Oregon Republicans Levy Birth Tax
Russell Sadler
Beware any candidate who tells you “politicians are trying to ‘steal’ your kicker surplus refund.” There is no surplus.
The State of Oregon is broke. It is living on borrowed money to pay its operating costs.
The so-called “kicker,” originally designed to prevent the state from profiting from income tax “bracket creep” during the inflationary ‘70s, has morphed into an accounting trick that deliberately understates Oregon’s financial obligations to perpetuate politically popular “surplus refunds.” After the checks go out just before the fall elections, the Legislature quietly borrows the money to keep the government solvent. Over the last 15 years, the borrowing is nearing $1.5 billion, collateralized only by a promise to pay it off out of future income tax revenues.
The latest calculations place the personal and corporate “refunds” at close to $1 billion. But if that money is squandered on fake refunds, the state will have to borrow more money to pay its bills. Oregon Republicans have posed as fiscal conservatives long enough. They need to be called out and made accountable.
Oregon's Republican leaders ape their national party on a smaller scale: lie about revenue, give lollipops to convince everyone how well we're doing, and borrow like mad to keep the state going. Then they tout hot-button social issues to distract attention from the real fiscal problems they are creating.
Gov. Ted Kulongoski suggests suspending the “kicker” for six years to break this “borrow and spend” cycle. The Oregon Republican Party leadership ridicules this suggestion, slyly talking about “politicians stealing your kicker refund.”
The practice of “borrow and spend” is not fiscal conservatism. It leads to reckless, unsustainable debt imposed on the next generation. While Republicans talk loudly of repealing the “death tax,” they are busily imposing a “birth tax” on everyone born over the next 30 years. The rare Oregon Republican legislators who have spoken out about their party’s practice have been punished.
Rep. Lane Shetterly, R-Dallas, was removed as chair of the House Revenue Committee and threatened with a well-financed primary opponent. Shetterly chose not to run again.
Rep. Lynn Lundquist, R-Bend, was defeated by a well-financed primary opponent when he broke with the Republican leadership and supported more money for education.
Sen. Ben Westlund, R-Bend, refused to be intimidated. He left the Republican Party and is running for governor as an Independent in a effort to get into a position to stop the Republican’s reckless “borrow and spend” practices.
While most Oregonians remain blissfully unaware of this burgeoning debt, the bond rating services on Wall Street are not. State Treasurer Randall Edwards has told lawmakers their ability to borrow with unsecured Certificates of Participation is tapped out. The rapid growth of unsecured debt is not the only thing that makes Oregon a pariah on in the bond markets.
Bond underwriters are alarmed by Oregon’s initiative process. They see the initiative used to force large expenses on the state. Measure 5 forced the state to finance public schools and relieve local property taxes. Measure 11 forced large prison operating expenses on the state. Underwriters see the same initiative process used to restrict the ability of the Legislature to raise the money to pay these expenses. Wall Street cannot see how Oregon can continue to pay the interest on its borrowings from future tax revenues under these circumstances. So they are cutting the state off from further unsecured borrowing.
Here is where Oregon could go so easily over the next few years:
- The demagogues win and the “kicker surplus” checks are sent out.
- There is not enough money to pay the bills.
- Republicans lead a referendum defeating any new taxes.
- The Legislature cannot borrow any more money.
- The Oregon Constitution forbids deficit spending.
- The whole house of cards erected by Republicans over the last 15 years comes crashing down.
That is not a farfetched scenario. Nor is it mine. It is what bond underwriters actually expect to happen to Oregon and a number of other states if “borrow and spend” continues.
Beware of any candidate who talks about “stealing your kicker surplus.” Ask them how they intend to pay bills the state has already run up.
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Jun 11, '06
Russell - Would you please consider adding two comments to your somewhat incomplete exposition here for our edification:
First, do you distinguish at all between personal kicker refunds and corporate kicker refunds in your thinking since they are treated differently under the law?
And second, would you please expand on how you see Westlund's platform, which combines:
a) Support for a constitutional amendment to the right to health care (which I support), but no platform plank on how a) would be funded, with
b) A regressive package of changes to the tax system that promises a refund to a majority of folks up the income scale while at the same time would: i) raise taxes disproportionately down the income scale, ii) suspend the inheritance tax, iii) reduce capital gains taxes, and iv) claims the difference between tax cuts for those up the income scale and revenue short falls by recapturing revenue from that vague mass of "tax cheats"
actually puts him at odds in any substantive way with long-standing Republican tax policy? And perhaps you could clarify, how does this differ from the traditional Republican fashion of address the fundamental concerns of Wall Street shifing taxes from the better off to the less better off?
There is a troubling aspect to your argument which attempts to tie into genuine concern for the burden we are passing on to future generations, and which parrots arguments that legitimately deflate the Republican strategy of playing to populist anti-tax, anti-government sentiments to advance their regressive agenda, but deftly fails to address with some honesty and sophistication certain key issues and facts.
Jun 11, '06
Ask, do you refer to SB 382?
If so, do you believe all parts of it should be debated publicly? Or did you approve of 2005 when one practically had to know one of the sponsors personally to know it existed?
I support Ben Westlund's idea of "support my proposal, show me a better one, or defend the current system".
I am not convinced SB 382 would result in your b). I'd like to see more open debate on the issue.
We haven't had that sort of serious debate about major changes in the tax structure of this state in maybe 20 years. It is time to have an open debate.
