Oregon Sales Tax

Oregon Sales Tax

Oregon has a serious problem with its state finance system. On April 7, 2007 the libraries in Jackson County, Oregon are going to shut their doors due to lack of funding. There are 5562 children signed up for summer reading programs at the Jackson County libraries who are not going to get the chance to participate in those programs any more. Pediatricians and educators have been stressing the importance of reading to babies and preschoolers. Chris Abbott, a kindergarten teacher at Walker Elementary School in Ashland, said she sees a clear difference between children who have been read to and those who have not when they start school. There is no substitute for handling a book and surely these children are going to lose precious moments that can't be replaced. (Aldous) Unfortunately, libraries aren't the only things slated for closure here in Oregon. Vicki Phillips, Superintendent of Portland Public Schools, has announced her plan to close 14 schools here in the Portland area by 2010 despite the fact that the population is increasing in Portland and class sizes are also growing. Teachers are facing classrooms overburdened with over 30 students and are unable to give each student individual attention. For the brightest children the lack of individual attention may not affect them deeply, but students that need the extra attention will certainly suffer.

The Oregon State finance system is almost entirely dependent on personal income tax which tracks directly with how well the economy is doing. When times are good the economy is booming and the coffers spill over with surplus tax dollars that get sent back to us as a kicker check. When times are bad they are really bad. The economy takes a nose dive, the unemployment rate rises and the need for state assistance grows. The income tax is dependent on a booming economy, so when the unemployment rate is up the amount of money generated is smaller. For decades elected officials in Oregon have warned the population that the state is too dependent on the state income tax. In 2002 Governor Ted Kulongoski met with business leaders here in Portland to discuss his economic recovery plan that included a plan to cut the state income tax, and implement a sales tax. Kulongoski said, "Some sort of consumption tax, such as a sales tax or gross receipts tax should be considered to help provide more stable funding for Oregon's public schools." The idea was rejected by voters in favor of a temporary patch, and despite the imposition of the 3 year Multnomah I-tax, which generated three hundred seventy five million dollars for education, the problems aren't going away. The Oregon public school system is mediocre at best, getting worse every year, and the costs for higher education are skyrocketing. There is a solution to this terribly inconsistent tax system. A sales tax would level out Oregon's revenue problems.

Imposing a 5% sales tax, and cutting the income tax down to 4% is a fairer tax structure that would be distributed across the population in the most equal way. The main argument about the fairness of a sales tax is based on people from two very different income levels making the same purchase. Joe makes $15,000.00 per year and spends $100.00. Frank makes $100,000.00 and spends $100.00. Is it fair they pay the same amount of sales tax? This is called a "regressive tax" meaning that the tax burden is unfairly distributed and unduly burdens the lowest income citizens. I agree that in this simple situation that it seems unfair to Joe to have to pay the same amount of tax on the $100.00 purchase as Frank is paying. However, simple mathematics suggests that Joe can't possibly spend the same amount as Frank annually. When Joe is seeking to buy a television, Joe's perspective of what amounts to a major home entertainment purchase is going to be totally different than Frank's. Joe is searching the Sunday paper for the latest Fryes advertisement so he can buy the 25 inch Daewoo special for $299.99 with a total sales tax of $14.99. Frank has a totally different idea as to the amount of what a major entertainment purchase would entail. Franks television isn't a Daewoo special; it's a 50 inch Plasma television with surround sound speakers from Best Buy with a purchase price of $3999.99 and a total sales tax of $199.99. The total amount of tax paid by both is fair, and distributed amongst the citizens according to their ability to pay. Ironically the current income tax structure fits the definition given by the anti-sales tax activists of a regressive tax structure. (Vedder 12) In a research brief done by the State of Oregon Legislative Revenue Office, the effective tax rate for a low income household (under $14,525 annually) is 13.1%, and the effective tax rate for a household in the highest tax bracket (over $126,173 annually) is 11.4% clearly the tax burden isn't distributed fairly as the system stands. (Oregon)

Doomsayers are quick with indictments of the sales tax proposal stating that Oregon will lose its competitive edge, and lose the ability to lure new businesses to Oregon. In the current income tax structure businesses and corporations in Oregon have a very sweet deal. The minimum business income tax is set at $10.00 annually for businesses making over $500,000.00 in profits. (Leachman) It's difficult to see the fairness in a tax system that clearly favors the top 1% of our society, corporations, and businesses that are only responsible for 10% of our states revenue. A successful and profitable business such as Nike, which brings in billions of dollars in profits, pays only $10.00 in income taxes, and a low income household pays 13.1% of their income. Imposing a sales tax would increase the state budget by a billion dollars annually, and reduce the tax burden on individuals. Ben Westlund, a Democratic Oregon state senator, said, "Under my proposed tax reform plan, every tax-paying Oregonian would get a tax cut." Westlund's proposal would distribute the tax burden more fairly; businesses would shoulder a little more of the tax burden and the average tax-payer would save $473.00 annually.(Westlund 1) There are businesses in the other 46 states that have a sales tax, and they have no problem with a competitive edge, or attracting new business to their states. Businesses are in business to make money and if there is opportunity for profit (which there is) business would still be done in Oregon. (Keating 7)

There are certainly rogue elements in our society that are currently evading the current income tax structure. Illegal aliens and under the table employment are only a small part of the problem. (Sennsholz 21) Under Governor Ted Kulongoski's current general fund budget for the 2005-2007 cycle, Governor Kulongoski calls for a 34% increase in Department of Corrections spending to $1.1 billion dollars for the current bi-ennium. Drug dealers, prostitutes, and thieves would all be taxed with the sales tax. There are no concrete numbers as to a specific amount of taxes that are evaded by these elements of society, but punishing criminals is a billion dollar industry. It would be poetic justice for criminals to pay some of the taxes to support their incarceration.

Oregon draws people from all over the world and the tourism industry generates a great deal of revenue for the state economy. However, tourists get to enjoy all the services our great state provides untaxed. Projections indicate that 190 million dollars a year would be generated by a sales tax from tourism alone. The Argument against collecting sales tax on tourism states that it would be cost prohibitive, meaning it would cost more to collect than it would generate in state revenue. Those estimates are based on the cost of retooling our system to collect a sales tax only on tourism. The argument lacks backing, if we have instated a sales tax, and are collecting the sales tax from everyone else already, how could it possibly cost more to collect another 190 million dollars? 46 States have a sales or consumption tax, and have no problems with loss of tourism. Anti-sales tax activists claim that imposing a sales tax would eliminate cross-border purchases damaging Oregon's economy. Neighboring states Washington and California have significant sales taxes, and shoppers from those states definitely evade their state sales taxes by crossing the border to shop in Oregon. There is no doubt that cross-border purchasing (tax evasion) would slow as a result of imposing a sales tax, but Washington State's sales tax is still significantly higher than the proposed 5% sales tax in Oregon. The cross border purchases would be less frequent but for larger amounts.

There is clearly a problem with our state finance system, and the library closures are only a symptom of more serious problems. Oregon is currently solely dependent on the income tax. It is evident that the dependence on the income tax is reeking havoc on our public education system, and that the closure of schools is eminent. The state finance system needs a serious overhaul. 46 states have already figured out that the sales tax will diversify the states income streams and provide stability. We have an inherent responsibility to provide the best possible education to the next generation; after all they are going to be the leaders tomorrow. The average working class Oregonian has to hear the call to action. Winston Churchill said, "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." The circumstances were obviously different, but the words apply well here. Our future as a society depends upon the future of our children. The call to action is clear we need to fix our public education system, and a sales tax will provide the stability needed to solve the problem.