WHAT IT WOULD DO
The measure would raise $800 million in various state taxes for the 2003-05 budget. The largest would be a three-year income tax surcharge, but the measure also includes a reduction in the senior citizen medical deduction, an increase in corporate minimum taxes, a reduction in the discount for early payment of property taxes and other provisions.
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The measure, a referendum, is not a repeal of the plan the Legislature passed. A yes vote would enact The tax increase package; a no vote would reject it.
WHO’S BEHIND IT
The Legislature adopted the plan to balance the 2003-05 budget. Opponents, including the Republican and Libertarian parties, and conservative citizen groups, gathered signatures to send the plan to voters as a referendum. The lead opponent is Citizens for a Sound Economy, based in Washington, D.C. Supporters of the measure include labor unions and advocates for social services and schools.
The income tax surcharge would vary from 0 percent to 9 percent of tax liability depending on adjusted gross income. The average joint return, reporting about $60,000 in adjusted gross income, would pay $98 in additional state income taxes for 2003.
The change in the senior citizen deduction would raise the eligibility age from 62 to 65 over three years and limit the deduction for higher incomes. Older taxpayers with incomes of more than $100,000 would pay an extra $573. The average increase would be $132.
The measure would replace the $10 minimum corporate income tax with a new graduated tax based on sales. A C-corporation with sales of less than $20,000 would pay a $250 minimum. Companies with sales of more than $25 million would pay a $5,000 minimum.
Rejection of the measure would trigger $545 million in automatic cuts in spending on schools, human services and public safety. It’s not clear how much of a shortfall would remain, given the improving economy. If further cuts have to be made, the governor could make across-the-board cuts, or the Legislature could meet in special session to craft a different budget plan.
State revenues began dropping in late 2001 as the bottom fell out of the economy. Lawmakers returned for five special sessions in 2002, tapping reserves, increasing cigarette taxes and cutting spending. As part of the budget-balancing plan, the Legislature put a temporary income tax increase on the ballot, but voters rejected it in January 2003. During the first three months of the 2003 legislative session, lawmakers struggled to balance what remained of the 2001-03 budget, settling on a plan based on a massive loan.
Revenues continued to plummet as they tried to balance the 2003-05 budget. They saved about $1 billion through freezing salaries and other spending cuts, but a stalemate born of resistance to deeper cuts and higher taxes led to the longest session in state history at 227 days. In the end, a group of moderate Republicans rebelled against their leaders and joined Democrats to pass a package of tax increases. Opponents gathered twice the required number of valid signatures to put the package on the ballot.
Pro: Supporters say schools and state services would suffer if the measure fails. They cast the measure as a plebiscite on the kind of state voters want. “In my mind, we need to make it clear to voters that this a real choice about the level of services,” says Rep. Lane Shetterly, R-Dallas, who played a key role in developing the legislative plan.
Failure means potentially larger classrooms and the threat of a shortened school year, proponents say. Thousands of working poor would lose access to health insurance under the Oregon Health Plan, courts may have to again close one day a week and low-level criminal offenders may not be prosecuted, they say.
Supporters argue that the package spreads the tax burden to businesses and wealthier individuals, and that most taxpayers, including those hit hardest by the recession, will not see an increase. They argue that a cut in government services does more harm to the economy than a tax increase does. Gov. Ted Kulongoski says a reputation for slashing schools and other services makes it hard to recruit businesses to Oregon.
Contact: Yes on 30: For Our Oregon, 503-230-0922; www.yeson30.com
Con: Opponents say the sheer size of the tax increase is outrageous and excessive. They say that the record number of signatures collected in a short time shows how Oregonians feel about higher taxes and that the legislators’ action shows a lack of respect for voters.
Higher taxes will hobble the state’s efforts to climb out of the recession and businesses will leave the state to escape the tax increases, opponents say. They point out that not all the taxes are temporary. Most of the business tax changes are permanent, and so is the reduction in the discount for paying property taxes early.
Lawmakers could find the money to balance the budget without cutting essential services or raising taxes if they had the political will to stand up to the public employee unions, opponents argue. Kevin Mannix, the Republican Party chairman, has proposed ideas for balancing the budget without raising taxes. He says voters see through the scare tactics politicians use, threatening schools and services for vulnerable people. “Citizens are sick and tired of that approach,” he says.
Contact: Taxpayer Defense Fund, 1-888-666-6829; www.stoporegontax.com