Oregon legislature, voters take long-run look at budget – will Washington?

January 27, 2010 | Economic Opportunity Institute

Yesterday, Oregon voters responded to the recession with strong votes in favor of two tax measures that will help preserve state funding for health care and education. The two measures provide more than a just revenue Band-Aid – they are a big first step toward resolving long-term problems in Oregon’s tax structure. So what lessons can we learn from our neighbors to the south?

First, some background on what happened in Oregon: The two ballot measures, Referendums 66 and 67, were put to a public vote after Oregon’s legislature approved temporary revenue increases in 2009. Both referendums passed with 7 point margins.

Together, the measures plug a $730 million budget gap – preserving funding for education, health care and other important public structures. Referendum 66 set a higher income tax rate on high-income individuals ($250,000 or more), while Referendum 67 increased the corporate minimum tax from its current level of $10 per year (set in 1931)

Oregon’s fix is more than a Band-Aid – it will also help heal the state’s long-term budget woes. Facing an immediate revenue shortfall, the two measures not only provide short-term relief; they will also provide more sustainable, long-term revenue to cushion against budget shortfalls during future economic downturns

Washington lawmakers should take note: Making the right budget fixes now will not only keep K-12 education, colleges, universities, children’s health, senior care and other public structures intact – it will help resolve long-term problems in Washington’s tax structure.

One such fix: End some of the 500+ tax exemptions currently on the books in Washington State. The result would be more than $1.7 billion in new revenue to backfill the current budget shortfall of $2.6 billion.

Another option: Update the sales tax to reflect today’s economy. For decades, consumers have been gradually shifting their spending from goods (subject to sales tax) to services (currently not subject to sales tax) – like beauty salons, veterinarians, accountants, attorneys and health care. From 1990 to 2003 alone, the percentage of sales subject to sales tax in Washington fell from 61% to 45% according to an Indiana University study.

Making these two changes will enable Washington to fund the public structures we rely on to train and educate our workforce, keep our children and seniors healthy, and promote public safety – not just this year, but far into the future.

Oregon legislators, and now voters, have spoken loud and clear: protecting core structures and guaranteeing educational opportunity with responsible, long-term revenue solutions is the best way to promote long-term economic success and preserve quality of life. It’s time for Washington legislators to do the same.

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Posted in Education, Health Care, State Economy, Tax and Budget

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