Tax defeat in Oregon could trigger cuts

PORTLAND — Oregon voters’ resounding rejection of an $800 million revenue measure has burnished this state’s reputation as a bastion for the national movement to limit taxes.

The measure’s failure, which was defeated Tuesday by a 59 to 41 percent vote, is expected to trigger cuts in education, public safety and knock many more people off the Oregon Health Plan, which offers medical coverage to tens of thousands of residents.

The Oregon revenue proposal — known as Measure 30 — was crafted by the state Legislature in August after the longest session in history. Grappling with one of the worst fiscal crises in state history, Republican and Democratic legislators narrowly approved increases in the state personal income tax, as well as corporate and other taxes.

Defeat of the legislative compromise could have long-term effects on representative government, some lawmakers say.

“The Legislature as we know it has been dramatically altered in the state,” said Sen. Peter Courtney, a Democrat and president of the Oregon Senate. “It is no longer viable as equal branch of government… And tax reform probably isn’t going to be done unless through the initiative process.”

The initiative campaign to put the tax measure on the ballot was led by the Oregon chapter of Citizens for a Sound Economy, a national tax-limit group. Russ Walker the group’s Oregon director, says voters in a state with some of the highest unemployment in the nation wanted a slimmer government — not new taxes.

“It’s pretty arrogant for the legislators to say they know better how to balance a budget than the people who have to pay for it,” Walker said. “It’s amazing how legislators never complain about initiatives when it serves their purposes, but they sure complain when it doesn’t work for their purposes.”

The Citizens for a Sound Economy has also fought at the national level for federal tax cuts, and in September waged a successful campaign to defeat an Alabama tax measure. The group is now planning to campaign in Washington state against the $1 billion proposal to beef up education funding through a 1 cent increase in the sales tax.

“I would warn legislators in the state of Washington not to underestimate taxpayers on this issue,” Walker said.

In Oregon, the tax measure would have cost households earning $27,000 to $43,000 annually $81 in additional taxes. That same household this year will see its federal tax bill go down by $844 as a result of congressional tax cuts, according to an analysis by the Oregon Center for Public Policy, a fact supporters of Measure 30 tried to use.

Measure 30 also sought to raise Oregon’s minimum corporate-income tax from the $10 — an amount paid last year by Enron subsidiary Portland General Electric — to anywhere from $250 to $5,000.

Even in Multnomah County, which encompasses the liberal heart of Oregon, the tax measure was rejected. County voters last year approved a local income tax to shore up Portland-area schools, public safety and social services. And they shied away from the state tax even though it was supposed to result in refunds of the local tax.

Dakar Lewis, a Portlander dropping his ballot off at a collection box Tuesday evening, said he makes well under $20,000 annually in his current job, and that the tax was “just too much out of my paycheck.” So, he voted against it.

Another voter, a 41-year-old translator who is HIV positive, supported the measure in hopes of maintaining funding for prescriptions he said were vital to his health. “We need this money for people with disabilities.”

Oregon has a history of defeating tax increases in general elections. A year ago voters rejected a $313 million tax measure, triggering budget shortfalls that prompted at least 90 of 198 school districts to shorten the school year. The average number of days cut was five, with Hillsboro School District west of Portland opting to jettison 17 days in a move that put a national spotlight on Oregon’s fiscal problems.

Oregon depends on its income tax for nearly 90 percent of the tax money, far higher than any other state. This tax boosted revenues in good times because of capital gains and other added income. But it fell sharply in recent years of high unemployment and weak stock markets.

In contrast, the Washington state sales tax raised revenue more slowly during the prosperous 1990s, but revenue also fell more slowly during the recent years of a weak economy.

Oregon legislators are now meeting to discuss ways to reform the state tax system to make it loss volatile, including a possible sales tax.

Oregon Gov. Ted Kulongoski a Democrat who supported the tax measure, met with reporters this week to discuss the aftermath of the vote. He said that he would try to prioritize the health-care cuts to minimize the impact on children, pregnant women, seniors and public safety.

But the Oregon Legislature, which meets in regular session only every other year, is not scheduled to reconvene until 2005. And Kulongoski said he was not inclined to call a special session this year to try to come up with new revenue measures to stop cuts planned to be at least $545 million.

Hal Bernton: 206-464-2581 or hbernton@seattletimes.com

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