Measure 97 and the Mirage of School Funding

— Voters are destined for disappointment

 

By John A. Charles, Jr.

Proponents of Measure 97 have consistently claimed that if the measure passes, it will generate an additional $3 billion annually for public education and other social services. Judging from the comments I’ve read in various Oregon newspapers, many people are falling for this argument.

Apparently none of the letter writers have ever watched a legislative appropriations hearing. These are the meetings where a tiny group of senior politicians sit in a back room and decide how to spend billions of dollars. I’ve watched hundreds of such hearings, and the most predictable outcome is that politicians will spend money in front of them on whatever they want.

Let’s just take a simple example. Oregon was one of 44 states that sued the tobacco industry in the mid-1990s to recover the health care costs associated with smoking. Plaintiffs claimed that the tobacco industry had long been imposing uncompensated costs on states in the form of health care for smokers who became sick from use of the product.

The suit was settled through adoption of a Master Settlement Agreement (MSA) with the four largest tobacco manufacturers. As part of the agreement, each state was to receive payments every year from 1998 through 2025.

According to the plaintiffs, the estimated $25 billion of MSA money was supposed to be used for tobacco prevention activities and health care subsidies necessary to treat smoking illnesses. But that was not a formal part of the agreement. Each state was free to use the funds in whatever way its state legislature approved.

In Oregon, total MSA funds received since 1998 have exceeded $1.26 billion. Almost all of it was spent on programs that had nothing to do with tobacco cessation or public health. Only 0.8 percent was appropriated for tobacco prevention programs.

How could this be? They promised!

Yes, Virginia, they promised. But every two years, 90 legislators show up in Salem, and they each have their own priorities. Once you put a pot of money on the table for them to spend, it’s game over.

Almost no one in the Capitol remembers what the MSA was, and, furthermore, they don’t care. They only care about spending money for the stuff they want right now.

Measure 97 is a horrible tax proposal, for many reasons. It unfairly targets a small subset of all businesses directly, but hits all businesses and all of us indirectly. It taxes sales but not profits. It would be the largest tax increase in Oregon history.

But if voters ignore these concerns and approve it anyway because they think it will increase funding for schools, they are destined for bitter disappointment.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. This article originally appeared in the September 2016 edition of the newsletter, “Oregon Transformation: Ideas for Growth and Change.”

Policy Picnic – October 26, 2016

Please join us for our monthly Policy Picnic led by

Cascade’s President and CEO, John A. Charles, Jr.


Watch Your Wallet November 8! Why You Should Vote No on Tigard Light Rail and Metro’s Open Space Levy

Metro is asking for a new tax levy despite the fact that it already has sufficient funds to operate all its parks. Since 1995, Metro has spent hundreds of millions of tax dollars buying up large tracts of lands far from where most people live. The Metro Council doesn’t want you (or your dog) to use most of these lands, but they do want you to pay for them. Metro’s Five-Year Operating Levy (Measure 26-178) is one more wallet-grab.

The proposed Tigard-Tualatin light rail project (Measure 34-255 in Tigard) would cost at least $240 million per mile to construct — the most expensive transit project in state history. Tigard will be required to fund part of that price tag, and increased taxes will be the result. This is what happened to the City of Milwaukie and Clackamas County when Metro forced through the Orange line.

John Charles will give you the inside story on these two ballot initiatives and tell you what their proponents don’t want you to know. He’ll explain what these measures really do and what they mean for you, your family, or your business. Bring your friends and coworkers!

Admission is free, but reservations are required due to space limitations. You are welcome to bring your own lunch; light refreshments will be served.

 

Cascade’s Policy Picnics are generously sponsored

by Dumas Law Group, LLC. 

Dumas Law Group
Money

Will the PUC Make Oregon’s Solar Energy Incentives Equitable?

By Lydia White

In accordance with House Bill 2941, the Public Utilities Commission (PUC) is making recommendations to the Oregon State Legislature to ensure Oregon’s solar energy incentives are equitable, efficient, and effective.

