Stop the madness
Carla Axtman
For quite some time, I've been a proponent of eliminating both the corporate and the personal kickers. It's terrible public policy to continue to allow our state budget to teeter on a constant precipice because Oregon economists are lousy at prognosticating state revenues. This is no way to run a state.
So (with apologies to Meatloaf), I'd do anything for kicker reform, but I won't do this:
In a packed hearing room Monday, lawmakers quickly learned the political balancing act they face in their efforts to change Oregon's one-of-a-kind "kicker" tax refund law.
Business leaders, whose support could be crucial, said they would support a proposal to stash half the refunds in a state piggybank, but only if it's accompanied by a cut in the capital gains tax.
The plan in question ties together Senate Joint Resolution 26 (kicker reform) to Senate Bill 883 (a massive capital gains cut). The capital gains piece reduces the gain in value of capital gains on the selling of businesses assets. This adds up to about $20 million a biennium according to the numbers at Tax Fairness Oregon. But that's not the jaw dropper. When fully implemented, this plan also phases in a reduction of capital gains tax on all other assets. It reduces this capital gains by 5% a year until fully implemented in 2020 when it will reduce the tax rate by 40%.
What does this mean in terms of revenue and taxes? For the last decade or so, the kickers have averaged about $266 per biennium. Capital gains revenue has averaged $844 million a biennium (numbers from Tax Fairness Oregon, btw). So basically, the average taxpayer is being asked to give up kicker money to make revenue more stable--while at the same time yanking $420 million out of the budget in order to hand it off to the wealthiest Oregonians. Once again, the middle and lower income folks are being asked to foot the bill.
The business lobby skulking around the Oregon Capitol has pushed for years to slash capital gains, claiming that it's hurting Oregon's ability to attract venture capital. Only, we seem to be attracting it at a pretty fair clip and at a better pace than most of the rest of the states.
The legislation package currently resides in the Senate Rules Committee, presumably because it (rightfully) faces stringent opposition on the House side. Democratic Leader Dave Hunt told me that he supports kicker reform and he supports a capital gains cut. But the cuts are too drastic and the kicker reform should be structured differently. Sources tell me that the House may try and put something together closer to Hunt's position before the end of session.
If this package were to somehow make it out of the legislature and referred to voters, it would absolutely have to be one of the top priorities for defeat. I've never volunteered to gather signatures before, but even I'd be out on the street working against this one.
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6:32 a.m.
May 17, '11
It's no way to run a 7-11, much less a state.
7:20 a.m.
May 17, '11
This legislature has already passed the THEFT (Tax Heists for the Enrichment of Financial Titans) Act, which will allow private utilities to charge ratepayers a fee for taxes that the utilities are not, in fact, paying.
Why should Warren Buffet be the only beneficiary of our legislature's largesse, when they can also pass a capital gains cut whose benefits will primarily accrue to a few thousand households? We can always make further cuts to AFDC and other safety net programs to pay for it.
7:45 a.m.
May 17, '11
I'd like to see kicker reform come with true tax reform...so that Oregon isn't so reliant on income taxes (but I realize there's no political muscle for that right now). Secondly, I agree that the proposed Capital gains cut is way too high. I'd be more supportive of a modest 10-15% Capital gains reduction tied to outcomes, similar to Oregon's Enterprise Zone where job creation, minimum investment, and only certain assets can be exempted. If companies are going to get any sort of incentive, they should be required to show something in return.
1:11 p.m.
May 17, '11
You might look at Tobias Read's bill HB 3420-!, it gives a modest capital gains tax break on investments made in Oregon when the gains a realized in the future.
9:36 a.m.
May 17, '11
Oh Carla, don't you like living in The Land of Id?
Just because Oregon More Than Doubles Its Venture Capital and the most recent economic forecast shows that, by several measures, Oregon’s economy has outperformed that of nearly all states and has been tops in the West you think some corporate lobbyists are offering a bad kicker deal for the middle class?
Never mind that Oregon has the second lowest tax rate on new investments or that Intel's message on higher education does not compute or that Oregon's richest are already slated to get a $134 million tax cut next budget period,the capital gains tax cut monster keeps rearing its ugly head.
Yes, we need to stop the madness.
1:28 p.m.
May 17, '11
As bills go this session, the only two on capital gains that makes any sense came from Tobias Read.
HB 2412/SB336 (with Hass as prime sponsor) puts all capital gains revenue into a rainy day account.
This is a simple savings formula that would build significant rainy day funds. Capital gains revenue has varied from $819 million to $198 million in recent years. This bill would also, however, turn back Measure 66 on the capital gains portion of one's income, reducing the rate come January 1, 2012 from 9.9% to 9%.
HB 3420-1 I mentioned in an earlier comment. With this bill, the General Fund would only experience losses on new investments that actually work. When the business interest is sold at a profit in the future, the owner or part owner would get a 10-25% reduction in their capital gains tax rate.
4:55 p.m.
May 17, '11
I thought these legislators were real politicians. That package won't sell. If they are going to put something up to vote on, then let it be something that has half a chance to pass. Eliminate the corporate kicker entirely. Pass a value added tax on tourists. Whatever.... But Oregonians think their kicker is theirs, and nobody elses. They will let the schools sink into the dust and the nursing home patients pushed out onto the street before they give up their kicker.
9:14 p.m.
May 17, '11
Capital gains is plain income. Even my Republican family members now agree with that. Most of it is one person selling a stock to someone else with no investment in the underlying company. (Tho there is a public good argument if it is risk $ that actually go into an Oregon company, but that is a tiny % of capital gains on tax forms.)
Oregon income and capital gains taxes will be high until Oregonians vote to lift the property tax limitations or vote to have a sales or VAT - which ain't going to happen.
They will be "high" because that's where the only $ left are.