I have reservations about adding a new kind of tax. Even if it were truly revenue neutral, adding a percent to the sales tax later is much smaller step than starting one up. If a single sales tax were to replace the income tax, with exemptions for food and medical care, I'd be more inclined to support it.

No no no! This is not why we voted blue. The problem with Oregon's income tax is that it's regressive, topping out at much too low a level. I seem to recall reading that we could end our budget woes if we just restored the pre-Republican-controlled-Legislature balance between taxes paid by businesses and taxes paid by individuals.

Rather than impose a regressive sales tax, why not make businesses pay their fair share, and increase the top income tax rate for the millionaires, giving us a truly progressive income tax?

Brett's got it right.

Why do we want to make the system even MORE regressive?

There are better ways to capture tourism dollars if that is the goal.

I have always thought that a sales tax would bring revenue in from all the tourists, which is not a bad thing.

Does a sales tax have to be "flat" all year? Could it be variable, being lower in the winter and higher in the summer to get more tourist dollars? If I knew that our sales tax would be 4% October to April and 6% May to September, I would buy my cars, washing machines, etc. in the winter - as would most Oregonians.

The one concern I have with this approach, which could be fixed, is that it still doesn't bring taxation equity to corporations. They are not paying their fair share, and a sales tax doesn't deal with that.

"a 5-cent sales tax"? is that supposed to be a 5 percent sales tax?

What part of No Sales Tax in oregon doesn't Salem Understand? 9 times it has been shot down, 9 times! I would like to see a law that the next state person to suggest that be taken straight to prison, to serve out thier term in office in jail. Do not mess with the will of the oregon voter!

Don't get me wrong, out here Homeless on the High Desert we are a bg fan of Ben Westlund, but five of the more moderate House Republicans, a moderate Senate Republican, and three of the most moderate Senate Democrats. doesn't say much for a so-called progressive takeover.

Obviously the sales tax trolls are alive and well again in Salem trolling for more dollars from the general public. When is enough enough? When are these sales tax trolls going to stop wasting the public’s time and money by not bringing it up again and again in the legislature? When is state government going to live within its means? The voters have rejected the same old regurgitated plan many times over. These sales tax trolls are assumed to be public servants of the voters, not adversaries. There was a time in Oregon when big business and corporations paid a near 50 percent of the revenue collected by the state. The current big business and corporate share is a pitiful five to six percent of the revenue collected. Continual tax give-a-ways to big business such as property tax abatements to fat cat developers, promoting non-efficient energy like ethanol, and dumping money into alternative transportations systems that are not financially self-sustainable requiring continual operating tax subsidies are but a few of the examples of what actually needs fixing

Small businesses are the backbone of the Oregon economy. The insanity is that small businesses located near the State of Washington border such as in Hood River and The Dalles will be some of those most hurt by an Oregon sales tax. Many small businesses such as those on Hayden Island in Portland are already struggling to survive and will probably have to close their doors. Allowing the lunacy of the sales tax trolls to receive their way will have many people seeing red instead of blue. Don’t cook Oregon’s books over the fire of the sales tax trolls. Balance those books by increasing and balancing the percentage of revenue collected from big business and corporations with that of small businesses, individuals and families.

Jeff, you're right... this is promising. But read the bill before making assertions.

Start at Section 95 and read down the list of all the things exempted under the proposed sales tax.

On a more general level, I love the uber-liberals who: 1) Want a super-progressive tax system. 2) Object to cutting service levels in lean times.

Pick one or the other, dude. Even if businesses get taxed up the wazoo, it's still a volatile income-based tax... which is just not stable.

Darrell - I assume that in 2002 when people were dying because they were being kicked off of OHP due to the budget shortfall... were you fine with that because at least they were paying a progressive tax?

Taxpayers in every income range could expect to pay less in taxes

Ok, I thought the big complaint of late is that there isnt enough money to fund everything the state needs to pay for. How does this help things?

Jon, that's like saying that if you replace one old light bulb with two energy-efficient bulbs, you're necessarily using more energy.

Senator Westlund's got a pretty good breakdown on his website of how a plan like this would work, but I can't tell whether this is the current bill or what he was proposing during his campaign, though the plans seem very similar.