One recommendation is to modify the compensation method for solar energy, net metering. Under net metering, solar owners consume energy their panels produce. When energy produced is insufficient, solar owners purchase additional energy from traditional sources. When excess energy is produced, solar owners sell energy. Solar owners are compensated at above-market rates and are exempt from paying their portion of incurred costs. Such costs include operation and maintenance of the grid and “spinning reserves,” the alternative power source utility companies run continuously in case solar produces less energy than projected. The state’s incentive structure shifts costs from solar owners to non-solar ratepayers. As the number of solar owners increases, ratepayers bear higher costs. The PUC is recommending these costs instead be shifted to taxpayers. While the PUC proposal’s efforts to alleviate inequity are commendable, their proposed recommendations still constrain Oregonians.

Although solar owners are double-dipping into the taxpayer pot—once when receiving heavily subsidized (and therefore low-cost) solar systems and again when receiving above-market compensation—the solar community is vehemently protesting. Despite the outcries, the PUC should pursue its recommendation to transition from net metering while also rejecting subsidies from ratepayers and taxpayers alike. By doing so, the PUC’s recommendations could relieve Oregon’s ratepayers from substantial burden.


Lydia White is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

4378920267_a52ee403fe_o

Improve Education Outcomes Through Education Savings Accounts, Not Measure 97’s Hidden Sales Tax

On the third day of the new school year at Portland’s Madison High School, Governor Kate Brown spoke about her goal to improve educational outcomes for all students. She bemoaned the fact that at 74%, Oregon has one of the lowest high school graduation rates in the country, and then she noted that “For me this is a very personal issue”:

“My stepson blew out of one of the local area high schools a few years ago. We were very fortunate. We had the resources to provide him with another educational opportunity, but not all families do. That’s why it’s absolutely imperative that we work together to improve Oregon’s high school graduation rates.”*

So how does Governor Brown propose to assist families that don’t have the resources hers had to help their children achieve educational success? Apparently, by supporting Measure 97 on the November ballot, which would be the biggest tax increase in Oregon’s history.

In reality, Measure 97 is a sales tax hidden behind the façade of being a tax on big business. Its passage will actually make it harder for many of the families the Governor wants to help, in the questionable hope that the revenue it generates would be spent properly to give their kids a better chance at graduation from the same schools that have failed so many in the past.

Measure 97 will not only act as a consumption tax on many of the goods and services Oregon families buy every day, but it also will reduce private sector employment opportunities as more than $3 billion are siphoned out of the private sector into the state general fund each year. From there, all this money—which is about what a six-percent retail sales tax would produce—may or may not be spent in ways that would give struggling families the same opportunities that the Governor’s family had when her stepson needed help.

Rather than ask voters to take a $30 billion gamble over the next ten years on a tax measure that may not show any positive economic or educational results for Oregon families, the Governor and voters should consider another way to provide all families with the resources they need to give their children the educational opportunities they deserve. And, this other way will not raise anyone’s taxes, and it will not reduce anyone’s job prospects.

This other way is school choice. Governor Brown’s predecessor, John Kitzhaber, took a major step toward this other way when he signed Oregon’s public charter school law in 1999 that currently allows more than 30,000 students to attend some 127 charter schools for educational opportunities they otherwise would have been denied. All without costing taxpayers or the public school system one additional dime.

Oregon is one of forty-three states and the District of Columbia that offer public K-12 charter school opportunities to their families. Now, the newest wave in the school choice movement is offering Education Savings Accounts in five states, and that number is sure to grow.

Education Savings Accounts, or ESAs, are not a college savings plan. Rather, if families decide the public schools their children are assigned to are not meeting their needs, they can leave those schools and instead receive money from the state to pay for approved alternative education options and expenses. Parents can spend the funds on private school tuition, individual courses at public schools, tutoring, online learning, textbooks, educational therapies, and other education-related services and products. They can use a combination of these services based on what they think would best meet their child’s learning needs.

