The Oregon State Capitol building in Salem. (Creative Commons)

Oregon has a funding problem. This has been clear for quite some time, as our state has struggled to solve billion-dollar issues like the housing and mental health crises. 

These issues have been magnified this year; “Over the next six years, our state will be facing a $15 billion budget shortfall because of congressional Republicans’ disastrous cuts to Medicaid and SNAP funding,” State Representative Lisa Fragala said in a statement to The Emerald.

This is a signal to all Oregonians that something needs to change: in this political landscape, we cannot rely on the federal government to help us fund our highly needed social programs. For example, Governor Kotek has had to call for the repeal of a transportation bill she sponsored because we don’t have the money. Nor is that money easy to get, given the way that the Oregon taxation system is structured. 

According to adjunct Professor Jesse Maldonado, “We only have two legs to a typical three-legged stool. Most other states have taxes from property, sales and income, (we are) a state that only has two of those three.” 

There are plenty of ideas out there for how we can increase the reserves in our treasury, but I’m here to suggest what on the surface sounds like a simple solution: raising property taxes. Yet, this is far easier said than done, as it would require an amendment to the state constitution.

Article XI, Section 11, of the Oregon Constitution states that “For tax years beginning after July 1, 1997, the property’s maximum assessed value shall not increase by more than three percent from the previous tax year.” What this essentially means is that we cannot raise a property’s taxable value (called officially Maximum Assessed Value) by more than 3% per year. This is highly problematic because it means that a property’s taxable value is not equal to the real market value , which is what the property is actually worth. If the RMV increases by more than 3% per year, the MAV simply can’t keep up. 

The League of Oregon Cities’  Property Tax 101 one-pager shows the enormous disparity between MAV and RMV in Oregon — the total disparity between how much properties are worth for tax and market purposes is an astonishing $400 billion or more. 

While it’s tricky to exactly value how much tax money we’re consequently losing out on since each county’s taxes are different, if we assume the average Oregon MAV tax rate is 0.78%, that would mean that Oregon loses $3.12 billion of tax revenue annually, an exorbitant value that is projected to continue to increase. 

So much potential, if only we pass an amendment to remove the arbitrary rate limit imposed Article XI, Section 11, and instead attach the RMV to the MAV. There is nuance to this argument, however, and exceptions would need to be made to the rule (a common occurrence in politics). There are situations in which the RMV falls below the MAV, and in this case it would not make sense to “recouple” the two. 

Professor Maldonado expressed concern about “(pricing) both renters and homeowners out of their homes” should we “raise property taxes unchecked.” With the amendment to the amendment, we would be increasing Oregon’s revenue stream in a way that wouldn’t harm those already struggling. New taxes are always problematic and face stiff opposition, but we must do what is necessary to adequately fund Oregon and its social services.