Lawmakers careful in talking about taxes

SALEM – Straightforward talk about raising Oregonians’ taxes is hopelessly out of fashion in 2005.

Public service and education advocates aren’t giving up on the subject, though. They’re just avoiding the joint appearance of the words “tax” and “increase” when they string sentences together at the Capitol.

Sen. Bill Morrisette, D-Springfield, is hoping to bring in more money through the excise on beer. But he understands the necessity of steering the proposal around the stated opposition of House Speaker Karen Minnis and Gov. Ted Kulongoski to tax increases.

So don’t expect Morrisette to call it an increase in the beer tax.

“It’s not a tax. It’s a fee. The `alcohol recovery fee,’ ” said Morrisette, explaining that the increased revenue would address some of the social costs of alcohol consumption by providing more money for addiction services and counseling.

Similar efforts are quietly under way to get the Legislature to look at closing tax loopholes, raising user fees and boosting the cigarette tax.

But the new legislative session’s political climate has some lawmakers taking a hard-line posture in opposing all taxes. And even those like Morrisette – liberals who have unabashedly voted for higher taxes and gone on to win re-election – are choosing their words carefully when it comes to taxes.

That’s because the Legislature returned to Salem this month mindful that twice in a 12-month span voters rejected statewide measures to raise taxes. Lawmakers responded, against the backdrop of a recession-squeezed state treasury, by cutting programs, tapping reserves, borrowing and allowing accounting gimmicks.

This session, budget analysts say the $11.9 billion in anticipated general fund revenue for 2005-07 will fall nearly $1 billion short of the cost of maintaining all programs at current levels. Top leaders have said they don’t want to rely on one-time dollars through borrowing or bookkeeping tricks. That would seemingly leave two major options: reducing spending or raising revenue.

The two politicians with the greatest influence over the tax debate, Minnis and Kulongoski, have staked out positions opposing higher taxes. Kulongoski, a Democrat, wants to convince Oregonians that state government is living within its means, although he hasn’t entirely ruled out increased revenue.

The governor has said he would entertain efforts to make the tax system more fair, and pointed out in an interview that the Legislature could always put revenue raisers before the voters through a ballot referral – a legislative act that does not require the governor’s signature.

Minnis, who oversees a Republican majority dominated by conservatives in the House, has taken the stance that taxes should not be on the table. Her Senate counterpart, President Peter Courtney, has not ruled out increased revenue, although he and other leaders in the Democrat-controlled chamber are not actively seeking increased revenues. Oregon’s constitution requires that revenue-raising bills start in the House, making it logistically difficult for the Senate to pursue such legislation.

Rep. Mark Hass, the Democratic vice chairman of the House Revenue Committee, said revenue-raising measures may have at least a faint chance of consideration, even if general tax increases are dead on arrival.

The Beaverton lawmaker is working on one such proposal. It would schedule all tax breaks for elimination in 2009. In the four-year run-up, lawmakers could study each tax credit or exemption on the books and make a determination of which of them should be kept; those that don’t get a majority of support from both houses would vanish. Hass likens his proposal to the process Congress used in the 1990s to decide which military bases should close.

“I think it’s up to us to make the case that, for instance, the pollution control tax credit should be allowed to phase out,” he said. “That, while it’s well-intentioned, it doesn’t rise to the level of school funding.”

Anti-tax activist Russ Walker said he fully expects statehouse leaders’ live-within-your-means resolve to be tested by pressure to increase revenues.

Walker, the Oregon director of the national organization FreedomWorks, led the fight to refer the 2003 Legislature’s tax package to the ballot, where it was defeated last year as Measure 30. He said that while no one is currently talking about a general increase in taxes, it’s clear that raising revenue is on the minds of some lawmakers and advocates for programs that rely on public spending.

“I’ve been approached by groups asking if we would look the other way with various proposals,” Walker said, referring to suggestions to reduce tax credits or increase the beer and cigarette taxes. He said his group of conservative activists will oppose any such effort because “once you open that door, it’s a floodgate.”


352: Total number of Oregon tax breaks

195: Tax breaks on income

120: Tax breaks related to property taxes

37: Other state tax programs

28.6 billion: Biennial dollar loss in revenue from all tax breaks

10 billion: Biggest revenue dollar loss from single exemption (property tax exemption on “intangible personal property” such as stocks and bonds)

– Oregon Department of Administrative Services