Friday, November 20, 2009

Oregon's fiscal crisis

Are the revenue raising Measures 66 and 67 doomed to fail because they are scheduled to be voted on in January?

I relocated to Oregon in fall 2002, and soon I was on the metaphorical public policy treadmill in order to figure out what was at stake in the special election the following January.  Measure 28 was on the ballot and it was an attempt to temporarily raise income tax rates. 

On January 28, 2003, Measure 28 was defeated by almost a ten percentage margin, and budget cuts resulted, including at the university where I work.

Before the year ended, there was another measure on the ballot, and again at about the same time of the year.  In February 3, 2004, it was with a convincing 18-percentage margin that Oregonians voted down Measure 30, which was aimed at increasing revenues through income and corporate taxes.

I wonder about the timing for such votes to increase taxes.  Are such revenue-raising attempts self-defeating because the ballots arrive at about the same time that we also receive bills for all the purchases we made over the lengthy holiday season from Thanksgiving until the new year? 

If the “no” votes are more a reflection of voters juggling with their personal finances, and less about a political philosophy of taxes, well, Oregonians seem to be significantly less secure now compared to back in 2003 or 2004—we are currently amidst a deep and broad level of economic contraction and unemployment.

Will we then look past our respective financial insecurities to understand that Measures 66 and 67 will not raise tax rates for most Oregonians?  Measure 66, for instance, will mean higher taxes for roughly about three percent of personal income tax filers, which means that it will not affect the remaining 97 percent.

I suspect that as in 2003 and 2004, the word “tax” could easily grab the attention of a significant number of voters who might almost reflexively reject the idea. 

Should the measures fail, the impacts could be worse than the aftershocks of the rejection of Measures 28 and 30.  In the current recessionary environment, government spending has been able to prevent a more serious depression.  A reduction of public spending could further worsen the state’s economic situation, through direct cuts and their eventual multiplier effects.  In a recent report, the National Governors Association observed that “the biggest impact on states is the one to two years after the recession is over.”  It is, therefore, important to uphold the taxes approved by the legislature. 

However, we also ought to recognize that Measures 66 and 67 are temporary solutions, at best.  We need to look no further than down south at California to realize that increasing the revenue stream alone is not enough.  Thus, irrespective of the results on January 26, 2010, I hope Measures 66 and 67 will catalyze discussions on Oregon’s priorities and commitment to its citizens. 

In the meanwhile, here is to hoping that Oregonians will reverse past trends this coming January. 

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