1.10.2010

Jeff the Great Votes No on 66 & 67

I recently asked my LinkedIn network a thought provoking question. I asked: “When you attempt to solve problems, are you reacting to symptoms or addressing the root cause?”

Let’s put this question into a real life scenario. Say you have a new teenage driver in your household, driving a car you own. They have fallen into a driving style where they accelerate as quickly as possible when a light turns green, only to slam on their brakes up ahead at a red light. This style of driving leads to you having to service the brakes on your car well before the average life of brake pads. When you discover the root of the problem (your teenagers driving habits), do you continue to service the brakes more frequently than you should (addressing the symptom) or do you teach your teenager how to drive more prudently and tell them they will pay for any unnecessary brake service (addressing the root of the problem)? I am guessing you would do the latter.

Oregon has a special election this January where we will vote on proposed tax increases for some individuals (measure 66) as well as changes to the state tax code for most businesses (measure 67). I am voting “No” on both of these because, in part, I believe they treat the symptoms and fail to address the problem.

I am against both measures but I really despise measure 67, the tax increase aimed at businesses. Let’s review the facts and you’ll see why I am so adamantly opposed.

First, don’t believe the television ads that want you to think big corporations only pay the $10 minimum tax. If an Oregon corporation is profitable, it is paying substantial income taxes in Oregon. Nike, Les Schwab Tire Centers, Precision Cast Parts, Columbia Sportswear….these companies ARE NOT paying just the minimum. Companies paying the minimum are those that do not turn a profit. Your locally owned sandwich shop or dry cleaners may not have turned a profit in 2009. Many small businesses don’t. These businesses don’t pay an income tax but they are still paying things like a payroll tax and property tax. These businesses are essentially paying for the opportunity to run a business that is not yet profitable. Measure 67 will make they pay even more for this right.

In addition to increasing the minimum tax on unprofitable companies, measure 67 does more damage. It changes the tax code and taxes some businesses based on sales, not profits. It increases the profit tax on Oregon’s largest employers by 1.3 percentage points. It is retroactive back 13 months. It increases many business paperwork filing fees…some will be doubled; some will be more than tripled.

Do any of these changes address the root cause of the problem or do they simply address the symptoms? I believe that the real problem is Oregon spending money irresponsibly, often spending more than it has. The symptoms are state agencies running out of money sooner than they should and the inability to run in the inefficient ways they are used to.

I read a story today that is a great analogy of what the Oregon legislature is asking us to do. It was about a women that upgraded to a more expensive apartment and leased a new car. Four months later she couldn’t afford the payments and asked her boss for a raise so she could meet the financial obligations she created. She was fired on the spot (from 48 Days to the Work You Love by Dan Miller).

Oregon voters are the boss and the legislature is the lady in over her head financially. Are we going to do what she asks or say no to her selfish demand?

I’ll close with one last anecdote. Recently I was debating these measures with another Oregon voter and he said something interesting. He stated something to the effect of “if the legislature would bring me (the voter) solutions to our problems without increasing taxes, I’d vote in favor of them.” I told him that he needs to tell his legislators to do just that. Something tells me that on January 26th he’ll mark “Yes” on his ballot for 66 & 67 but he won’t follow through with telling his legislators what he expects from them. Me, my “No” vote will be part of my message to Salem.

9 comments:

Pete Forsyth said...

It's pretty inaccurate to call these referenda "retroactive." Rather, a "no" vote would retroactively repeal the laws. That's pretty fundamental to how the Oregon System works.

Anyway -- there's been a healthy debate around who pays the $10 minimum, and it's pretty easy to track down if you're interested. The research behind the "yes" campaign's claims comes from the OCPP, an organization composed of economists who take their research and reputation pretty seriously. So, it's all very well for you not to "believe" it, but that doesn't make it untrue.

But apart from all that -- the idea that there's inefficiency in government is certainly a compelling one. But those who have made that the central angle of their complaint re: 66 and 67 have failed to come up with large expenditures to cut. Since the legislature is legally compelled to balance the budget, that's the job you have to do if you want to take a compelling stand against tax increases: what, specifically, is that analog of the expensive car and apartment in your allegory?

Again, I agree that there is likely a certain amount of inefficiency in government; but I'd argue that it's not on a systemwide level, but in a variety of smaller portions of smaller budgets.

Remember, the legislature doesn't run agencies. That's the governor's job.

Jmartens said...

Thanks for the comment, Pete.

So which law(s) will a No vote repeal? Yes, the legislature passed some laws mid-2009 but they were referred to voters before becoming law, no? Have businesses been paying their estimated taxes based on the guidelines in measure 67? Have the higher fees already been instituted?

If no to those last two, I'd say the laws are not yet in effect and therefore not being repealed with a no vote.

Regarding the OCPP, I just looked over their board and staff...didn't see a single economist on the list. Lots of government and policy types, no economists. Just say'n.

Pete Forsyth said...

