Two tax reform measures on the Nov. 7 ballot that would cut billions from the state budget have supporters clamoring for smaller government and opponents warning about suffocated programs.
Ballot Measures 91 and 8 would overhaul Oregon’s tax system and reduce funding for the state’s universities, K-12 schools, emergency services and health programs.
“The effects would be immediate and drastic,” said John Coney, a spokesman for Gov. John Kitzhaber, who has spoken against the measures.
If passed, Measure 91 would allow individual and corporate taxpayers to deduct all federal tax payments from their state income tax returns. Currently, federal tax deductions are limited to $3,000, and corporations receive no deduction at all. Measure 91, sponsored by Oregon Taxpayers United, would eliminate the deduction limit and offer the tax break to corporations.
The projected impact would be a $1 billion cut in the state’s annual income, with the biggest tax breaks going to Oregon’s wealthiest individual and corporate taxpayers.
Measure 8 would prohibit state spending from outpacing increases in Oregonians’ incomes. If the measure passes, the state would be forced to spend no more than 15 percent of the state’s personal income. With the state currently spending about 18 percent of personal income, measure would trim the projected 2001-2003 state budget by $5.7 billion.
“We’re concerned about all of the measures,” said Oregon University System spokesman Bob Bruce, “but Measures 91 and 8 would have a significant fiscal impact, not only on the university system but also on the entire state.”
Bruce said the impact on the university system would be the equivalent of losing funding for the state’s four regional universities and one of its three major ones.
“That major of a change would make Oregon public universities less affordable, less accessible and certainly less cost-effective,” Bruce said. “It’s unthinkable.”
But supporters of the measures, such as Measure 8 author Don McIntire, argue that the tax reforms wouldn’t constitute a cut in funding, but rather an overdue cessation of increased spending.
“Governments want to grow as fast as they can ­­ they want to spend every dime they get their hands on,” McIntire said. “When government increases spending faster than the economy rises, that’s a recipe for disaster.”
McIntire, who also wrote the 1992 Ballot Measure 5, which sliced property taxes, said that giving the state a spending limit is the best way to instill fiscal discipline in government without forcing the legislature to cut programs.
“Measure 8 would establish the state budget on citizens’ ability to pay rather than on a state’s ability to spend,” he said. “We will cut out no services. What we will do is finally force our legislature to do the right thing. To cut costs and give taxpayers more bang for the buck.”
Measure 91, on the other hand, seeks to scale back government by reforming the state’s income rather than expenditure.
The Oregon Voters’ Pamphlet states that it is unclear when Measure 91 would go into effect. If the measure applies to the 2000 tax year, state income would be reduced by $870 million this year. After the 2001-2002 tax year, state revenue would be cut by about a $1 billion each year.
But taxpayers must make $81,000 a year to benefit from the tax break, and those making less would actually lose money in the first few years after the measure’s passage, according to a Legislative Revenue Office report.
Every biennium, the legislature returns the state’s surplus, called a “kicker,” to taxpayers if tax collections exceeded projections by at least 2 percent. The tax cut Measure 91 proposes would wipe out that surplus, which constitutes $282 million for personal taxpayers and $34 million for corporations, according to the report.
Those making more than $81,000 a year, however, would receive a large enough tax cut to offset the lost kicker revenue.
For this reason, opponents of the measure have called it a regressive tax cut.
“It takes the notion of progressive taxation and turns it over onto its head,” Coney said.
Becky Miller, of Oregon Taxpayers United, doesn’t consider that claim a criticism, however.
“I don’t believe in progressive taxation,” she said. “Progressive taxation ends up rewarding people for not achieving because they can kick back and get an easy ride.”
A more regressive tax system would reward the industrious and create opportunities for the unemployed, Miller said.
“When people get a tax cut, they invest it, they buy more and they make more jobs for the middle class,” she said. “It’s pretty obvious when people have more money in their pockets, they spend more money and give it back to the economy.”
A poll conducted by The Oregonian and KATU-TV in Portland found that 54 percent of Oregon voters support Measure 91 and 41 percent oppose it. About 40 percent of Oregonians supported Measure 8 and 46 percent opposed it.