You increase the tax base, and you can bring more money in and lower costs for everyone involved. (It's the same principle as Measure 44.)

Good points, Adam! (especially Con #4!)

Kari, the reason that intangible services aren't taxed?

Do you want Mandate Media to have to start charging sales tax on web design services? One price for in-state, another for out-of-state sites? It's likely that you could afford the set-up and administration, but what about some high school kid who's designing a website for some extra cash? Should he/she have to charge sales tax?

What about that same kid mowing their neighbor's lawn? "All right, Mr. Peterson... that'll be $5 plus an extra 5% comes to $5.25. I'll just cut a check to the Department of Revenue for twenty-five cents and we'll be all squared away."

I'm a little surprised at the amount of knee-jerk anti-sales tax response still out there. Most of the world has figured out that stable governments need multiple revenue sources. The three primary areas are income, property and sales tax. Its often referred to as a three legged-stool. Remove one and the system is out of whack. In Oregon, after proportional property tax increases have been legislative away by some sizemore-based initiative in the early 90s, we've had a one-legged stool. When the economy is booming like the early 90s, things are very good. But when the economy tanks like the late 90s/early 2000s, things are very, very bad.

Moreover, our income-tax based only tax system leads to pyschological harm and confusion. Oregon's overall tax revenue is among the lower half of the nation, but we all feel like its such a high burden because our personal income tax is the highest in the nation. Put another way, you notice $50 missing in your paycheck far more than an extra nickel for your beer.

We need a stable muli-source tax revenue system in Oregon. Like global warming, no reputable economist (even progressive liberal ones) would dispute that some form of sales tax should be a part of that system. Of course, many people debate on the type of sales tax. But I think this proposal is an exciting first step toward something that can help establish a more rationale stable revenue system.

As for the argument that Oregon always votes down sales, I can't help but add that this is an irrelevant Karl Rove-esque soundbite point. The last popular vote on a sales tax was 14 years ago. At that point in time people preferred cassette tapes to the new CD technology. People then thought George W Bush's father was conservative. Most people barely heard of sexual harassment and gay marriage was not even something people imagined on an acid trip. And most importantly almost half the people living in Oregon today, didn't leave here then. The simple point is times change and so do people's view on things. (consider congresses position on the iraq war). Simply saying its never been the case is a nice historical fact. But it doesn't mean adding a sales tax component to our revenue system is not long overdue.

Does anyone have studies/links showing that the sales tax is super stable? I'd guess that consumption would down in recession as income decreases.

If you want stability, the better thing to do is create a kick-ass rainy day fund. More progressivity could be built into this approach than with a sales tax. In addition, a good rainy day fund would have the right fiscal effects. We could tax less in recession, and tax more in good times.

The whole kicker thing puts a straight jacket on the state. We could resolve this issue by creating really strict laws to govern surpluses and the use of the rainy day fund.

JHL said ... On a more general level, I love the uber-liberals who: 1) Want a super-progressive tax system. 2) Object to cutting service levels in lean times.

Pick one or the other, dude.

That would take care of that dilemna.

Although it is "moderates" apparently pushing this bill, I always have to laugh when "progressives" try to impose a sales tax.

Adam, a sales tax is regressive. Let's say the average person earning $20,000 per year spends $8,000 per year on items subject to a 5% sales tax. His $400 payment is 2% of his income.

Now the average person making $100,000 spends $20,000 per year on items subject to a 5% sales tax. His $1000 payment is 1% of his income.

The person with the lower income pays a higher pecentage of that income in tax. THAT is the definition of a regressive tax.

And Oregon is one of the few states in the nation that recognize this. We're already PREOGRESSIVE. Why change that?

As for the old "two-legged stool" problem, sales tax revenues dip and rise with economic prospects just like income taxes do. California had a massive budget problem earlier this decade just like Oregon did, and they have a hefty sales tax along with their income tax.

Now, if you want to make Oregon's income tax fairer and more progressive, I'm all for that. If you want to reform the kicker so that Oregon can accumulate a "rainy day" fund to ride out the economic dips, I'm all for that.

But sales tax? Count me out. For the Tenth Time.

I also noticed that TR couldn't help libeling mass transit, by claiming that we are:

dumping money into alternative transportations systems that are not financially self-sustainable requiring continual operating tax subsidies

www.urbanplanningoverlord.blogspot.com

No, and no, and no again! This is not progressive. This is the opposite of progressive. Sales taxes, by their very nature, are regressive.

