baltimore and received a scholarship that allowed him to attend a private high school, preparing him for college and a successful career. Better than anyone, he knows the power of educational choice to unleash a child’s potential.

“A scholarship is not a five-year plan or a Power Point…,” Bradford explained recently. “It’s a ticket to the future, granted today, for a child trying to shape his or her own destiny in the here and now….”

Choices in education are widespread in America, unless you are poor. Affluent families can move to different neighborhoods, send their children to private schools, and supplement schooling with enrichment opportunities. Lower- and middle-income families, however, are too often trapped with one option: a school in need of improvement assigned to them based on their ZIP Codes. Families deserve better.

Six years ago, Arizona became the first state to pass an Education Savings Account (ESA) law for some K-12 students. In April, lawmakers there passed a new ESA bill which expands the program eligibility to eventually include all Arizona children. Florida, Mississippi, and Tennessee also have ESA programs limited to certain students, such as those with special needs. Nevada also passed a near-universal ESA bill, but it is yet to be funded.

An Education Savings Account is analogous to a debit card for qualifying education expenses. It gives parents who want to opt out of a public school that is not meeting their child’s needs a portion of the per-student state funding to spend on their child’s education in other ways.

Now, Oregon has a chance to put parents in the educational “driver’s seat” with Senate Bill 437, known as the “Educational Opportunity Act: The Power of Choice.” This bill would allow parents to spend a portion of the per-student state funding for their child on the schools or education services that are best for them as individuals. Options could include private or home schools, tutors, online courses, and therapy. Funds not used by the student in a given year could be rolled over for future years, even into college.

Critics might ask if this bill would drain funds from public schools, or would it leave them harmless while allowing many students to make different choices? The answers depend on several assumptions which have been evaluated in a new review of a universal Oregon ESA program.

The amount of the ESA deposits is the biggest driver of fiscal impacts. Based on the assumptions in the study, the program would have a fiscal “break even” for state and local school districts combined at an annual ESA amount of $6,000 for each participating student with disabilities and/or in a low-income household and $4,500 for all other students. These are the dollar amounts proposed in an Amendment to the bill and represent a reduction from the current state allocation which averages $8,781 for all students.

Of course, fiscal impact is not and should not be the primary measure of this or any well-designed school choice program. But it is a political reality that such a program should not impose a fiscal burden on the state at a time when all budgets are under pressure. SB 437 would offer Oregon families as much choice as possible in how their children take advantage of educational opportunities funded by the state, while not harming public schools.

The Senate Education Committee will hold an informational hearing on SB 437 on Tuesday, June 13, at 3 pm at the Oregon State Capitol. You can make a statement in favor of school choice by attending the hearing and/or submitting written testimony on the bill.

Children have different needs and learn in different ways. The landscape of educational options available to meet those needs is more diverse today than ever. Education Savings Accounts for Oregon parents are a life-changing education solution whose time has come. Families have had enough five-year-plans and Power Points, as Derrell Bradford put it. To give Oregon kids a ticket to the future—today—the Legislature should enact Senate Bill 437.


Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Oregon program at the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. Steve Buckstein is Cascade’s Senior Policy Analyst and Founder. A version of this article originally appeared in The Portland Tribune on May 25, 2017.

Kicker Envy 2017

By Steve Buckstein

Individual Oregon income taxpayers may receive kicker refunds when they file their 2017 tax returns based on a percentage of the state income tax they paid in 2016. Based on the May revenue forecast, $408 million could be coming back to taxpayers, with the average refund being $210. A final determination of whether the kicker will “kick” and how big it will be should be announced on August 23.

But even before those potential refunds reduce our 2017 tax liability, some are questioning whose money it is, and others seem envious that the “rich” will get much bigger refunds than the rest of us. So, whether the kicker law is good or bad public policy, let’s think a little about who this money really belongs to. Is it a rebate for overpaying your taxes, or is it somehow “our” money that is better left in government coffers?

How the kicker works 

First, the mechanics of the kicker law: Oregon state government is highly dependent on the personal income tax for its General Fund budget. With a fairly flat tax structure, most wage earners are in the nine percent income tax bracket, while the highest income earners are in the top 9.9 percent bracket. Therefore, state revenue can be quite volatile, going up and down as the economy cycles between boom and bust.

