Oregon has a $3.8 billion deficit, and legislators are planning to make drastic cuts to education, health care, public safety and other programs to make up for it. However, they aren’t convinced the cuts are enough. Instead of imposing more sweeping cuts, legislators are seriously considering a classic, yet controversial alternative: tax increases.
After announcing budget cuts of $2 billion last week, state House and Senate leaders began brainstorming ideas for new revenue streams and are confident that raising taxes for corporations and individuals with higher taxable incomes is the only way to ensure that financial solutions don’t drain individuals who have been hit hardest by the economic downturn.
“We’ve made $2 billion in cuts to education, human services and public safety,” Rep. Phil Barnhart (D-Central Lane and Linn Counties) said. “These are cuts that will be felt by Oregonians who rely on these services, whether that be schools or health care, but we cannot only cut our way out of this problem. Now is the time we need to ask Oregon corporations to step forward and help their fellow Oregonians, simply by paying their fair share of taxes.”
Two bills seeking to raise taxes on corporations and residents who make more than $250,000 a year in taxable income would increase state income taxes by $800 million during a two-year period and are already included in the money the state is expecting to see in the 2009-11 biennium. If the bills do not pass, House Majority Communications Director Michael Cox said more drastic cuts are likely, and some could affect higher education.
The House Revenue Committee will hear testimony this week on the bills.
“They are being seriously considered,” Cox said. “The House majority and the Senate majority have been jointly considering raising taxes, and it is likely that it is going to happen.”
In Oregon, Cox said two-thirds of businesses pay a corporate minimum tax of $10 – a tax that hasn’t been increased since 1931. Businesses would not be devastated by the proposed $90 increase, he said.
“The amount of the state’s corporate minimum hasn’t budged since 1931. Times have changed and the people of Oregon deserve fairness, especially in light of our economic crisis,” Senate Revenue and Finance Chair Ginny Burdick said. “We need those who are able to pitch in to step up and help.”
For the remaining third of businesses that earn profits exceeding $250,000 a year and are required to pay more than the corporate minimum, taxes would increase by 8.2 percent.
However, even if the bills pass through the legislature and are signed by Gov. Ted Kulongoski, anti-tax groups including Americans for Prosperity plan to petition against the increase and make it a ballot issue in the November election.
Under Oregon law, individuals or organizations have 90 days to collect signatures to send bills to ballots for public vote.
“There is a moral principle here, and we believe that it is immoral to ask people who are already hurting to pay money when the government is growing,” said Jeff Kropf, state director of Americans for Prosperity. “Our organization believes that government can become more efficient and that government should not be raising taxes until they have met maximum efficiency.”
Kropf said the corporate minimum tax increase would be enough to deter businesses from setting up shop in Oregon.
“Businesses will go somewhere like Idaho where the taxes are lower to start,” he said. “Or even worse, business will relocate from Oregon. It just seems unrealistic to discourage business to come to the state when unemployment continues to soar.”
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