Is the proposed unprecedented increase in taxes a case of ‘greed vs. need’ as its advocates contend? Or, are the measures a retroactive ‘job killer’, put into place during one of Oregon’s worst recessions, as its opponents assert? We bring this spirited debate to you, in print …
Ken Turner, East Portland Chamber of Commerce Governmental Affairs Committee Chair, introduces the morning’s topic: Oregon Ballot Measures 66 and 67.
Story and photos by David F. Ashton
No more-timely debate could have been scheduled for the last East Portland Chamber of Commerce (EPCC) “Good Morning East Portland” meeting of the year, than was this one, hosted by their Governmental Affairs Committee at CherryWood Village on December 16.
Speaking to a standing-room-only audience of about 45 members and guests, J. L. Wilson, Vice President of Associated Oregon Industries and Oregon State Representative Jefferson Smith were set to square off for a spirited-yet-polite debate regarding the tax hike measures, Oregon Ballot Measures 66 and 67.
Before the meeting, J. L. Wilson told us, “It’s important for people to be informed about these measures. It’s a very weighty debate, with legitimate points of view on both sides. It serves everyone well to be well-informed about them.”
Oregon State Representative Jefferson Smith commented, “Part of being elected is I get to be an occasional whipping boy. Today is one of those times. Beyond that, it’s a key issue for the state, and for those in this district that I represent. It’s important for me to share my views not only when it’s easy, but also when it’s difficult.”
All about Oregon Ballot Measures 66 and 67
The chamber’s Governmental Affairs Committee chair, Ken Turner, started off setting the stage by reading the summaries of both measures.
(The best website we’ve found to read the full text of each measure, to find out who’s supporting and opposing them, and to discover the colorful and contentious history of these measures, is ballotpedia.org: CLICK HERE to be taken to the specific page that discusses with Oregon Ballot Measures 66 and 67 in detail.)
Turner went on to outline the morning’s program: Each presenter would, in turn – with the first to present determined by a coin flip – give an opening statement, make a presentation, have the opportunity to give a rebuttal, and make a closing statement.
We present this debate in full text, transcribed from our digital audio recording, lightly edited for brevity.
J. L. Wilson, vice president of Associated Oregon Industries, tells why he opposes the two measures that would increase taxes in Oregon
J. L. Wilson – Opponent of the Measures
“I would open up with two thoughts. The first is that there is only one significant issue facing the state. It is the issue that everything that our prosperity depends on – the level of government services than we want and enjoy – it is the return of private sector employment in the state. The private sector jobs create the wealth; it creates everything that we want in the state, and, it stems from private-sector job creation.
“[Regarding] Measures 66 and 67, the only lens to measure these is whether they promote job creation at this critical point in time, or whether they inhibit job creation at this point in time.
“I would suggest to you that if it does not promote each job creation, and in fact inhibits it, you’ll have to say that you cannot vote for these measures.
“The second issue is sustainability of what we’ve got going in the State right now. I’m puzzled: Why now? Why, in the worst recession of our lifetime, are we permanently raising taxes by 40% on corporations, with a 20% marginal increase on individuals?
“During the recession, State government has added 5,100 jobs, all paid for by citizens; by the business owners who have lost 131,000 jobs. I submit to you, we’re standing at sort of a precipice here. We’re at the point where we might not be able to sustain the level of government that we now have during the best of times, let alone right at this critical point in time. We’re proposing to permanently raise taxes in the worst economy in the state in 80 years.”
Oregon State Representative Jefferson Smith, tells why he supports the two measures that would increase taxes in Oregon
Rep. Jefferson Smith – Proponent of the Measures
“I decided to come here for three reasons. This is the second time that I’ve visited the Chamber in the last few months. This issue came up, and with some zeal, at that time.
