When Is a Tax Not a Tax?

Governor Kitzhaber wants you to drive less, and he knows that the best way to discourage driving is to make it more expensive.

The simplest way to do this would be to raise the state gas tax, which is currently 30 cents per gallon. However, this would require approval by three-fifths of the state legislative assembly, rather than the simple majority necessary for non-tax measures. There might not be enough votes for a tax increase.

The other problem is that the Oregon Constitution directs all gas tax revenues to be used only for road maintenance and improvement. Since improving roads would actually benefit motorists and potentially encourage more driving, this would undercut the Governor’s objective.

Instead, he is backing a legislative proposal known as the “low-carbon fuel standard,” designed to reduce the carbon dioxide emissions from motor vehicles. Because this will be a very expensive requirement for gasoline refiners, it would cause the price of gasoline to rise by at least 19 cents per gallon, and possibly much more.

As a non-tax measure, this bill only needs a majority of votes in the legislature, and there will be no actual revenues created that might benefit motorists. They will simply pay more, and get nothing in return.

In the world of Oregon environmental policy, this is called a clever strategy. For motorists, it’s a scam. Legislators who go along with it should be ashamed of themselves.

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Equal Outcome Is the Wrong Goal

In Governor Kitzhaber’s final inaugural address this week, he focused on the themes of equality and community. Specifically, he wants to reduce the gap between rich and poor. He also believes that only through collective action can we achieve that goal.

Unfortunately, his obsession with “equal outcome” guarantees that we will lose “equal opportunity.”

For instance, our Governor is passionate about spending more public money on the “free” public education system, because free education is supposed to make everyone better off. But the taxes required for this very expensive entitlement impose major burdens on families that prefer to educate their children at home or through private schools.

Is the Governor proposing legislation offering a money-back guarantee so that dissatisfied parents can get a refund and spend their tax dollars on the schools of their own choosing? No, he is not. His insistence that we all pay for a generic service makes him feel better about himself, but deprives actual students of educational opportunities.

The governor may dream of a more equal world, but if he insists on regulating his way towards that goal, he will dramatically reduce our personal freedom. And what most people really care about is the opportunity to pursue their own dreams, regardless of whether the eventual outcome makes them richer or poorer than their neighbors.

Testimony on the Nike Tax Bill (Economic Impact Investment Act of 2012)

Good morning, Co-Chair Burdick, other co-chairs and members of the committee. I’m Steve Buckstein, Senior Policy Analyst and founder of Cascade Policy Institute, a public policy research center based in Portland. Our mission is to promote individual liberty, personal responsibility, and economic opportunity in Oregon.

Regarding the concept of this legislation, I have some praise for the Governor, coupled with concerns and suggestions for making the bill better, and fairer.

First, the fact that the Governor is ready to grant tax certainty to Nike and other big companies in return for capital investment and job creation should be applauded. It’s recognition that taxes matter, and good tax policy can attract business and jobs. But, Oregonians of all political stripes also appreciate fairness, and I’m concerned that this legislation will be fundamentally unfair, especially to small businesses and many Oregon job seekers.

 

The Governor only wants to make tax certainty deals with what he calls “the right kind of businesses” that will drive our per capita income up. This leaves out people who, for whatever reason, have little education and/or few job skills. These are often the young and minorities, for whom a lower wage job is the first rung up the economic ladder.

 

Also, granting the Governor power to approve or disapprove such deals at all risks charges of favoritism and corruption. Just think about Nike getting its deal while one of its competitors is later turned down. A level playing field would eliminate these concerns. One way to do this is with a formula that prorates the number of jobs and capital investment required to the business size. For example, 500 jobs added to Nike’s current 8,000 Oregon employees would equate to 125 new jobs for a company that currently employs 2,000 Oregonians, without any gubernatorial discretion at all.

 

And, what’s magical about the 500-job threshold in the first place? While that’s a big number anywhere in Oregon, 50 jobs may be a big number in smaller communities. And, five jobs may be significant elsewhere. This is a small business state; so why not expand tax certainty to the businesses that create most of the jobs already?

 

In conclusion, I agree that granting Nike tax certainty is a good idea. But it would be an even better idea if all companies got the same certainty—big and small alike. That way, every Oregonian would stand to benefit, and the program would be fair to all.

 

Thank you.

Tax Certainty for Nike? “Just Do It” for All

Governor Kitzhaber has called a special session of the Oregon legislature to enact what he calls the Economic Impact Investment Act of 2012. It would give him the authority to directly negotiate with, and offer “tax certainty” to, any company promising to create at least 500 jobs and invest at least $150 million over five years in our state. Any future changes in Oregon’s business tax structure would not apply to such firms over the lifetime of their agreements.

 

The urgency of this proposal comes from the fact that Nike is looking to expand soon and is apparently being courted by other states. According to the Governor, if his proposal is rushed into law, Nike has agreed to expand here with a proposed $400 million investment and more than 2,000 jobs.

 

Unfortunately, the Governor made it clear that he would only approve such deals for companies that create a lot of relatively high wage jobs. He explicitly rejected the idea that a company offering 500 minimum wage jobs, for example, would be approved.

