Sides clash over Oregon tax cut plan
Sunday, September 21, 2008 12:39 AM PDT
BRAD CAIN
Associated Press
SALEM — An income tax-cutting measure on the Nov. 4 ballot is being promoted by its sponsors as a way to provide much-needed relief to Oregon taxpayers while stimulating the economy.
‘‘Whenever you cut taxes, people tend to turn around and spend that money in the general economy. That helps everybody,’’ says Russ Walker, who is co-sponsoring the measure along with anti-tax activist Bill Sizemore. Others warn, though, that the measure is a Trojan horse that mostly benefits upper-income households. They point to state estimates that it eventually could slash state tax revenue by up to $1 billion a year, forcing cuts in education, social safety net and public safety programs.
‘‘The impact on the state budget will be devastating. The ones who are going to suffer the most are the ones who need help the most,’’ says Cathy Kaufmann of Children First for Oregon, a statewide advocacy group.
Those are the key arguments around Measure 59. If approved by voters, the tax plan beginning in 2010 would remove the $5,600 limit on federal income taxes Oregonians can deduct on their state tax returns, allowing all federal taxes to be deducted. Walker, Oregon director of the national fiscal conservative group FreedomWorks, says the tax reduction would produce a supply-side result of economic expansion with more income and more tax revenue to offset the cut. He dismisses opponents’ warnings about deep budget cuts as ‘‘fear mongering.’’ Oregon voters rejected a similar Sizemore proposal in 2000 ballot and a like-minded measure in 2006. Measure 59’s large price tag gives opponents ammunition to try to shoot down the idea again. One critic says the measure, if approved, could slash state revenue by about 9 percent at a time when health care costs and other state expenses are rising. It’s ‘‘fuzzy math’’ for Walker to suggest that the tax cut would somehow be offset by economic expansion, said Chuck Sheketoff of the Oregon Center for Public Policy.
a Silverton-based think tank that supports spending for social services and other programs.
‘‘It won’t pay for itself,’’ Sheketoff said. ‘‘It will wreak havoc on the state budget. It’s big money — equal to all of the funding Oregon’s public universities will receive from the state in the current two-year budget.’’
Plus, he said, Oregonians at lower income levels would no additional tax breaks because they already can deduct all their federal taxes up to $5,600.
Under the measure, middle-income taxpayers with income of $30,600 to $50,000 a year would see a tax cut of $2, Sheketoff estimated.
The average tax reduction for other income groups would be $46 for those earning $50,000 to $83,200 a year; $457 for those making $83,200 to $165,100; and $2,199 for those earning $165,100 to $405,100, Sheketoff’s group said. For the top 1 percent of Oregon taxpayers — those making $405,100 or more a year — the average tax cut would be $15,809, it said.
Walker said, however, that Measure 59 is about tax fairness.
‘‘The fact is, everybody who pays below $5,600 in federal taxes a year already gets full deductibility,’’ Walker said. ‘‘It’s only fair to give that to everyone else in the state,’’ meaning middle- to upper-income taxpayers.
The measure sounds like a good idea to at least one voter, Keizer attorney Tom Larimer.
He and his wife are in the household income bracket that would bring them a $457 tax cut. Larimer said that would help pay household expenses and raise the couple’s four school-aged children.
Larimer says that money also would help the local economy.
‘‘That $457 will be spent at the local hardware store, the local service station, and the local restaurant,’’ he said in an interview. ‘‘It’s money that will get dumped right back into this community.’’
A leading opponent, political consultant and former U.S. Senate candidate Steve Novick, said the small amount of relief that would go to most taxpayers doesn’t justify the damage Measure 59 would inflict on state services.
‘‘If you think we have too much education, health care and public safety in Oregon, then you should vote ‘yes’ on Measure 59,’’ Novick said.
