By Shelby Sebens | Northwest Watchdog
PORTLAND — Oregon voters have rejected a sales tax nine times, but lawmakers aren’t giving up.
They want to stir that pot once again, if only to get people talking about a move on a sales tax.
A proposed resolution, which got two public hearings this week, would implement a 5 percent sales tax — Oregon is one of five states with no sales tax.
Income and property taxes, however, would remain.The proposed legislation exempts water, food, clothing, drugs, medical and mobility equipment and utilities.
Another piece of legislation includes lowering the income tax rate — one of the highest in the country at up to 10 percent for high earners — and making way for other tax credits, basically adjustments intended to make up for the additional cost to taxpayers.
Lawmakers supporting the legislation say they don’t expect it to pass this session. It’s a conversation piece, so to speak.
“The purpose of this is more of a dialogue as opposed to getting in the weeds on the legislation on this,” state Sen. Mark Hass, D-Beaverton, said during a public hearing on the proposal Wednesday.
Gov. John Kitzhaber testified during the first public hearing Monday, saying something must be done to fix the state’s unstable tax code. Public support, he said, is a priority. He and other Democrats, at the questioning of state Sen. Larry George, R-Sherwood, said spending reduction needs to be part of that discussion. George is vice chairman of the Senate Finance and Revenue Committee.
But questions over raising the sales tax leads to even more questions, which many states are trying to answer as they struggle to bounce back from the 2008 recession. Is one type of taxation better than the other? Which is fairer and which is better for job creation?
Oregon’s neighbor to the north, Washington, has no income tax and one of the highest sales tax rates in the country at 6.5 percent statewide, plus high local sales and use-tax rates. But that state is facing a $2.6 billion budget shortfall and has fared among the worst in the nation in terms of economic recovery since the recession, budget policy experts say.
From Louisiana to Nebraska, governors have entertained the idea of repealing state income taxes. Seven states don’t impose the tax, but research is mixed as to whether states with no income tax do better than those without.
Michael Mitchell, state policy fellow with the Washington Budget and Policy Center, a progressive budget policy group in Washington, said the state’s tax revenue remains $1.4 billion below the state’s pre-recession levels. Washington loses millions to cross-border shopping, as consumers often head to Oregon, according to Washington Department of Revenue.
But there’s little political will in Washington to consider an income tax.
Part of the problem is a distrust in government. What’s to stop elected officials from raising taxes after residents agree to them?
That’s an issue Oregon could face, Cascade Policy Institute Senior Analyst Steve Buckstein said. Buckstein, who served on then-Gov. Ted Kulongoski’s tax restructuring task force from 2007 to 2009, said researchers found then, and have since confirmed, a sales tax is dead unless coupled with the elimination of another tax.
“I want to be clear that I don’t like sales tax very much either,” Buckstein said during the public hearing Wednesday. But, he said, it’s time to start a serious discussion about swapping the income tax for a sales tax, which would be less harmful to the state. But for Oregonians to support it, the state would have to make an income tax unconstitutional.
“Rip it out by the roots,” he said.
The debate over implementing a sales tax in Oregon focused largely around those who oppose it, calling it a regressive tax that unfairly hurts low-income residents, to those who support it if the funding stream is dedicated to education.
Contact Shelby Sebens at [email protected]
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