Taxes will dominate the political scene this year

Sex, religion and politics always have ignited fierce debates.

But taxes are a far more explosive subject in Oregon nowadays.

That is sure to continue for at least another year.

Politicians and political activists are ramping up their rhetoric about tax increases, tax cuts, tax reform and the proper level of state government programs and services.

An income-tax increase plan approved by the 2003 Oregon Legislature is the subject of intense debate.

If the plan is overturned by voters, the state budget will be out of balance. That will force the Legislature to return to the Capitol for a special session to cut programs and services – or raise more revenue.

Meanwhile, lawmakers have agreed to return to Salem in June for a special session to consider major tax reform.

That debate is certain to be influenced by political considerations.

It’s déjá vu all over again.

Lawmakers spent most of the past year discussing how much money to spend on state programs and services and debating the amount – if any – of additional taxes needed to pay for it.

During the longest legislative session in state history, the Legislature approved an $800 million tax increase, some of it temporary, to pay for a general fund and lottery budget of $11.4 billion.

Those who opposed the tax increase are trying to overturn it by forcing a Feb. 3 vote on the plan.

They predict that they will gather the 50,420 petition signatures that they need by Nov. 25 to force a special election.

During the next few weeks, you’ll be hearing a lot more from the sponsors of the referendum – Citizens for a Sound Economy, the Republican and Libertarian parties and radio talk-show hosts.

Opposing them is Our Oregon Coalition, which includes Democrats, labor unions, educators, seniors and social service activists.

At issue: the three-year income-tax surcharge backed by the Legislature’s Democrats, most moderate Republicans and Gov. Ted Kulongoski.

For the median family household income of $40,916, the net income tax increase for 2003 would be $36. According to the 2000 U.S. Census, half of Oregon’s families made less than $40,916 and about half more.

Tax-hike sponsors say that is a reasonable investment to maintain adequate funding for schools, universities, public safety and social services.

Foes say the tax increase – the largest in state history – will devastate Oregon’s struggling economy.

Besides, they say, the state has plenty of money and just needs to manage it better and cut waste.

It’s an open question whether tax foes will be able to gather enough petition signatures to force a vote, but I believe they will.

And if if the measure makes the ballot, I believe Oregonians will soundly reject the tax plan.

After all, Oregonians have rejected income-tax increases 13 times in the past 90 years – most recently on Jan. 28, when they rejected Measure 28. That measure would have raised the top income-tax rate for three years.

Tax-hike defenders take issue with that analysis.

They point out that because of federal tax breaks, no Oregon taxpayer will have to shell out more in taxes than they did this year. And most will enjoy big tax cuts.

They also say the Legislature made deep cuts to state programs and services and took many steps to make government more efficient. They also say Oregonians oppose deep cuts.

There is evidence to support that viewpoint.

It’s clear that Oregonians don’t want school days cut, sick people tossed out on the street or state troopers forced to go on unemployment.

But neither do taxpayers seem eager to pay higher taxes.

That is the dilemma facing elected officials.

At its core, the tax debate gets down to how the majority of voters – as well as Republicans and Democrats – view taxes, the role of government and the chances for economic recovery.

Democrats generally favor higher taxes because they support a bigger role for government than do most Republicans. Democrats don’t think the economy will rebound fast enough in the coming months to generate the taxes needed to pay for the level of government services they back.

Republicans generally want lower taxes because they believe in a smaller role for government than do most Democrats. And Republicans think the economy will rebound, providing plenty of tax revenue – if government can only learn to live within its means and end wasteful practices.

What makes this debate so fascinating is the fact that the Democratic and Republican parties are so closely matched in Oregon, with independents being the state’s fastest-growing political affiliation.

As usual, those in the middle – moderates as well as independents – will determine which party prevails.

The outcome of the 2004 elections will determine which party controls the Legislature in 2005 – when taxes again are expected to dominate the legislative agenda.

State Editor Richard R. Aguirre can be reached at (503) 399-6739 or raguirre