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“The Rent Is Too Damn High!” — Why Rent Control Won’t Help

Once again, Portland led the nation this July with its home prices rising 12.4 percent year-over-year versus the national average of just 5.0 percent. As of April, Portland remained the 12th most expensive rental market in the nation. These numbers are not unrelated. Housing prices are often related to what units can be built for, whether they are single-family homes or multifamily apartment houses.

Whatever the causes of rising rents in Portland and elsewhere, the political fix bubbling to the surface not only won’t help most people afford housing, it likely will make the situation worse. That political fix goes by the name of rent control.

Last year, Willamette Week published an informative and entertaining piece entitled “The Five Myths About Portland Apartments.” In response to Myth 3, which is that rent control is the answer, Jerry Johnson of Portland real-estate consulting firm Johnson Economics noted:

“Rent control is an Econ 101-level policy disaster. If you happen to get one of the rent-controlled units, good for you. But it’s basically a lottery of who wins and who loses.”

Apparently unaware of the policy disaster that rent control forebodes, Oregon Speaker of the House Tina Kotek recently proposed allowing localities to enact their own rent control programs. She also wants to end so-called “no-cause” evictions and to ban rent increases above a “reasonable” percentage “for the foreseeable future.” In her prepared remarks she said, “Our housing crisis is a man-made emergency that demands bold action,” and, “We have privileged the right to make a profit on property far above the universal human right to safe and stable housing.”

Our housing crisis may very well be a man-made emergency. If so, the Speaker has misdiagnosed the cause, which has more to do with Oregon’s “man-made” restrictive land use laws than it does greedy landlords. And, the “bold action” she proposes likely will make the situation worse.

Economists of virtually every political stripe reject rent control as a viable way to improve housing affordability. They recognize what too few of our political leaders and voters recognize: namely, that controlling the price of a commodity, in this case rental housing, actually harms the very people the policy is designed to help. They know from economic theory and observation over many decades The High Cost of Rent Control. They know that it misallocates housing resources, heightens tensions between landlords and tenants, stifles private investment in affordable housing, and leads to deterioration and eventual abandonment of the very housing stock that middle- and lower-income tenants wanted it to protect for them at affordable prices.

Three local economists were quick to respond to Speaker Kotek’s suggestions:

“Rent control just sends us a couple hundred miles closer to San Francisco in terms of housing policy,” said Gerard Mildner, director of the Center for Real Estate at Portland State University.

“It’s almost textbook that any form of rent control ultimately harms consumers, as well as landlords,” said Eric Fruits, an economist and editor of Portland State University’s Center for Real Estate quarterly reports. “It may benefit some in the short term, but in the longer term, there will be fewer units available to rent, which will only make matters worse.” Instead, Fruits said, the free market should be allowed to work, with higher prices sending signals to developers that more units are needed.

“The demand for urban living is increasing and cities are not increasing the supply nearly fast enough,” Portland economist Joe Cortright said. “The only solution is to build new housing.”

As an Oregonian editorial then pointed out:

“Among other things, limiting rent growth dampens future investment in housing, inflates rents for unregulated units and discourages residents who secure rent-controlled units from moving, even when it’s in their best interest.”

In a lively discussion on social media following Speaker Kotek’s pronouncements, one person responded to her call for an end to “no-cause” evictions:

“No cause eviction benefits good tenants. When the bad guys move in, they threaten the good tenants who are afraid to testify about their behavior. The good tenants become prisoners in their apartments while the bad guys run wild. A landlord’s only defense is to become more restrictive on who they will rent to, therefore decreasing options for all renters.”

Even self-proclaimed “progressive” Portland city commissioner, Steve Novick, notes:

“…most economists say rent control has unintended consequences, including a decline in the production of new rental housing.”

While this is true, in “progressive” Portland and in the state Capitol economic laws are often trumped by political laws that make people feel better for a while, until economic reality rears its ugly head. Of course by then those who passed the laws have often moved on.

Accountability is rarely a part of the political process, which may be why it so often leads to unintended consequences that harm the very people the politicians were trying to help. Unfortunately, we may be destined to repeat this process again as rent control lurches onto the 2017 legislative agenda.