The legislature first passed the kicker law in 1979, and voters added it to the state constitution in 2000. It mandates that state economists estimate what income tax revenue will be over the following two-year budget period. The legislature then must balance the budget by not allocating more money than the estimate. If the estimate is low by two percent or more, then the entire surplus must be returned to taxpayers. The kicker law actually is composed of two parts, dealing with personal income taxes and corporate income taxes differently. In 2012 voters decided that any corporate kickers would be returned to the state general fund to provide additional funding for K-12 public schools.

Some people argue that the way the kicker “kicks” makes little sense. They correctly note that projecting state revenue two years out to within a two percent margin is terribly difficult, and has been done only rarely. Others defend the kicker law as an important brake on runaway government spending, especially since voters have rejected other tax and expenditure limitations at the polls.

Whose money is it? 

Whether the kicker law is good or bad public policy doesn’t change the answer to a more fundamental question: Whose money is it?

Some argue that the kicker money really belongs to the state. After all, they say, it’s in the state’s coffers because individuals paid what the tax law said they owed on their tax returns. As long as any Oregonian has a “need” for that money—be they school children, the elderly, the disabled, etc.—then the money should go to them instead of back to the individuals who earned it.

How much is that latte? 

Of course, this is the Marxist “from each according to his ability, to each according to his need” justification. Taken further, not only would the kicker money remain with the state, but the state could retroactively come after even more of your previous income if, in the wisdom of government officials, anyone still “needed” those funds.

One way to look at this argument is to think about walking into a coffee shop today and ordering a $3 latte. The price is posted on the wall, but the person behind the counter asks you a question before accepting your order. “Did you get a raise last year?” “Yes,” you tell her proudly, “I was very productive last year and my boss gave me a 10 percent raise.” “That’s great,” she replies. “The $3 latte will cost you $3.30.” “Why?” you wonder. “Because your ability allows me to better meet my needs.”

You wouldn’t accept this argument from your barista, and you shouldn’t accept it from your government.

Next, some argue that the kicker “lavishes a windfall on those who don’t need it.” They point to the top one percent of taxpayers with adjusted gross incomes over about $386,000 who would receive more than $4,500 each, while the average taxpayer would only get back $210. What is often unstated in this argument is that those “lucky” top taxpayers paid way more income tax than the rest of us, and they will get back exactly the same percentage of their tax payments as everyone else does.

Envy is a powerful emotion, but it should not trump reason. If we can find a better way to restrain runaway government spending, we should do so. But until that day arrives, the kicker law is one defense against those who argue that some of the money you earned belongs to someone else just because they “need” it.


Oregon Income Tax Calculator: https://smartasset.com/taxes/oregon-tax-calculator


Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization. An earlier version of this Cascade Commentary was published in November 2007.

 

Oregon Politicians Support Better Roads, Just Not Here

By John A. Charles, Jr.

Recently the Oregon Legislature held a hearing on HB 3231, a bill promoted by Rep. Rich Vial (R-Scholls) that would authorize the formation of special districts for the purpose of constructing and operating limited-access highways.

Opponents made many of the same arguments they’ve been using for decades: new highways threaten farmland; increased driving will undermine Oregon’s “climate change” goals; and we can’t “build our way out of congestion.”

Perhaps the most comical opposition argument was made by Marion County, which sent all three of its Commissioners in a show of force. The Commission Chair concluded his remarks by saying, “We understand progress; we just want that progress to go somewhere else.”

Oregon stopped building new highways in 1983 after I-205 was completed. Elected officials came to believe that our needs for mobility could be met through increased urban densities, massive subsidies for public transit, and various forms of “demand management” to entice or even force people out of their cars.

The new approach didn’t work.

It turns out that manipulating urban form through land-use controls has very little influence on driving. Sure, you can regulate suburbia out of existence through density mandates, as Metro is doing. You can also reduce the parking supply and bring light rail right to someone’s front door.

But no matter how much some people fantasize about using alternatives to cars, it’s not very practical. Midday meetings, post-work errands, childcare obligations, and countless other demands lead people to rationally opt for driving for most trips.

That’s why, after a 20-year spending binge of $3.67 billion for new rail lines, TriMet’s share of daily commuting in Portland actually dropped from 12% in 1997 to 10% in 2016.