That doesn't mean they're always a bad thing, as long as the point isn't to raise general funds. Cigarette taxes, for instance, are good for paying the health costs generated by smoking in the first place, as well as acting as a deterrent for smoking.

But a general sales tax? No! That will force more low- and zero-income people to pay taxes they can't afford and don't currently pay! Look, five cents on the dollar isn't much for me, but for a guy who only makes $8,000 a year, every single penny counts.

The answer, and the reason we voted progressive, is to tax wealth at progressively higher levels. The more you own, the more -- and the larger percentage of your income -- you can afford to part with to pay for the services everyone uses.

I'd also like to point out that those at the lower income levels currently are not subject to state income tax. BUT, they'd have to pay a sales tax were it enacted - leaving our most vulnerable with less. Does that make sense to anyone?

Hi folks...

Count this low/middle income worker as a supporter.if this was only about the integrity of the tax system. I support my family on $33,000/yr. My discretionary spending is pretty limited once the rent, groceries and meds are purchased, maybe 2500-3000 a year for work clothes, safety boots, a pair of jeans, the NYT subscription. At 5% that would be about $150 for sales tax. Compared to my Oregon income tax that's a bargain.

Unfortunately, this issue is also about trust. I live in Oregon's armpit of incompetence...Jackson County, where we can't keep libraries open, roads cleared, public safety enforced or parks clean. My cynic meter is running off the scale right now so it's hard to believe that the leg would come up with a plan that actually had measurable benefit to folks in circumstances similar to mine.

Thanks

The expected savings posted on Westlund's site (Ben Westlund, linked earlier) reinforce the idea that it's a regressive change in taxes. I'm not sure about the state of current effective taxes on income/wealth, but Ben Westlund's site projects that savings at particular income levels would be:

Income - Savings - Ratio of savings/income(in thousands) 35k - $133 - 3.8 45k - $170 - 3.78 55k - $269 - 4.89 75k - $473 - 6.31 125k - $700 - 5.6

For a flat change in tax, all those ratios would be equal (meaning the change in tax as a percentage of income would be the same at all income levels). This isn't a perfectly regressive change, but the income levels below 55k aren't receiving as large a savings in proportion to their income as the income levels at 55k and above.

Note: To clarify, the ratios given above are the percentage of income that their taxes will be reduced by (multiplied by 1000 to avoid small numbers, since the changes are pretty small). Larger numbers means their taxes will be reduced by a larger percentage of their income.

The exemptions can certainly be geared towards only taxing luxury items, which is a necessity for a sales tax. On the other hand, someone making 35k/yr wouldn't necessarily spend more on a dishwasher, television, computer, etc. If they're fiscally smart, they'd just save the rest of the money, which is where low-income families have the hardest time. The frivolous spenders (of which low and high income workers can be guilty) will get hit hard, and the most obvious of these are the extremely wealthy celebrities; despite the impact of a sales tax, I do think it has some benefits in reducing some of the consumer waste in our country.

A couple of additional points:

Steven Maurer wrote “If you wanted to keep more of your own money, you'd ride a bike to work.”

If the tax trolls in Salem truely wanted to bring equity into the tax system instead of just advancing a socialistic agenda, bicyclists would be directly taxed for their use of the road instead of relying on subsidies from other resources to pay for bicycle infrastructure.

Secondly, does anybody really think this or any other sales tax would remain at five percent? Every money grabbing legislature and governor that would follow its initial start up would be scrambling for ways to increase it. Additionally, every city, town and county in Oregon along with Metro would want to jump on the band wagon and add on a sales tax of their own. Soon Oregonians would be paying as much as Washingtonians in sales taxes, but still have the Oregon personal income tax to deal with. Big business and corporations in Washington pay far more in taxes than they do in Oregon. This as with other sales tax proposals appears to be like yet another way for political forces to dig deeper in the pockets of Oregonians so those forces can exercise more socialistic controls over the daily lives of citizens. To any sales tax proposal just say; “NO thanks, I am both and American and an Oregonian.” (Take your socialistic controls and go elsewhere)

Some one said above to someone else :

So I guess you would be in favor of getting rid of the lottery and all cigarette taxes?