“Why did I come to a business group to talk about tax increases – including a tax increase on businesses? It might just be because I’m stupid. By the way, I’ve been here [speaking before the EPCC] before, and I could have avoided coming here again. But I wanted to be sure to share with you some facts, and some perspective to make sure that in the zeal of our self-interest, we do not lose sight of some key realities of this community’s key interests.
“I’ve heard information – and I’m not criticizing Mr. Wilson – in the course of this debate that has been inaccurate, misleading, and incomplete. I do not have all of the data, but I’ll offer the best I have. This morning, hopefully, we can provide some information on both sides of the issue.
“Third, I am looking for allies, over [a period of] time. This State was built, not merely by people on the left, or people on the right – who were advocating for a particular interest – or their self-interest. The State was created by citizens who realize that we need to create private wealth, and maintain critical public services. That balanced perspective was critical at the formation of the state, and will be critical over time to making this state great again. I don’t expect it to win over all of you. But, I’m hoping over the next little bit, some of you who will be with me on this.”
J. L. Wilson
“What we’re proposing, here at this critical junction, is that nothing matters more than private sector job creation. At this point in time, when the state needs private sector employment, [these ballot measures are] proposing a new corporate minimum tax on C-Corporations that is 20 times higher than the next highest corporate minimum tax levied in the country.
“The measures are proposing a corporate minimum tax based on gross sales. This means you will be taxed whether you are profitable or not – based on your sales, up to $100,000 – even if you don’t make a profit.
“It’s important, because it taxes you 20 times higher than the next highest state, which is New York at $5,000. Never mind that 30 states don’t even have corporate minimum taxes, because they recognize the folly of taxing an entity that is not making money.
“These taxes are permanent. We’re not talking about a temporary two-year tax to get us through this lean time, after which the government resumes its traditional growth pattern of tax revenues. We’re talking about permanent tax increases during this recession. Even the Obama administration recognizes the folly of permanently increasing taxes in the middle of a recession.
“The tax rates on business go from 6.6% on income to 7.6% on income. They settle to a lesser rate, but still higher than the current rate. On personal income taxes, the marginal rate goes from 9% to 10.8% and settles back to 9.9%. You have a permanent increase in personal rates. As many as you know, if you’re an S-Corp or LLC, you’re paying these taxes through your personal income tax returns. Don’t let it be said that this is a corporate income tax and a personal income tax – they’re both business income taxes. They both have dramatic impact on jobs.
“The taxes are retroactive; going back to January, 2009.
“Can you imagine operating company, and you’ve had to lay off some of your workforce – and had to dip into reserve funds – and then you get hit with a double tax bill on April 15 for 2009 taxes and 2010? Can you imagine what that does to our economic growth in the state? This tax is retroactive!
“Next is double taxation. Voters approved a measure that said you can deduct up to $5,500 in federal taxes paid on your state income tax returns. That $5,500 deduction goes away if you’re ‘rich’. “You are considered rich if you make more than $125,000. This is double taxation!
“And, I restate, these taxes are just pretty, darn high. The 9% marginal rate goes up to 10.8% marginally, which I believe may be the second highest in the country. The 11% marginal rate might be the highest in the country.
“If you read the Wall Street Journal as I do, that newspaper showed a graph indicating that Oregon, under this scheme, would have the second highest taxes in the world. We’d be the second highest taxing entity in the world – just behind Denmark.
“I don’t think there’s any question that this’ll be a drain on jobs, and a drain on our prospects for economic growth. Even the Legislature’s economists, using a static model, say that this will cost 6,000 jobs. Private-sector economists, using behavioral impacts, say that the impacts will be much higher, up to 70,000 jobs. If we’re talking about the loss of tens of thousands of jobs, why are we even debating this tax increase at this time? Do we understand that the health of this public sector depends on the health of the private sector?
“Let’s get the private sector healthy; that should be job one. To do that these tax measures need to be defeated.
“Government [sector] jobs growing while private jobs of decreased by 130,000. Is there any doubt that government plays by the same rules we do? They don’t.