Well, the fact that a "yes" vote would put something into effect retroactively is a reflection of the repeal effort. And any accountant who fails to advise their client to budget for a law that's been passed by the legislature and signed into law by the governor probably isn't going to stay in business.

As for the OCPP: not sure how you define "economist," but I'd hope it has something to do with advanced degrees...?!

I'm not going to rehash the arguments they've put forward, but I believe if you seek out their press releases, op-eds, Chuck Sheketoff's posts on BlueOregon, etc., you will find they tell a compelling story about how Oregon businesses pay taxes.

Jmartens said...

Which OCPP people have advanced Econ degrees? Again, I see no economist in the group.

In fact, OCPP seems to be nothing more than a partisan organization that gave it self a name that doesn't sound so partisan. How many tax decreases have they said negative things about? Cause their web site sure seems to be pro tax increase.

But anyway, none of that taxes away from my point. These tax increases treat the symptom and fail to address the problem.

Pete Forsyth said...

OCPP analysts generally have Masters or Doctoral degrees in the social sciences and/or law, or professional business degrees. It may be that none literally has a master's in economics, I'm not sure. I'm also not sure whether or not "master's in economics" is requisite to be considered an economist; *I* certainly am no economist. I'll leave it at that.

I agree that these measures treat the symptoms rather than a systemic fix. In fact I doubt you'd find anyone who disagrees. But you've done little to convince me that treating the symptoms is a poor choice.

And I'm not sure a systemic fix is possible short of a constitutional convention. What's your plan to come up with an overall solution? Does it go beyond eliminating days from the school year, increasing class size, etc. -- or is that it?

David Swift said...

Pete,

My accountant did fail to advise me of the impending new taxes. But maybe that's because I'm like so many other "corporations". During this recession, I'm an one-man cabinet shop based in Vancouver who does business in Oregon.

I hope to have a profitable company someday...maybe even be rich, but my first two years have been far from profitable.

I didn't quite make minimum wage either of the last two years. Thanks for trying to take a few more bucks out of my pocket.

Pete Forsyth said...

David, your situation sounds almost identical to mine. And yeah, you and I will be paying $140 per year more than we used to.

But I'm not trying to "make a few more bucks out of your pocket" (or mine, for that matter). I'm hoping that we can keep schools and other vital state programs from shutting down, like Jeff implies, finding a way to deal with a horribly messed up tax structure in the state.

Here's to greater success in 2010 -- the kind that makes $140 feel like the small price that it is!

Cori said...

While I agree with you that the state needs to change things...it's not the kids that should suffer. Yes, the state is using schools to tug at heart strings, but I don't think that the end result if these measures don't pass is going to change a thing in Salem. The end result will only hurt kids of all ages from K-college!! Schools are already struggling with huge cuts!! And if these measures don't pass, schools will lose more than $450 per student enrolled in their district--which puts it far less than schools were getting per student in the '90's. That adds up to be millions, especially for the large districts that are already struggling. Schools will shut down, programs will be lost, jobs will be lost, kids will lose out on education that is so needed in this world!

I do not think that it is a great thing to raise taxes, yet, the corporations have had a pass in Oregon for years!!! When measure 5 passed it killed the schools, and put the burden of paying for them and other community services on struggling families and individuals...while giving breaks of thousands to the corporations. These measures shift some of the burden back on to the corporations (and I'm not taking small businesses--for they will pay $140 more a year...really if you have to shut down because of $140, you probably wouldn't have made it anyway--harsh, but the truth).

Jeff, if you are so into changing how the government works in Oregon...then do something about it...but voting no on these measures will do NOTHING but hurt kids and the community!!!

Pete-Thank you for supporting schools and the community. As a teacher, it's heartbreaking to hear people not really seeing how these measures are going to effect the schools.

Jacob Johnson said...

Jeff,

Thank you for your thoughtful comments on the issue. I think (in regard to Measure 67) the verbiage (commercial, info on website, and the ballot itself) is misleading. Companies that are profitable are paying 6.6% income tax (although the proposed would be an increase to 7.9%), and the minimum tax seems to mostly affect the small businesses that are not profitable (by raising the minimum tax to $150).

I think we could all agree that disincenting small (or any size) business to do commerce in Oregon is not good for our economy. It is a no brainer that less incentive (leading to less commerce) to do business in Oregon means less jobs in Oregon, and with one of the highest unemployment rates in the nation (8th per bls), I don't see how anyone could get behind such legislation.

Instead we see commercials implying (greedy) corporations are getting rich by doing business in Oregon while our children suffer. These are not causal, nor should they be lumped together as such. Unfortunately, the proponents of yes on 66/67 have marketed their campaign as such, and in our fast paced world, I am concerned we Oregonians won't do our research enough to understand the implications of these taxes.

Less incentive to do business in Oregon, taxes borne by Oregonian consumers (the corporations will pass-through the taxes to their prices), and no incentive for the state to improve spending/budgeting practices, I don't see the upside.

Again, thanks for putting the information out there as this campaign is misleading at best, and we truly need to think about the consequences.

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