Lottery: Yes, by all means get rid of it. In this case, the State preys on people's addictions. Talk about regressive! If we had a more progressive tax system at the state and federal levels we'd have no need for the lottery.

Cigs: Keep the taxes. Cigarettes suck. Their main purpose is to make stockholders of tobacco companies, convenience stores etc. rich. I've seen lung cancer and heart disease up close, and let me tell you the health effects are horrific. Yes their are adverse income effects. If their needs to be a correction for the poor, do it though income support and/or health care allowances.

Most of the world has figured out that stable governments need multiple revenue sources. The three primary areas are income, property and sales tax. Its often referred to as a three legged-stool.

I agree. Let's go for a three-legged stool. Individual income tax, property tax, and a gross-receipts tax (modelled after Washington's Business and Occupations tax). A flat B&O tax could have negative impacts on struggling small businesses, so exempt, say, the first $20,000 in gross receipts. Or the first $50,000. Design the B&O tax to feed a stability fund in good years, and to generate enough revenue to support a healthy K-16 public education system.

Why cut the nearly-flat-rate income tax? Why not raise the top rate to 10%, but put in meaningful, annually-indexed brackets? We can offer most Oregonians a significant tax cut.

I have always thought that a sales tax would bring revenue in from all the tourists, which is not a bad thing.

Want tourists to pitch in? 5% lodgings tax on all motel/hotel rooms, dedicated to funding state parks. I did some rough calculations a few years back -- combined with other dedicated revenue streams, that would just about free state parks from the general fund.

Any revenue package that relies on a sales tax instead of a gross receipts tax is DOA as far as this voter is concerned.

(And BTW, I run a small business and I don't buy a whole lot of stuff. A gross receipts tax might wind up costing me more than a sales tax. This isn't a case of trying to push the tax burden off on "someone else." I just think sales tax is regressive and terrible public policy, particularly since there are far better alternatives out there.)

Reading some of the posts on here from supposed, "democrats" and "liberals" makes me think that we are not living in a progressive state, but rather a truly RED state.

A majority of Oregonians are simply too selfish and too ignorant to ever allow a sales tax. They have drawn the line and in this respect, the state may as well be REDDER than RED. There is NO negotiation with a majority of Oregonians, no matter what the benefits.

I have NO faith that Oregonians will be smart enough to accept this whatsoever. So, it makes no difference if this passes the legislature, whether it balances the budget, whether it actually helps the state or not. Oregonians, stubborn to their very core, will vote it down. I can promise you that.

The issue is not whether to have sales tax and no other tax. It is whether sales tax should be part of the puzzle.

UPO compared the tax impact of someone making 100K v 20k and it is true that the 20K person pays a higher percentage in sales tax (although UPO's numbers are suspect because most of the 20K earners income is going to be on goods exempted from sales tax). But regardless when you add the additional income and property tax into the equation, the 100K person pays a higher percentage of overall tax.

In addition, adopting a sales tax component to the tax structure does not mean other forms of tax reform should be ignored. I support putting the corporate kickers into a rainy day fund (I even support getting rid of the individual kicker). I support increasing the minimum business tax from a minimum $10 to $1000 or $10000 depending on the size of the business. I also support the idea of a more progressive income tax structure where those making more money, pay a higher percentage then those making less.

None of those additional legitimate progressive tax proposals, however, are reasons not to get sales tax into the mix.

(sigh) It's no suprise that a portion of the plan is regressive... but out of context, of course it makes no sense.

That's like looking at a part of the Governor's renewable energy plan and saying, "Less fossil fuel power? But we'll need more power in the future, not less! That's bad policy!"

Jenni and Mike Smith, I know you can take a big-picture view of this thing. Try it.

i used to live in washington, land of a sales tax and no personal income tax. can we make that work in oregon?

i'd like to see some political muscles flexing here. let's see our elected officials talk about making sure big biz pays their fair share as a means of fixing our broken taxation system.

Why is a sales tax proposal tied to a capital gains tax reduction?

Maybe because it has to get a broader base of support to pass than just the Liberal Seal of Approval.

Usually, when things get referred to the voters, they go to the entire state, not just the Democrats. Pesky, I know.