“The State’s ‘All Funds Budget’ has increased by 9% during this economy. This is, if one factors out federal government expenditures – the all fund budget group – by about $3 million.
“There have been tax increases on your health insurance plans – there’s already been $1 billion of tax increases, notwithstanding measures 66 and 67.
“Let’s get the private sector healthy. A healthy public sector depends on a healthy private sector. To do that, we need to put these tax increases on the shelf.”
“Let me start with some facts, and then I’ll offer some responses.
“First, 90% of the state budget goes to three things. I’ll use the same rhyme I used during my last visit: 90% of our budget medicates, educates, and incarcerates. (In the Oregon state budget) there’s not a department of foreign aid; not a significant poor people welfare program – all of our human services programs, including Children’s Services, is about 3% of the budget.
“What we’re talking about is cutting governmental services, current service levels, which we did cut by $2 million. We are talking about students keeping their favorite teachers, seniors receiving home care, and criminals staying in jail. There are no other things to address.
“Second, the $10. Oregon’s minimum corporate income tax has been $10 since 1931. Personal income taxes have increased significantly. The power business groups in the state, and Oregon Associated Industries, have done a good job to maintain this apolitical victory of catastrophic proportions.
“The percentage increase over $10 is a lot. Because it’s $10 bucks. 100% increase in the $20 bucks.
“Third, as reported by the Oregonian, these measures will have the catastrophic impact of moving Oregon from the 48th highest in business taxes to the 46th highest business taxes. We don’t have a sales tax in the state. People who track this stuff know 35% of sales tax is being borne by businesses. We are not a high tax state. Even if you take the passage of these measures into account, Oregon’s overall tax burden ranks us as 36th in the state [Editor’s note: Perhaps he intended to say ‘in the nation’].
“This does increase taxes. I make no bones about that. But I also want to make sure we don’t overstate the degree to which it does, it’s very modest. The original [tax increase] proposal by the Oregon Business Association would have been increased Oregon tax by $1.2 billion. This increase is about $750 million. This is a modest increase, this was the only way to get to the state legislature the approve this – which I assure you is not made up of a bunch of leftists.
“I also want to talk about this district. Only 2 to 3% of Oregonians will pay this increased tax. At first, I had good knowledge that nobody, including myself, comes to the legislature to cut services and increase taxes. And I talked to Republican Greg Smith from eastern Oregon; he voted in favor of this. He said one of the reasons he voted for it was because only 26 people in his district are going to have to pay this tax. But he added, ‘There are a lot of people my district who receive services from the State’.”
“My district, right here [encompassing outer East Portland], is just as poor. If these [measures are voted down], the calculation is that David Douglas School District would lose $5 million – that’s the equivalent of 70 teachers, or 16 school days. That’s not counting what happens to human services, or jails.
“I’ll quickly touch on job creation. Teachers are jobs; police are jobs. Rather than getting into an argument about which jobs are public sector and private sector – let me talk about a state I recently visited, which is Minnesota.
“In 1980, Minnesota had 10 Fortune 500 companies and so did Oregon. Now, Minnesota has 18 Fortune 500 companies, Oregon has two. Is the biggest difference the marginal tax rates? No! They’re a higher-tax state than we are. The biggest difference was investments in education over the last two-and-a-half decades. The anti-tax movement has been successful in convincing us that the only way to grow an economy is to cut taxes on the powerful – and expose the powerless. In fact, the opposite is true.
“If we invest in job creation and workforce development, and develop the next generation of geniuses, we can grow our economy. I’m not saying that the marginal rates will improve an economy. But they can help pay for investments that do grow an economy.
“70,000 jobs [lost]? It’s a false claim. The Brookings Institution, the Oregonian, and the Oregon Legislative Revenue Office say that the Cascade Policy Institute figures are inaccurate.”
Noting that “the rich” are considered to be individuals who earn $125.000, J. L. Wilson, says these new proposed taxes will hurt the very people who create jobs.
