Today the Port of Portland voted unanimously to enter into an Air Service Development Agreement with Delta Airlines. Under the terms of the agreement, the Port of Portland will pay Delta a service retention fee in the amount of $3.5 million in exchange for Delta’s commitment to continue daily nonstop service between PDX and Tokyo, Japan, from September 1, 2009 through May 31, 2010. This program is also available to any other air carrier willing to commence new daily nonstop service between PDX and Asia, so it creates an open-ended liability for the Port. If 7 other airlines sign up for the same deal, then presumably the Port would have to pay out $24.5 million, regardless of whether it actually has the money and regardless of whether PDX needs the service.
With the recent dismissal of the Oregon legislative session, Oregonians have ended up with three things: taxes, taxes, and more taxes. The legislature raised taxes by over $1 billion this year by increasing the income tax on the wealthiest Oregonians and by raising the corporate income tax. Legislative leaders have claimed that these tax burdens on the state’s job creators will help create long-term jobs throughout the state. In reality, the loss of Oregon jobs and businesses is apt to be unfathomable.
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The state recently announced that its $175 million “stimulus package” has created or saved 3,236 jobs.1,2
What the state hasn’t yet told citizens is that Oregon risks losing ten to twenty times or more as many jobs if two “anti-stimulus” tax bills take effect.
I estimate that raising the maximum tax rates on personal income, including capital gains, to eleven percent will cost the Oregon economy 36,000 jobs by 2015. The job losses will continue to accumulate beyond that year. This analysis does not incorporate job losses due to higher corporate income taxes.
The estimate is based on a model of state employment growth that incorporates data for all 50 states for 26 years. It exploits tremendous variation in tax practices from one state to another, and within individual states across time. The model was developed for my 2005 analysis of Oregon’s capital gains tax. (See “Generating Jobs and Income Through a Capital Gains Tax Reduction,” Appendix 1, Equation 3, available at http://www.conerlyconsulting.com/pdf/Capital_Gains_Report.pdf.)
The opinions expressed herein are those of the author and
should not be attributed to any other individual or to any other organization
with which the author is affiliated.
The State of Oregon faces State budget deficits due to the sharp decline in employment and economic activity in the state. In an attempt to fend off this fiscal problem, the Oregon House just passed, and the Oregon Senate will decide shortly, on two major tax measures:
• HB 3405 would increase tax rates on corporate profits, from 6.6 to 7.9 percent for two years, dropping to 7.6 percent thereafter.
• HB 2649 would increase, for three years, personal income and capital gains tax rates from the current 9 percent to 10.8 percent and 11 percent for those earning more than $125,000 and $250,000, respectively. A 9.9 percent rate would be imposed thereafter.
Oregon state legislators are busy working to pass bills that they hope will generate $800 million income tax dollars from wealthy individuals and corporations.
The personal income tax bill would impose higher tax rates on households with taxable income above $250,000 along with single filers whose income tops $125,000. Supporters think they can raise about $500 million over two years, but that’s only if economic realities don’t get in the way.
The Task Force on Comprehensive Revenue Restructuring was charged with developing a blue print for a state and local government tax system. But Portland pollster Adam Davis has shown that public negativity on government and politics is now higher than it has been in 30 years. Oregon voters do not trust government or politicians to get things right.
With Oregon facing a $1-billion-and-counting budget deficit, the temptation exists for legislators to close the budget gap with tax increases. Before any conversation about raising taxes occurs, however, state officials should first agree to a set of guiding principles of taxation.
Oregon state revenues are now projected to be $1 billion short of paying for existing services in the next biennial budget, and the economic downturn is putting pressure on all levels of government. The State Legislature will be faced with the challenge of satisfying unlimited demands with limited resources. Smart Spending, rather than new taxes, will be one step on the path out of our current crisis.