 

While it’s good to seek high wage jobs here, rejecting low wage jobs hurts those with little education and/or few skills. These are often the young and minorities. They have little reason to rejoice over the Governor’s new plan.

 

Granting Nike tax certainty is a good idea, but it would be an even better idea if all companies got the same certainty—big and small alike. That way, all Oregonians would stand to benefit.

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

Cascade Requests Congressional House Committee to Delete Funding for Milwaukie Light Rail

Portland, OR – Today Cascade Policy Institute sent a letter to Rep. John Mica, Chairman of the Congressional House Committee on Transportation and Infrastructure, requesting that he delete all $750 million in federal funding being requested by TriMet for the Milwaukie light rail project.

Noting that the recently-signed Budget Control Act of 2011 requires Congress to reduce federal spending by $917 billion over the next 10 years and that Rep. Mica has released a draft six-year transportation spending bill forecasting a 35% cut in federal highway/transit spending, Cascade President John A. Charles, Jr. stated that the price tag of $205 million per mile for Milwaukie light rail was “indefensible” and should be terminated.

Cascade sent a second letter to Gov. John Kitzhaber, informing him of the letter to Rep. Mica and asking that he intervene to terminate the Milwaukie project, but implement a low-cost alternative concept with the following elements:

  • Finish the new bridge over the Willamette River
  • Cancel the light rail portion
  • Connect the streetcar loop
  • Offer more “express” bus service to Milwaukie

Charles stated, “The Milwaukie project offers no new transit service, forces the relocation of 68 businesses and 20 residences, and degrades current bus service to Milwaukie. We can improve service while saving about $1.3 billion, and that plan would free up about $600 million in local dollars for other civic improvement projects.”

For the letter to Rep. Mica click here.
For the letter to Gov. Kitzhaber click here.
For a summary of the low-cost alternative plan for Milwaukie light rail click here.

 

Recent K-12 Education Reforms Let Kids Transfer to a Brighter Future

Public education exists to serve children – period. However, as evidenced by the Oregon Education Association’s (OEA) ongoing actions, some believe public education should serve primarily the adults who work in the system. Thankfully, this legislative session, Oregon’s state leaders concluded otherwise.

After tense negotiations on several education-related bills, Oregon’s legislature passed the most substantial education reforms Oregon has seen in decades, at the governor’s request. The more “controversial” elements of that package will provide students – who find their traditional public schools unsuitable – more educational options from which to choose, including charter and online schools. Such student-focused, choice-based measures were a particular pebble in the OEA’s shoe. Why?

Choice threatens the OEA’s monopolistic hold on public education. That grasp has allowed the OEA (a union) to become Oregon’s most financially powerful special interest group, lobbying for, well, itself. So when something undermines that power – even if that something is beneficial to children – the OEA will stand in the way, as it did this legislative session. Oregon families should be grateful the OEA lost and the governor and legislators led. Now, many children in need of a better education no longer will be held hostage.

For example, last summer, more than 4,700 Oregon kids were on waiting lists for charter schools. Because school districts were not authorizing enough additional charters to keep up with demand, desperate families have been left high and dry. (Currently, only districts and the State Board of Education can sponsor charters.)

Now, if charter school applicants are denied by districts, they can appeal to public colleges for sponsorship, providing a new avenue for charters to grow. Although public colleges will be able to sponsor just one charter each, this should help hundreds of families find the schools for which they are looking.

Many Oregon families also have been waiting for access to virtual, or online, charter schools. Currently, Oregon’s virtual charters are operating under an enrollment cap that has kept many kids from using this innovative option. Online learning is emerging as a cutting-edge way for students to have wider access to courses that otherwise might be unavailable to them.  If Oregonians want to enroll their children in such schools, why not let them?

Thanks to state leaders, kids now will be able to access any virtual charter school without having to obtain their local district’s permission – at least until three percent of that district’s students are attending a virtual school. Although still unnecessarily limited, this improvement will be life changing for families who have been denied entry. It also will make it easier for families who have received permission but have had to wade through the same transfer paperwork year after year.

The third choice measure that will benefit Oregon students essentially carries charter schools’ open-enrollment policy over to traditional public schools. Today, it is difficult, if not impossible, for parents to enroll their children in out-of-district public schools because districts often refuse to let kids transfer. Now, parents will be able to enroll their children in any public school, as long as the receiving school district is accepting transfers.

In short, districts no longer will be able to force kids to stay in their local public schools if they’re able to get a public education elsewhere.

The OEA claimed that giving parents such choices creates financial instability for schools (by losing transferees). Other states, which have such policies in place, seem to cope. Why can’t Oregon? Moreover, this begs another question: Does the OEA believe that it and traditional public schools are entitled to students?

If parents choose to leave a school, that suggests something is either wrong with the school or, even if the school is “good,” their children’s needs aren’t being adequately met. In both instances, parents believe they can find a better fit for their kids elsewhere. If the goal of public education is to educate, why deny children access to schools that could do a better job of educating?

Oregon’s lawmakers and governor finally are answering that question. They’ve put partisan politics aside to support reforms for which thousands of Oregon families have been waiting. There still is much work to be done to ensure Oregon’s children – not the OEA – are the true  of beneficiaries public education. But this start will show Oregonians that the sky doesn’t fall when choice is incorporated into public education; it gets brighter.