J. L. Wilson
“There are elements in Jefferson’s talk I want to rebut. I think there are two issue sets; are both relevant, and both are legitimate points of view.
“It’s one thing to say that we’re ‘taxing the rich’ – and by rich were talking about individuals with a $125,000+ annual income. You say you’re taxing 3% of Oregonians.
“At the same time, about 3% of Oregonians provide nearly all of the employment in the State’s private sector. We have roughly 125,000 employers in this state which works out to about 3% of the population. That 3% of our population who employs also invests and gives charitably. That’s who were talking about taxing – the very people we need to create jobs, and create wealth. Creating wealth also benefits the public sector. That’s exactly who are being targeted in this measure.
“I submit that these increased taxes are counterproductive, by any measure. If we expect to grow as a state – it we expect to get where we want to be, public services included – this is the 3% of the folks that we need to do what they do best: create jobs.
“What’s better: Public sector or private sector jobs? You can’t fund public sector jobs on the back of the private sector, when there are no private sector jobs to sustain them. It’s a chicken-and-egg argument, but I know which one comes first. You can’t have the level public services unless you first have a base of private employment. That is not debatable.
“Right now, private sector job creation is what’s needed in this state. This is why we oppose these measures so vehemently.”
Rep. Jefferson Smith says he appreciates the civil tone of the debate, and tells how the legislature arrived at this tax increase proposal.
Turning to his opponent, Smith said, “I appreciate that while we disagree, Mr. Wilson, we do so civilly – I truly appreciate it.
“Here’s what legislative choices we faced [in dealing with the State’s budget]. We came in to the session and were told we had a $4 billion shortfall, based on the current service level. This doesn’t include cost-of-living increases, and other things going up.
“We had three choices: (1) Fill all the $4 billion shortfall with service cuts; (2) fill all of it with revenue increases; or (3) fill it all by doing something in between.
“The significant majority of folks thought the reasonable path is ‘somewhere in between’. I held a multi-partisan Town Hall meeting where I asked that question. I had only one or two people say we should close the gap only with tax increases. I had only one, and eventually zero, who said we should do it all with service cuts.
“Let’s talk about that ‘in-between zone’. We took about $2 billion out of the current service level. We took out about $1 billion of one-time money. And, we raised about $700 million in taxes.
“Associated Oregon Industries’ [tax proposal was for] a broad-based tax, paid by your customers, your employees, in fact, by many of you. I know how many [people in business] in this district are doing – their proposal would have hurt more. This proposal has a lower ‘price tag’ by $1.2 billion in taxes that what the business groups were supporting.
“Nobody did this with zeal. They didn’t do it to punish the rich. We did it because we recognize that we need to invest in state services if we’re going to come out of this recession.
“Let me make this very, very clear: Recessions in the past have been responded to by a mixture of private-sector innovation and work, and public sector problem-solving. If we go out in a posture that one [technique] is the answer and the other is just a follow-on, it is kind of a yesteryear politics and will get us nowhere. We have to think about how we can make our private-sector robust, and have a public sector that provides important services that help create jobs, over time.
“Let’s talk about retroactivity. True story; it’s retroactive. And, by the way, is not that your taxes go up more – everybody gets a tax increase [if the family earns more than] $250,000 a year. The tax they pay, up to $250,000, is exactly the same as everybody else pays on their first $250,000. It’s only on the margin over that amount that’s taxed. If you make $300,000 a year, your taxes are increased very slightly. We know people are in that kind of money, have significant fluctuations in incomes. We talked to accounts that recognize that retroactivity should not be a big problem; there are no penalties for late payment.
“Let me say something about government and spending, I know this is on people’s minds.
“I do think that we need to demonstrate the outcomes they government services provide. If we have a posture that is merely an anti-tax, anti-public service, anti-teacher, anti-public safety posture, we will never build the trust of the public that we need to transform public services for the century.”