Each eligible child is able to draw from his or her own personal Education Savings Account maintained by the state and funded by most, but not all, of the money that otherwise would have been sent to the local school district. When properly structured, ESAs require no new taxes and are not a financial burden on the state or local public school districts. They simply allow money already allocated for public education to be used in ways individual families choose, instead of in ways dictated by the ZIP code students happen to live in.

In an improvement over earlier school choice programs such as vouchers, ESAs let families spend only what they want to each year, and save or rollover the balance toward future educational needs. If not all the money in an ESA is spent by the time a student graduates from high school, the remaining funds may be used to help cover his or her higher education costs.

So, let’s not ask taxpayers to gamble that our troubled public schools will somehow get it right this time if we simply give them enough new money out of our pockets with the hidden sales tax in Measure 97. Instead, let’s ask our legislators in Salem to explore a new, truly innovative way to improve educational outcomes for each individual student with personal Education Savings Accounts.


* Governor Brown’s complete remarks at Madison High School were recorded and can be heard on this KXL radio episode of Beyond the Headlines in the first segment of about seven minutes at https://soundcloud.com/kxl-beyond-the-headlines/week-of-8-28-16-episode-130

No to Hidden Sales Tax on Steriods 97

Policy Picnic – September 21, 2016

Please join us for our monthly Policy Picnic led by Cascade’s Senior Policy Analyst and Founder, Steve Buckstein


Topic:  Measure 97 – A Hidden Sales Tax on Steroids

Description:

Measure 97 on Oregon’s November 2016 ballot would impose the biggest tax increase in Oregon history: a sales tax on steroids, hidden behind the facade of being a $3 billion annual Gross Receipts Tax on business. It will raise taxes by $600 per capita.

Contrary to claims that it is only a tax on big corporations, the nonpartisan Legislative Revenue Office found that it will act largely as a consumption tax on Oregonians, with lower-income households being hurt the most. Prior to receiving its ballot measure number, Measure 97 was known as Initiative Petition 28.

Steve Buckstein will explain what the measure really does and what it means for you, your family, or your business. Bring your friends and coworkers!

Admission is free, but reservations are required due to space limitations. You are welcome to bring your own lunch; light refreshments will be served.

Please click here to reserve your free tickets.

Cascade’s Policy Picnics are generously sponsored by Dumas Law Group, LLC.

Dumas Law Group
No to Hidden Sales Tax on Steriods 97

Cascade Policy Institute Says NO to Measure 97

    ELECTION RESULT: 59 percent of Oregon voters said NO to this sales tax on steroids. Only 41 percent voted to impose it on all of us.
Measure 97 on Oregon’s November 2016 ballot would impose the biggest tax increase in Oregon history: a sales tax on steroids, hidden behind the facade of being a $3 billion annual Gross Receipts Tax on business. It will raise taxes by $600 per capita.
Contrary to claims that it is only a tax on big corporations, the nonpartisan Legislative Revenue Office found that it will act largely as a consumption tax on Oregonians, with lower-income households being hurt the most. Prior to receiving its ballot measure number, Measure 97 was known as Initiative Petition 28.
Below are factual and opinion sites to understand what the measure is and why it is in effect a sales tax on steroids, hidden behind the facade of being a tax on business.

