Making the Rich Pay their Fair Share on the Ballot in Oregon

In 2009, Oregon lawmakers approved HB 2649 and HB 3405, a balanced approach to dealing with their fiscal problems that included increased taxes on the wealthiest state residents and corporations.  These revenue increases were combined with lowered taxes for people receiving unemployment insurance benefits, offering tax relief to many families.  

But right wing anti-tax forces were able to get the issues on the ballot for a vote on January 26--as measures 66 and 67.  With other states around the country likely to be considering tax proposals this session, implementation of these revenue increases in Oregon would bolster progressive tax efforts around the country.

Oregon still faces a $4.2 billion biennium budget deficit for FY 2010 and 2011.  Lawmakers were forced to cut over $1.7 billion in funding for vital programs in almost every area in FY 2009 and 2010, including K-12 education, Medicaid, and public assistance.  As progressive tax reform would generate over $700 million for the state, failure to ratify these revenue increases would only exacerbate the budget crisis in the upcoming year.  As Chuck Sheketoff, Executive Director of the Oregon Center for Public Policy (OCPP), explains, "[a] 'no' vote is trouble.  Should opponents prevail, the corporate minimum tax would remain at $10.  Taxes would go up for the unemployed.  The flow of federal dollars into Oregon’s economy would shrink.  And in all likelihood, the legislature would be forced to cut further education, public safety and health and human services."

Progressive Tax Reform Best Response to Fiscal Crisis:  As we detailed last year, progressive tax increases are a far better alternative to massive budget cuts.  The latter can cause extensive damage to the economy by reducing consumer spending, exacerbating job losses, and hurting working families who rely on public services.  Additionally, progressive tax reform does not have the detrimental economic impact that opponents often cite.  In fact, several states that raised taxes on the wealthy experienced higher economic growth than other states and did not see an out-migration of wealthy residents.  Just in 2009, Connecticut, Colorado, Delaware, Hawaii, New Jersey, New York, North Carolina, Rhode Island, and Wisconsin instituted either a permanent or temporary reform of personal income taxes.  Over 10 states considered or enacted business tax increases to help deal with budget deficits last year as well.

Oregon Measures a Modest Step Towards Making the Wealthy Pay Their Fair Share:  Measure 66 will increase the marginal income tax rate on individuals earning above $125,000 and joint filers making above $250,000 to 10.8 percent.  For single filers making $250,000 and couples earning over $500,000, their marginal tax rate would increase to 11 percent.  This would only impact 2.5 percent of Oregonians.  The top rate would permanently fall to 9.9 percent for income over $250,000 for joint filers and $125,000 for single filers in 2012.  Additionally, the measure exempts the first $2,400 of unemployment insurance benefits from taxation in 2009, providing tax relief to over 270,000 Oregonians.  Considering all state and local taxes, the richest Oregonians will still be paying a smaller percentage of their income in taxes than working and middle class families.  Accordingly, the measure is only a modest step towards a more equitable tax system.

Partly in an effort to restrict tax avoidance, the main provision of Measure 67 is the implementation of new minimum taxes on corporations.  In particular, the measure would raise the $10 corporate minimum tax for the first time since 1931 to $150.  Overall, 97.5 percent of all business in the state would either pay the new minimum tax or see no tax increases.  In 2013, the changes would only impact businesses making over $10 million.  Even if measure 67 is approved, the state would still have the lowest corporate taxes on the west coast and the fifth lowest in the nation. 

Despite affecting only the richest individuals and corporations in the state, Measures 66 and 67 will generate over $700 million in the upcoming fiscal year.  These slight changes to the tax structure will go a long way to protect vital social services that Oregonians deserve.

Public Support for Progressive Tax Reform: The public overwhelmingly supports these progressive tax increases.  A poll released on December 30, 2009 found that 55 percent of Oregonians support the two measures, 38 percent oppose, and 7 percent are undecided.  Scott Moore, spokesman for Vote YES for Oregon, remarked, "[t]he key message coming through is, these measures are better than the deep cuts to services everyone cares about.  And they're better than broad-based tax increases that affect the middle class."

Major organizations support the effort, including: AARP Oregon, American Federation of Teachers, Children First for Oregon, Oregon AFL-CIO, Oregon AFSCME, Oregon Alliance for Retired Americans, Oregon Council of Police Associations, League of Women Voters of Oregon, Oregon Nurses Association, Oregon State Fire Fighters Council, SEIU Oregon State Council, and several others.

Measures 66 and 67 are likely to be a bellwether for efforts by advocates around the country to enact balanced revenue increases that safeguard funding for essential public programs and protect working and middle-class families who have borne a disproportionate share of the pain caused by the economic downturn.

Returning Cap-and-Trade Revenue to Consumers Recommended in California

As California prepares to implement its own cap-and-trade climate change law, state officials are looking to ease the economic burden on consumers by using revenues generated to deliver a tax rebate to families, an approach called "cap-and-dividend."  An advisory committee to the California Air Resources Board has recommended that 75% of up to $20 billion in expected annual revenue from the new measures be returned to consumers.  The return would occur in the form of annual dividend checks that could exceed $1,000 for a family of four.  The remaining 25% of the total revenues may be allocated to projects such as renewable-energy plants that would reduce greenhouse gas emissions.

The committee's report recommends the auctioning of greenhouse gas emissions permits.  The sales are expected to reap $2 billion to $22 billion in revenue a year from 2012 through 2020.  Specifically, the law would require utilities, refineries and other industrial polluters to buy permits under the recommendations, generating the revenue that would be returned to consumers to offset expected higher energy prices.   Consumers who reduced their own personal energy use would experience the highest personal savings, creating incentives for energy efficiency and lower greenhouse pollution by both producers and consumers of power in the state.

The national implications of the California recommendations are clear.  Unlike the federal cap-and-trade bill approved by the U.S. House of Representatives, the California Committee notably rejected the utilities’ request to give them free allowances.  In contrast, the U.S. Senate bill proposes a "cap-and-dividend approach" similar to California's committee proposal.  As a Center for Budget and Policy Priorities report noted last year, "policymakers can design a climate rebate to offset the impact of higher energy-related prices on low-income and middle-income households efficiently."

The California recommendations highlight a way to address the economic equity concerns over cap and trade revenues.  There is a broad consensus that returning funds to consumers, especially low income earners, can alleviate the burden of higher energy prices.  Nine states are already operating similar cap-and-trade auctioned permits, which have generated $500 million in the first 15 months.  Returning cap-and-trade revenues to consumers -- not the original polluting industry sources -- is the far better approach to address climate change and assure that average households are not burdened.