Auto-mobility is a wonderful thing, and there is no reason to feel guilty about new roads. For one thing, driving is strongly associated with economic growth. According to ODOT, for every job created in Oregon, we can expect an additional 15,500 miles of auto travel each year. If you’re in favor of new job creation, you have to accept increased driving as a logical consequence.

Moreover, the emissions associated with driving are now so minor that the real concern should be reducing air pollution from congestion. Vehicles sitting in gridlock have per-mile emissions of infinity; getting those vehicles into free-flowing conditions will improve local air quality.

Autos generally have the lowest emission rates when traveling at steady speeds of around 50 MPH. This is also a driving speed that makes most drivers happy, especially at rush hour. The way to accomplish both goals is through the construction of new highways when needed, coupled with the use of variable toll rates (also known as “dynamic pricing”). This could happen under HB 3231.

Across the country, dozens of impressive new highways are being built, many with private financing. Dynamic pricing is being be used to pay off bonds and eliminate congestion. This is the progress that most commuters dream about.

Unfortunately, it probably won’t happen here. Oregon politicians only support progress somewhere else.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article originally appeared in the Portland Tribune on April 25, 2017.

Education Savings Accounts Can Help Students Without Hurting Public Schools

By Steve Buckstein

School choice programs allow students to choose schools or other educational resources and pay for them with a portion of the tax funding that otherwise would go to the public school assigned to them by their ZIP code.

While school choice is popular with large segments of the public, opponents often claim specific programs like vouchers or Education Savings Accounts (ESAs) drain funds from the public school system, and so must be rejected.

What opponents overlook is that public funding for K-12 education should actually help educate students, not simply fund specific schools whether or not they meet specific student needs.

The latest and most versatile school choice programs sweeping the country are Education Savings Accounts. ESAs deposit a percentage of the funds that the state otherwise would spend to educate a student in a public school into accounts associated with the student’s family. The family may use the funds for private school tuition or other approved educational expenses such as online learning programs, private tutoring, community college costs, higher education expenses, and other customized learning services and materials. Funds remaining in the account each year after expenses may be “rolled over” for use in subsequent years, even into college.

Here in Oregon, this school choice debate will center upon the latest proposal to offer all K-12 students many more educational options: a universal Education Savings Account program contained in Senate Bill 437. SB 437 is also known as the Educational Opportunity Act: The Power of Choice.

So, will this bill drain funds from public schools, or will it leave them harmless while allowing many students to make different choices? The answers depend on several assumptions which have now been evaluated in a new review and evaluation of a universal ESA program for Oregon.

The amount of the ESA deposits is the biggest driver of fiscal impacts. As introduced, SB 437 would provide participating students with disabilities and in low-income households $8,781 per year (current state funding) in their ESAs. All other participating students would receive $7,903 (90% of current state funding).

As Introduced, based on the assumptions below, the Fiscal Impact on the state and local school districts could be in the range of $200 million annually based on the following assumptions:

■ 90 percent of 61,000 students currently enrolled in non-public education would participate in the program.
■ Seven percent of 563,000 students currently enrolled in public schools would participate.

Based on these assumptions, the program has a fiscal “break even” for state and local school districts combined at an ESA annual amount of $6,000 for each participating student with disabilities and/or in a low-income household and $4,500 for all other students. These are the dollar amounts proposed in the -1 Amendment to the bill.

The Figure below shows the net fiscal impact on state and local budgets across a range of ESA amounts, again based on the assumptions above. 

If fiscal impact were the only measure by which to evaluate this ESA program, the Figure shows that the program is “optimized” at an amount of $3,000 for each participating student with disabilities and/or in a low-income household and $2,250 for all other students. Once fully implemented, the program would save state and local governments $53 million a year.

Figure:

ESA_FIGURE

Of course, fiscal impact is not and should not be the primary measure of this or any well-designed school choice program; but it is a political reality that such a program should not impose a fiscal burden on the state at a time that all budgets are under pressure.

The primary measure of this ESA program should be that it offers Oregon families as much choice as possible in how their children take advantage of educational opportunities funded by the state.

The full report, Education Savings Accounts: Review and Evaluation of a Universal ESA in Oregon, can be found online here.


Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization.

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