•  Text of Measure 97 (IP28)

•  No on Measure 97: Defeat the Tax on Oregon Sales

The official campaign to defeat Measure 97

•  Does Oregon Rank Dead Last in Corporate Taxes? NO

by Steve Buckstein, Cascade Policy Institute, October 2016

•  Improve Education Outcomes Through ESAs, Not Measure 97’s Hidden Sales Tax

by Steve Buckstein, Cascade Policy Institute, September 2016

•  Measure 97: A $30 Billion Gamble Oregon Voters Shouldn’t Make

by Steve Buckstein, Cascade Policy Institute, August 2016

•  Cascade Policy Institute Opposes Measure 97,
the “Sales Tax on Steroids”

Media Release, August 2016

•  Like a Sales Tax on Steroids

by Steve Buckstein, Cascade Policy Institute, July 2016

•  A Sales Tax by Any Other Name

by Steve Buckstein, Cascade Policy Institute, June 2016

•  Assaulting “Corporate Profits” Will Hit Average Oregonians

by Steve Buckstein, Cascade Policy Institute, October 2015

•  Shifting the Cost of Measure 97 Forward

The Tax Foundation, October 2016

•  Supporters of Measure 97 Mislead On Corporate Taxes

The Tax Foundation, September 2016

•  Gross Receipts Taxes: Lessons from Previous State Experiences

The Tax Foundation, August 2016

•  Oregon Initiative Petition 28: The Threat to Oregon’s Tax Climate

The Tax Foundation, April 2016

•  Oregon Legislative Revenue Office Report on IP 28

(now Measure 97)

•  Portland State University Report on IP 28

(now Measure 97)

•  Oregon Legislative Counsel Opinion Letter on Measure 97

Concluding that contrary to proponents’ claims, “the Legislative Assembly may appropriate revenues generated by the measure in any way it chooses.”

Willamette University Economics Professor and Cascade Policy Institute Academic Advisor Fred Thompson has written a series of informative blog posts related to IP28/Measure 97 on the Oregon Economics Blog:

Why Are State Corporate Income Taxes Disappearing?
Tax Mavens Talk About Disappearing State Corporate-Income-Tax Revenues; Oregon Did Something About It
Where, Oh Where, Has Oregon’s Corporate Tax Gone? Where, Oh Where, Can It Be?
Update on IP28
More Background on IP28 (Measure 97?)
Measure 97: Any Pinocchios Yet?
The LRO’S Research on Measure 97

 

25thAnniversary_ENews_Banner_Block_1

Measure 97: A $30 Billion Gamble Oregon Voters Shouldn’t Make

The massive gross receipts tax Measure 97 on Oregon’s November ballot (previously known as Initiative Petition 28) is guaranteed to suck more than three billion dollars a year out of the productive private sector and deposit them in state coffers. What isn’t guaranteed is how all this new government spending might impact the state economy.

While union proponents of this “sales tax on steroids” argue that putting more money into education and other public services will be good for the state, two reputable economic studies don’t show it.

A nonpartisan Legislative Revenue Office report looks ahead five years and sees no positive economic effects showing up by then. While LRO economists may believe there will be positive effects later, that assumes the money will be spent effectively by a state that has a poor track record of doing so.

A Portland State University report, actually paid for by the measure’s public employee union proponents, looked ahead ten years and still found no positive economic effects showing up. Again, the PSU economists assume there will be positive effects eventually, but their model doesn’t show them.

So, we’re left with this inconvenient truth: If Measure 97 passes, taxpayers will send more than $30 billion to the state over the next ten years without any noticeable positive economic effects to show for it. That’s a $30 billion gamble that Oregon voters should turn down.

7848255574_a1b4481542_z

Repeating Mistakes Is Not a Housing Strategy

The Portland City Council has approved a plan for the Housing Bureau to lease industrial land in North Portland for $10,000 per month, beginning October 7. The site is to be used for the construction of a large homeless shelter that potentially could serve up to 1,400 people. This idea, pushed by developer Homer Williams, was rushed through with virtually no due diligence.

Before additional money is spent, the City Council should carefully analyze what went wrong in two previous construction projects. First was the $58-million Wapato Jail built by Multnomah County in 2004, but never operated. With 525 beds in pristine condition, one would think there is potential for this site to temporarily house at least a few people now living under bridges.