J. L. Wilson advocates voting “no” on Ballot Measures 66 and 67
“You know how I feel about job creation.
“A new gross receipts tax on business, without regard to profitability, will not create a single job. “A permanent tax increase on small businesses, S-Corps and LLCs and increased income taxes on C-Corps will not create a single job. A retroactive tax increase will not create a single job. A new plan of double taxation, by limiting or federal election on state income taxes, will not create a single job. And a higher marginal rate of taxation and 10.8 and 11% will not create a single job.
“This is we oppose Ballot Measures 66 and 67. There will be job loss as a consequence of the measures passing.
“With regarding to compromise solutions to which Mr. Smith refers – business leaders didn’t have their heads stuck in the sand. We propose a temporary tax increase. We oppose this permanent tax [instated during] the worst recession in 80 years. A two-year tax increase is bad enough, but we would do that, to help the State get on with its business.
“By the way, the cost growth of government will be 16% in this biennium; 17.5 in the biennium after that. Tell me why you need a tax increase on business and individuals at this particular point in time – you can’t come up with a reason.
“And finally, consider the notion of government cutting and ‘tightening its belt’. The State’s General Fund higher is still today than it was two years ago, even during this recession. The All-Funds Budget is still 9% higher than it was two years ago. What I’m telling you is the government is not starving for money, and there’s no reason that a permanent tax increase is needed today.
“Vote no on the measures, please.”
Jefferson Smith advocates voting “yes” on Ballot Measures 66 and 67
“Investing in education builds great jobs. Keeping her streets safe and our businesses save does create jobs. Keeping her people healthy does create jobs.
“Talking about the [State’s] General Fund, I want to clarify something. When they say that the general fund increased – 95% of that increase in the General Fund came from two sources. The first source was from increased federal payments to Medicaid, etc., due to the economic crisis; not on something State government was spending.
“Understand the public sector is different from the private sector in it one respect. When business is bad for you [business] guys in the private sector, you have fewer customers. When business is bad, the State of Oregon and in the United States of America, the government has more customers. More people access human services, for instance.
“Imagine two headlines; which of these of a scarier: ‘In the wake of the failure of Measures 66 and 67, Oregon cuts school days, eliminates people from the Oregon health plan, loses federal matching funds, and releases people from jails’.
Or, in the wake of the passage of Measure 66 and 67, ‘Oregon moves from 48 to 46 and tax levels on corporations United States of America’. Which would be a scarier headline?
In this State, we’ve had a consistent divestment of public services; a consistent divestment and education. There’s been an ideological attack on government for the last 30 years – some of which I agree with; but much of it is not factually based, it’s ideologically-based.
“This is not been good for business. It is not good for job creation; it has not been good for us in competing in the global economy. It is not greatly based on the ratio of lower taxes versus higher taxes – but how we properly invest in innovation in the future. It will have a lot to do with how well we invest in public services.”
These ballot measures are too important — as these two gentlemen point out — to either not vote, or vote without really studying the measures. Please, be do your part as a citizen. Become informed. VOTE!
About the Chamber:
The East Portland Chamber of Commerce is focused on giving its members the tools to grow their businesses, learn to be effective business leaders and be heard by local government officials.
Chamber hosts weekly (except the last two weeks in December) “Good Morning East Portland” networking meetings hosted by different chamber members each Wednesday morning from 7:30 to 9:00 a.m. Meetings are free and guests are welcome. Visit the East Portland News COMMUNITY CALENDAR to find the location of upcoming meetings and events the Chamber hosts.
Other chamber activities include public affairs programs, educational seminars, ribbon-cuttings for new businesses, annual golf and bowling tournaments, social activities and opportunities for members to give back to their community. The chamber also keeps members updated through a weekly newsletter and an interactive web site: CLICK HERE to visit it, or follow the Chamber on TWITTER, or call the office at (503) 788-8589.
© 2009 David F. Ashton ~ East Portland News