The Associated Press
SALEM, Ore. — Improvements in Oregon’s battered economy are giving ammunition to anti-tax activists who say there’s no need to impose an $800 million tax increase on Oregonians next spring.
But supporters of the tax hike argue the signs of economic healing are tenuous and the state will face yet another gaping budget hole if voters block the increase.
The Legislature in August approved the tax plan — which includes a three-year, income-tax surcharge — as a way to protect schools, public health and other services from further cuts.
The argument was that lawmakers already had made an earlier round of painful cuts in services and that continuing revenue declines brought on by the state’s weak economy made the tax increase necessary.
Now, however, opponents who hope to force a Feb. 3 statewide vote on the tax are seizing upon bits of favorable economic news in Oregon to bolster their argument that the tax increase isn’t justified.
“Why take a chance by doing something irresponsible like raising taxes when things are improving?” said Russ Walker of Citizens for a Sound Economy. “It just isn’t necessary to raise taxes to protect critical services.”
Walker points to a recent report by state economists showing that a two-year slide in state revenues — which has forced $1 billion in funding cuts — appears to have bottomed out.
The report by the state Office of Economic Analysis showed the first significant upswing in tax collections since mid-2001.
Oregon consistently has had the highest unemployment rate in the nation, mainly because of the high-tech bust. But the state’s latest jobless report issued Friday showed that unemployment fell to an eight-month low in October, dropping to 7.6 percent from 8 percent in September.
Backers of the tax hike, while applauding any signs of an economic recovery, said the improvement is slight. The jump in revenue collections couldn’t bridge the state’s shortfall if the tax measure is overturned, they contend.
“It’s like finding a $10 bank error in your favor when you are trying to put together the money to buy a new car,” said state Rep. Lane Shetterly, one of the moderate Republicans who supported the tax.
“It’s good news economically, but it doesn’t make the tax measure unnecessary by any means,” Shetterly said.
Shetterly and other supporters of the tax point out the tenuous nature of Oregon’s economic improvement.
Just this past week, Sumitomo Mitsubishi Silicon announced it will close its two wafer plants in Salem by the end of 2004, eliminating 620 jobs.
At this point, it appears Oregon voters will make the final call on whether the $800 million tax hike will take effect.
Tax opponents said they already have gathered the 50,000 petition signatures they need to place the tax on the Feb. 3 ballot in hopes that voters will reject it.
Political analyst Jim Moore said he thinks the issue for most voters will boil down to the anti-tax camp’s argument that government already has too much money vs. the pro-tax camp’s assertion that critical services will suffer without more tax revenue.
“But you could see where a slight uptick in the economy could have some effect, especially if we have a head-to-head debate by leaders of the two sides,” Moore said.
Oregon Republican Party Chairman Kevin Mannix, who opposes the tax, has signaled that he plans to tout the issue.
“With the improving economy, we might end up having only a one-year shortfall,” Mannix said. “It might turn out that the Legislature was way premature in establishing a three-year income-tax increase.”
Mannix has said he will issue a plan Dec. 8 showing how the state could balance its budget without the tax increase in a way that would protect schools and other vital services.
Shetterly doubts that can happen.
He noted that Oregon lawmakers have spent the past two years trying to plug budget holes that keep reappearing. Social services, school districts, law enforcement and other programs have all lost millions because of funding cuts and stand to lose even more if the tax increase is repealed.
“We’re already tapped out. We’re now at a point of having no good choices,” Shetterly said.