Second, in 2011 Portland opened the $47 million Bud Clark Commons, which includes 130 studio apartments and extensive social services for low-income individuals. It was a nice idea, but the police have been called so often to the Commons that in December 2013, then-Chief Mike Reese told the Portland City Council that he was considering filing a chronic nuisance property complaint against the shelter.

Both structures were built with good intentions, but things did not go as planned. Let’s learn from the past before repeating mistakes in the future.

Money

Oregonians Should Oppose Measure 97’s Regressive Taxation

The biggest proposed tax increase in Oregon history now has a measure number. Measure 97 on this November’s ballot would create a 2.5 percent gross receipts tax on C corporations with Oregon sales above $25 million.

Contrary to union claims, Measure 97 will not simply tax big out-of-state corporations. As the non-partisan Legislative Revenue Office Report has found, it will act primarily as a consumption tax on Oregonians. The estimated cost of this tax is $600 per year per person, with lower-income households being hurt the most. It is an eight-times-larger tax increase than Measures 66 and 67, which voters approved six years ago.

“Corporate taxes” are really paid by individuals, including consumers in the form of higher prices, employees in the form of lower compensation, and owners in the form of lower profits. The union backers of Measure 97 know this but claim that it will simply make corporations “pay their fair share.” This tactic is not only misleading, but if successful will harm every Oregon taxpayer.

Consumers will see price increases that in many cases will be much more than the stated 2.5 percent rate, without having any idea that the cause is Measure 97. As such, Measure 97 is the epitome of a regressive tax, and Oregonians should oppose it.

Money

Cascade Policy Institute Opposes Measure 97, the “Sales Tax on Steroids”

FOR IMMEDIATE RELEASE 

Media Contact:

Steve Buckstein
steven@cascadepolicy.org

503-242-0900

PORTLAND, Ore. – Cascade Policy Institute’s Board of Directors has voted to oppose Measure 97, the 2.5 percent gross receipts tax on C corporations with Oregon sales above $25 million. It would be the biggest tax increase in Oregon history.

Contrary to union claims, Measure 97 will not simply tax big out-of-state corporations. As the non-partisan Legislative Revenue Office Report has found, it will act primarily as a consumption tax on Oregonians. The estimated cost of this tax is $600 per year for every man, woman, and child, with lower-income households being hurt the most.

As the national Tax Foundation has noted, by seeking to raise more than $6 billion per biennium, Measure 97 will increase total state taxes by approximately 25 percent. It is an eight-times-larger tax increase than Measures 66 and 67, the tax increase measures that were on the 2010 ballot.

Following the Cascade Board vote, Cascade’s President and CEO John A. Charles, Jr. released this statement:

“All corporate taxes are paid by individuals, including consumers in the form of higher prices, employees in the form of lower compensation, and/or owners in the form of lower profits. The union backers of Measure 97 know this, but cynically claim that it will simply make corporations ‘pay their fair share.’ This tactic is not only misleading, but if successful will harm every Oregon taxpayer.”

“As the two most reputable studies (LRO and PSU) on the effects of Measure 97 to date conclude, it will act largely as a consumption tax on Oregonians. As the former State Economist and chief author of the PSU study noted in March, it will be ‘like a sales tax on steroids.’ That is because Measure 97 will tax multiple transactions from production, through processing, through distribution, through the ultimate retail sale.”

“Measure 97 is especially punitive because unlike retail sales taxes that often exempt necessities such as food, medicine, and housing, Measure 97 will tax everything. Consumers will see price increases that in many cases will be much more than the stated 2.5 percent rate, without having any idea that the cause is Measure 97.”

Two recent Cascade publications on the ballot initiative that is now Measure 97:
Like a Sales Tax on Steroids
A Sales Tax by Any Other Name

About Cascade Policy Institute:

Founded in 1991, Cascade Policy Institute is a nonprofit, nonpartisan public policy research and educational organization that focuses on state and local issues in Oregon. Cascade’s mission is to develop and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity. For more information, visit cascadepolicy.org. 

# # #

1 2 3 4 5 27