John Tapogna
Good government happens at the intersection of passion and thoughtful policies. We use our hearts and our heads to advance programs that improve our schools, deliver better health care, make our communities safer, create jobs and move families from poverty to the middle class.
This political cycle has been long on passion and short on policy. An angry share of the electorate wants to break up banks, build walls or both. And they have no patience for white papers. Trust in major institutions is at an all-time low. Newspapers, television news, public schools, banks, big business, organized labor and Congress all poll at 30 percent or less. Veteran Oregon pollster Adam Davis likens the mood to a Category 5 hurricane.
All this passion creates a rich environment for skilled political strategists. And how they choose to harness it -- for better or for worse -- will shape our future.
The architects of Measure 97 sensed the mood long ago as they set out to design what could become one of the largest tax increases in Oregon history. Give them credit for their political instincts and polling capabilities. But absent from their team was any expertise on tax policy.
The result is a sloppy, incoherent ballot measure.
Measure 97 is built on the ill-devised gross receipts tax. It assesses a tax on the total sales price of products as they move along a supply chain -- for example, from a packager to a wholesaler to a retailer to a customer. That's called tax pyramiding, and it's a major reason only five states have a gross receipts tax.
Regressivity is another. The Measure 97 tax would apply to virtually everything that Oregonians buy or use, with no protections for low-income consumers: groceries, prescription drugs, electricity, natural gas, gasoline, clothing, health insurance, cellphone service, and most forms of entertainment. The tax could hit you a half dozen times between your bed and the morning shower: flip on the light, check your phone, open the freezer, grab the coffee, turn on the stove, feed the dog. This goes on all day long.
Add it up and the nonpartisan Legislative Revenue Office estimates Measure 97 would cost the lowest-income households, those with less than $21,000, $372 annually. A typical Oregon household would pay about $600 per year. Also paying would be 38,000 private sector workers whose jobs would either disappear, or never be created, as low profit margin companies scale back operations.
There's more not to like.
The tax on sales, rather than profits, means that startups, including software firms, would face big tax bills in their early, money-losing stages.
The measure arbitrarily favors some companies over others based on how they pay their taxes.
The measure exempts companies that pay taxes through their owners' personal income tax returns.
And, with no enforceable spending plan, the revenue would slosh around in all corners of the budget, making it impossible to say what we would get for the money.
Passage of Measure 97 would bring an abrupt, clumsy end to a six-year run of exemplary public management. Oregon's post-recession revenue recovery is the seventh-fastest in the nation. We negotiated a smart deal with the Obama administration that delivered almost $2 billion in federal innovation funds, curbed per capita health care costs, and helped launch the Affordable Care Act. And in 2013 state lawmakers enacted hard-fought, criminal justice reforms that ended the growth in prison beds.
Strong revenue growth, together with health care and corrections reforms, has fueled investments in education. In K-12, we implemented full-day kindergarten and boosted spending per student to $11,232 in 2015-16. That's $1,159 per student higher than Washington state and is closing in on the U.S. average. Meanwhile, higher education budgets rose 16 percent during 2015-16 -- the highest increase in the U.S. -- and Oregon began offering free community college.
Two governors and dozens of skilled legislators, on both sides of the aisle, deserve credit for the recovery's management.
Share your opinion
Submit your essay of 700 words or less to commentary@oregonlive.com. Please include your email and phone number for verification.
Looking ahead, we need some additional revenue. The bill for our big pension mistake has come due, and the state must contribute for its share of the Affordable Care Act. Together, higher pension and health care costs will create a 7 percent deficit in the state's general fund in upcoming years. Beyond that, we should continue to accelerate our education investments.
But, Measure 97 jumps the shark. It would expand the general fund by almost one-third with the largest gross receipts tax in the U.S.
So, Oregon this is our moment. We need to govern with our hearts and our heads. We need to feel the need, recognize Measure 97 is the wrong answer, and demand that skilled legislators move on to better solutions.
John Tapogna is President of ECONorthwest, an economic consulting firm that has operated in Oregon since 1974. The views expressed here are his own.