* Political activist and frequent candidate Jimmy McMillan memorably used “The Rent Is Too Damn High!” as his main campaign issue, slogan, and the name of his political party during his campaigns, including the 2010 New York gubernatorial election.

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Twenty-Five Years Litigating for Liberty

How many attorneys do you know who make their living defending liberty? Well, 43 attorneys work full-time at the national public interest law firm Institute for Justice. They protect school choice, economic liberty, the First Amendment, and private property. Supported by generous donors, the Institute for Justice never charges its clients.

Founded 25 years ago, the Institute for Justice has litigated over 200 cases, including five before the U.S. Supreme Court, where it won four times. The fifth case led to the infamous Kelo decision, where the Court unfortunately seemed to forget that private property cannot be taken through eminent domain for a “public purpose,” but only for a “public use.”

This year, Arizona Governor Doug Ducey appointed Institute for Justice co-founder Clint Bolick to the state Supreme Court, saying that “Clint is nationally renowned and respected as a constitutional law scholar and as a champion of liberty.”

It is fitting on this 25th Anniversary of Clint Bolick’s Institute for Justice that Oregon’s free-market think tank Cascade Policy Institute has chosen him as the Keynote Speaker at our 25th Anniversary Dinner on October 20. There, Justice Bolick will talk about how important defending personal and economic liberty has been—and still is in his new role on the Court. You won’t want to miss his inspiring talk.

For full details and to RSVP, go to CascadePolicy.org/25.

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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
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Two-Thirds of Oregon Union Members Want to End the Unions’ “Forced-Rider” Problem

By Kathryn Hickok and Steve Buckstein

This month, National Employee Freedom Week (August 14-20, 2016) called attention to the rights of union members to opt out of union membership if they choose and to stop paying dues and fees to unions they do not support. National Employee Freedom Week has conducted surveys of union members and households. One of this year’s significant findings is that a strong majority of union members nationwide agree that if members opt out of paying union dues and fees, they should represent themselves in negotiations with employers.

Two-thirds (66.9%) of Oregon union members agree with this proposition. “Worker’s Choice” would end the so-called free-rider problem (really a forced-rider problem), which argues that labor laws require unions to continue representing workers even after they stop paying dues. The Mackinac Center for Public Policy explains: “Without requiring a complete overhaul of collective bargaining laws, [Worker’s Choice] can free unions from having to provide services to employees who do not support them, and allow individual employees to represent themselves and negotiate independently with their employers.”

Now we know that two-thirds of Oregon union members want workers to be able to represent themselves, and they don’t want to force unions to represent non-dues payers. It remains for future court decisions, or other political efforts, to end union compulsion in Oregon. Until that happens, Worker’s Choice should continue to be brought to the attention of union members and the public.


Kathryn Hickok is Publications Director and Steve Buckstein is Senior Policy Analyst and Founder at Cascade Policy Institute, Oregon’s free market public policy research organization.

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

 

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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.

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Oregon Union Members Want the Option to Represent Themselves

National Employee Freedom Week (NEFW, August 14-20, 2016), aims to educate union members across the country about their rights to opt out of union membership and stop paying some or all of their dues and fees to unions they do not support. NEFW has conducted various surveys of union members and union households over the last several years. One of this year’s significant findings is that a strong majority of union members nationwide agree that if members opt out of paying all union dues and fees they should represent themselves in negotiations with their employer.

Over two-thirds of union members nationwide agree. By the same margin, 66.9% to 33.1%, Oregonian union members agree with this proposition. This would end the so-called free-rider problem unions hide behind (really a forced-rider problem), arguing 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.

Now we know that two-thirds of 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 this solution, known as Worker’s Choice; but they aren’t. Unions want to be forced to represent all workers because under current labor law, states like Oregon that are not Right to Work states 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.

A case heard by the U.S. Supreme Court in January (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 Court left in place, the right of public sector unions to compel workers to fund the propagation of ideas they disbelieve. An Oregon initiative measure that would have allowed public sector workers to opt out of all union dues and represent themselves did receive a ballot title this year, but did not collect signatures to be placed on the November ballot. Backers were hoping that the national Friedrichs case would have made their effort unnecessary, but for various reasons they were unable to mount a successful campaign.

It remains for future court decisions, or other political efforts, to end this 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.

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. 

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