Secondly, are you aware of the Hunt/Berger capital gains tax cut that paid for itself by changing other taxes? Don't have the bill # at the moment, but there was a big stink when Wayne Scott let that wither and die in committee while his plan (with his name and ORA in the masthead) which didn't pay for itself got voted on in the House.
There has been too much secrecy and debate killing (how dare anyone want to see the Hunt/Berger bill openly debated given that the Majority Leader and a major lobbying group supported the Scott/ORA bill which got rammed thru to a vote, for example).
There might be more public interest in politics if bills like the above were debated publicly with candidates saying "I support/oppose this legislation because........".
Of course, that requires more thought than just repeating soundbites and slogans.
Jun 11, '06
"the Legislature quietly borrows the money to keep the government solvent. Over the last 15 years, the borrowing is nearing $1.5 billion, collateralized only by a promise to pay it off out of future income tax revenues."
As usual, Russell, your partiality is obvious. Granting a smattering of truth to your superficial description of kicker history, the Republican Legislature needed a cooperative Democrat Governor, complicit Democrats and heads-in-buns media to get away with all this "quiet borrowing.
Jun 11, '06
Great way to frame this very real problem!
One fact check - Lynn Lundquist is NOT from Bend, he is from Powell Butte, a wonderful farming community in Crook County, which you should all know is the spiritual and geographic center of Oregon.
Jun 11, '06
Those of us who have been actively involved in this issue know it was Republican presiding officers who came up with the idea of mailing out the kicker checks (it was part of the tax return process before that as I recall), anyone who questioned the wisdom of that was told voters wanted it, and more importantly, there were GOP staffers actually claiming it didn't cause taxpayers any money for the printing and mailing of the checks because that was paid for in the authorizing legislation.
Add to that a complicit Oregon press ("looks like people will get their kicker checks") and there was considerable peer pressure not to even discuss this. Those of us ordinary citizens who tried to discuss it were treated as guilty of heresy or something by way too many politicians. GOP legislator Tim Knopp was the sponsor of the idea to put the kicker in the Constitution, and ever since then, the GOP refrain has been "the voters have spoken".
People who did not register to vote until after 2000 never "spoke" on this issue. There have been other issues the legislature was glad to debate and try to put on the ballot again. So why not the kicker? Are some politicians afraid what the voters will do?
I think both Steve Duin and Russell Sadler have done a public service this weekend with their contributions to the debate.
If someone says "In order to maintain the kicker, I have posted online (or printed) a list of the cuts I think we should make to the Oregon state budget", that would be fine.
Then we could all read the list of cuts and debate whether changing the kicker or making the cuts would be better. And the supporters of the kicker would be able to talk with legislators/ challengers and see if they could line up the 31 votes in the House and 16 votes in the Senate to make the necessary cuts. If the votes aren't there to make the cuts, something else has to be done besides rhetoric slamming all those who don't think the mighty kicker has been engraved in the capitol marble. If you look, what has been engraved on the front is a quote about benefits justly apportioned!
And Howard, unless you are a member of the Republic party, you give away your partisanship with statements like "the Republican Legislature needed a cooperative Democrat Governor,".
That's a word game thought up a couple decades ago by the "finger in the eye" crowd who thought insulting Democrats was much more important than solving problems.
If you want to persuade people to your point of view, please learn the proper use of the words relating to parties:
Vic Atiyeh was the last Republican Governor of the 20th century. Republicans have held House majority for many years. Democrats gained control of the Senate after a session of 15-15. Since Atiyeh, every governor has been a Democratic governor.
Jun 11, '06
Sadler's statement, if it really is meant to support frugal spending for state operating costs and carrying zero debt, has sway only if he's also:
(1)signed and actively encourages others to sign the Oregon Spending Limit petition (without exclusions), thus allowing Ted's kicker '3 bienniem holiday' to retire the "borrow & spend" debts by 2010
(2) is decidedly against what PDC does in Portland with urban renewal districts since PDC borrows & spends against the promise to pay off debt with future tax revenues.
Jun 11, '06
"And Howard, unless you are a member of the Republic party, you give away your partisanship with statements like 'the Republican Legislature needed a cooperative Democrat Governor',".
LT, I am not a Republican. What "partisanship" does that give away?
"Republicans have held House majority for many years."
LT, a simple House or Senate majority of conservative and moderate Republicans is often a weak hand without sufficient votes to override a gubernatorial veto.
Jun 12, '06
I admit my ignorance on this issue, but I was under the impression that the state was not allowed to borrow any money (outside of inter-fund transfers) for operations; that the only indebtedness permitted by the state constitution is for capital expenditures (such as prison construction). While that bonded debt-service is built into future budgets, it was my understanding that no legislative assembly could legally obligate a future assembly for payment of past programs. The constitution requires a balanced budget; that's what all the fuss is about early in the legislative sessions regarding the "re-balance" process. Since the revenue above the 2% limit is never counted as available for spending, why would there ever be a need to "quietly borrow the money needed to keep the government solvent."? I find myself skeptical on this point.
Jun 12, '06
Mr Sadler - Lets be fair and attack all of this kind of financing since this is what all "pay as you go" schemes work on. I just looked at the Police Fire Disability Fund on my property tax, it is growing out of sight and the only way to fund the $1.6B unfunded liability is by future prop taxes.
I keep hearing people complain about the kicker, but can we really trust politicians of either ilk when it comes to spending? I mean the population of Oregon increased by 20% from '90 to '00 and yet the Oregon general fund budget went from $14B to $35B in the same time. If one politician had the backbone to keep his word and actually commit to funding a rainy-day fund, we might believe them.