The good things about Oregon's current tax system: 1) when you add up all the state and local taxes, it's flat (as opposed to regressive, like Washington); 2) ummm...

The bad things: tax revenues are volatile, businesses get off too easy, and not enough revenue is raised.

Adding a sales tax would only slightly decrease the volatility (I work as an economist for the state of Washington, and have followed their revenue forecasts for years). A sales tax would make our tax system more regressive (richer people spend a greater proportion of their income on investments and services, and lesser proportion on goods, than middle- and lower-income folks), unless it was balanced by adding some progressivity to the state income tax. A sales tax would raise revenue from out-of-state tourists-- but according to previous State of Oregon studies, the amount raised would just cover the administrative costs for having a sales tax (it's another whole collection system, requiring auditors). A sales tax would raise money from the underground economy--the one certifiable plus.

And when I say sales tax, I mean a general tax on goods. Taxing services would make it less regressive, because wealthier folks are the ones who make the most use of accountants, law firms, etc. The Florida legislature voted in a sales tax on services a number of years ago--it lasted about 90 days before it was rescinded, due to intense public pressure (you can guess where the pressure came from).

To fix the three "bad" things about Oregon's tax structure, while not making it more regressive:

1. Get rid of the kicker.

2. Rainy-day fund.

3. Renter relief, and homestead exemption to lower the property tax burden on residential property.

4. Add revenue while maintaining a flat tax by adopting a sales tax (food and pharmaceuticals exempted) and making the income tax progressive by reducing the tax rate for low-income and middle-income households.

Check out the study by the Institute on Taxation and Economic Policy at http://www.itepnet.org/wp2000/text.pdf. Compare Oregon, Washington, and California tax burdens on low-income households. Imagine Oregon with more revenue, and with a tax structure looking a bit more like California (can't believe I'm writing this).

If the good is making the revenue stream stable on the backs of low income workers and skilled trades I'd like to know the definition of bad. You will not give these people enough break in income tax to make up for the 5%. I've lived with sales taxes and they are in every instance regressive. Once these folks pay their rent and groceries (toilet paper ain't groceries - use leaves) they will pay 5% on every cent they earn plus income tax. They're already hammered by FICA and you all think piling on is a swell idea. Rich folks will skate, you know those stocks you plan to buy, no sales tax. You know that car you plan to buy and finance? With interest you will pay a minimum of double on the sales tax to the finance company. Oh, you low incomes don't pay any taxes anyhow, nonsense, 15.4% right off the top of every cent of wage - FICA. Now on $200,000 it's 7.7% of wage. You know all those pages on the 1040 that you fill out, well they fill out 1040EZ and get crapped on, they've got nothing to put on those extra pages.

Damn, BushCo's got nothing on you backers of this mess.

You don't stop to think, the income tax revenue goes to hell in bad times because the majority of it rests on the people who get hammered - that's not the well-to-do. The damn income tax is already regressive.

One thing I like about the sales tax is that it helps to shift the tax burden towards businesses a little bit. I know it's being accompanied by a reduction in income tax, so another thing that could be done to counter the regressiveness of a sales tax is to either increase the standard deduction on income tax, or lower the rate in the lowest tier for income tax. To counter the losses from either of these options, don't lower the rate of the highest tax bracket as much as planned.

Not unless one of the other taxes, either property or income, is totally eliminated.

Bob Tiernan

We MUST stabilize the revenue stream to government and a modest sales tax is the way to do it. Yes, it is regressive. So jigger with the income tax (ours is already terribly flat).

Please don't let this opportunity slip away. A sales tax is vital for the long run stability of Oregon's state budget.

A sales tax is one way to help stabilize the revenue stream. It's not the only way. We could have a stable stream with income tax, by eliminating the kicker and transferring surplus revenue into a stability (rainy day) fund, coupled with some reasonable, flexible spending limits.

And a question for every "sales tax" supporter on this board: why is a sales tax on consumers better for Oregon than a gross receipts tax on businesses? (And before you say something about driving businesses out of state, Washington imposes a gross receipts tax and hasn't suffered a mass business exodus.)

I think that I take heart from this discussion. What I've come away with is this topic is so volatile that this has no chance of passing because it would be political suicide. Oregonians don't want a sales tax and have proven that time and time again. I'd rather know what something is going to cost in the end anyway.

