An Economist's Perspective on HB 3405 and HB 2649By Randall J. Pozdena, PhDPresident, QuantEcon Inc.June 9, 2009

Randall PozdenaThe 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.

Introduction
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.

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Why taxing the rich may backfire

Steve BucksteinQuickPoint!

Click the play button to hear the audio commentary

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.

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Tax Reform Vision Goes Up In Smoke

Steve BucksteinCascade Commentary

Summary:

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.

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Tough Times Call for Smart Spending

Cascade Commentary

Summary

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.

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Keep “Double Majority” Voting Rule in Place

Steve BucksteinCascade Commentary

Summary

Critics of Oregon’s so-called “double majority” rule say it isn’t democratic because a simple majority of those voting may not be able to pass a tax measure. But in reality, just 25% of registered voters can raise taxes under “double-majority.” “Double majority” is a sensible taxpayer safeguard that should be kept, and even strengthened.

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How Much Does State Government Cost Each Oregonian?

Steve BucksteinCascade Commentary

Summary

Ask even reasonably knowledgeable people how big the Oregon state budget is this biennium, and they likely will tell you that it’s around $15 billion, which is actually just the General Fund. The All Funds Budget is $48 billion—$6,376 per year for every man, woman and child in Oregon. Taxpayers deserve to know exactly how much their government is spending.

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Parking Space Tax Fails the Transparency Test

Steve BucksteinCascade Commentary

Summary

The governor’s Task Force on Comprehensive Revenue Restructuring recently discussed imposing a tax on commercial parking spaces to raise revenue for Oregon’s highway transportation system. The argument was made that businesses, not consumers, would pay; but ultimately this is yet another hidden tax that likely will be passed along to consumers in the form of higher prices. If we want to tax shoppers, then we should tax them openly and not make business our hidden tax collector.

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