NO, NO, NO!

The only argument I've seen to the statement:

"Taxpayers in every income range could expect to pay less in taxes, except some taxpayers who earn too little to owe income taxes."

is that somehow services for these same poor will magically be increased. Besides that being a real leap of faith, it makes no sense. So, you wanna tax me more... to pay for more services for me? Okaaaay.

Which economic wizzard that thought up doing this again on the basis of stability didn't stop to look at WHY income tax is unstable in OR? It is bottom based. If you tax the snot out of those who lose first and hardest in a down turn you lose massively in revenue. Meanwhile, the rich skate. If any of you sales tax "progressives" have an accountant friend why don't you find out how income is sheltered from income tax?

Quite honestly you piss me off. I pay workers as well as I can and at or above local pricing, I work shoulder to shoulder with them in the construction business I've spent over 30 years doing. They work hard, they work smart, and they get screwed, and it's really offensive when the screwing is done by "progresives." I can understand the Republican Plutocratic Party doing it, it's their game, but you all piling on makes me crazy.

Go ask your home's shopper just how much of the weekly "grocery" bill is unprepared food and how much of it is all the things that keep the house going. You get to pay x% sales tax on everything that isn't unprepared food. Now take $1600/month subtract the going rate for 2 bed apt & food & see what's left and then pay x% on every cent of that. Now do it to $2500 and add on OR income tax to your precious sales tax, don't forget to take 7.8% off the $2500 first for the employee FICA. Let's drive a stake in the heart of labor and call it stability.

I'm not a tax reactionary, hit my S-Corp a little harder, make the income tax seriously progressive, quit the kicker nonsense - see I'm costing me money, but you can go hang when you try to screw my guys.

Adam: If someone made me king and I could create any system I wanted and have it pass and stick, here is what I would do:

First, your second point could be improved Capital gains tax should be pegged at the highest income tax rate. Period. There is nothing gained by pegging it lower then that. With all the tax exempt retirement plans available, you won't discourage savings. Secondly, by not over incentivizing capital, you won't encourage larger boom/bust cycles then the region/nation.

Second, so how does this bill get us any closer to that ideal anyway? It doesn't. This proposal is not better than the current system. It is more regressive.

Regressive taxes erode economic opportunity for those struggling at the edge, and increase reliance on social services. It increases volatility. It exagerates class differences which undermine peace and stability in society. That also increases the cost of services, as more energy is spent enforcing class/opportunity differences.

This is exactly the wrong way to put a third leg on the stool: sticking a four foot pole on the bottom of a short stool and shaving one of the other legs to make it even less level.

The right place to repairing the tax base is to look to tax exemptions and credits that imbalance the system and eliminating the kicker. Moving the budget cycle to every year rather than every other year wouldn't hurt either, as it could increase the accuracy of projections.

To All the Progressives Opposed:

After looking at all of the comments on this page among those who have offered argument against the sales tax, I say this:

The current system is FAR more regressive than you currently admit or understand.

The REASON: The poor, as well as everyone else in Oregon, are subsidizing public costs and capital depreciation caused by all VISITORS to Oregon. And they are many, business & pleasure.

Roads, bridges, public safety, law enforcement, planning, EVERYTHING incurs cost when someone visits the Coast, visits Wieden + Kennedy about a new marketing campaign, or shows up to ostensibly push their documentary about global warming. And they pay very little for it. Nope. the poor - and everyone else - have to unfairly foot the bill.

So to argue that a sales tax would be regressive on the poor is either disingenuous or ignorant. Frankly, it's a bit ridiculous to say such things when the Oregon Department of Community & Economic Development is greatly funded by the worst poor tax of them all: the lottery.

But I don't see torches and pitchforks over that one on this website. Why not? Alternatively, a sales tax is not similarly addiction/desperation driven and can be tooled very specifically to target or avoid specific populations, i.e. food exemptions, certain services, etc for low-income & seniors. The lottery, unfortunately, is also well-honed but it pinches the wrong people.

I think for many folks on here, some reconsideration is in order. I think we can all agree the system is broken, but the argument against the sales tax is misinformed if the primary argument is a knee-jerk "regressive" opinion. You're not looking at the whole, ugly picture.