With respect to taxes, Oregonians are laying in a bed we made

Does Mr. deLespinasse really mean to suggest Portlanders didn't know what they were voting for in the Arts Tax because it was too complex?  In the form approved by voters, I could tell you what any Portland resident's tax burden would be down to the penny just by asking three yes or no questions.  Try doing that with property, income, or sales taxes.  One can claim the arts tax is regressive, one can claim it is unconstitutional, but it surely is not complicated.

To the broader point of whether we have too many taxes, levies and fees, we're laying in the bed that we made.  Property taxes are the primary means of funding local services.  The limitations enacted by measures 5 and 50 arbitrarily restrict what we can collect in property taxes, ensuring a growing inability to fund service.  Every year we face the same choice of either finding new revenue through levies or fees, or cutting things that we used to take for granted.  Will it be gym class on the chopping block this year or the police mounted unit?  Will it be a fire station or another cut to road maintenance?  When confronted with the intolerable we turn to alternative funding.  If we can't fund services we want with regular property taxes then we fund them with fees, levies, and yes regressive and possibly unconstitutional income taxes. 

Oregonians are inventive, resourceful, and empowered by democracy to act on our interests.  If a service cut is unacceptable we will find a way to pay for it.  Adding more arbitrary restrictions as Mr. deLespinasse calls for would only encourage more bizarre assessment schemes and more hoops to jump through.  It would ensure our system of funding local service got more complicated, not less.

If we want a less complicated system the solution is obvious:  Reform property taxes, and allow them to pay for the things we want them to pay for.  What purpose has been served by doing otherwise?

An Open Letter to my State Senator

Written in response to a general solicitation for feedback on the Economic Impact Investment Act.

Thank you Senator [] for the opportunity to comment on the Economic Impact Investment Act.  I'm deeply disturbed by the prospect of Oregon being bound for forty years through a law enacted with barely a week of consideration and review.  The process chosen by the governor for bringing forth this legislation guarantees that no one can honestly say they know what they're doing.

With that in mind, some suggestions:

• This legislation should be a prelude to a law that can receive due and appropriate consideration in the 2013 session.  Emergency legislation should enable the governor to address what is truly an emergency and nothing more.

• Toward that end, this legislation should include a sunset clause.  If the 2013 session doesn't see these powers as necessary than they are not necessary.

• I make a living forecasting long term contingent liabilities, and I can tell you with some confidence that no one knows anything about what Oregon's economy will look like in 2050.  That is even more true when considering the fortunes of a single company, even one the size of Nike.  There is no good reason, either for businesses or the state of Oregon, to make promises about their conduct that far into the future.  Any dispensations granted as a result of this legislation should be limited to 20 years at the most.

Finally, a word of caution.  It may be tempting to look at locking in the status quo as a small thing.  But this legislation and the process by which it is enacted will set a precedent.  Who will come calling and what they will demand next Christmas?

Senior Tax Deferrals

There is an op-ed in today's O that demonstrates the difference between a government program and private insurance.  The state of Oregon has long had a property tax deferral program to help seniors stay in their homes.  Taxes are deferred until a home is sold, with annual interest charges accruing.  The program is equivalent to a reverse mortgage with the annual payment fixed at the property tax level.  The state acts as the insurer, fronting the deferred taxes to counties and taking risk on the level of repayments.

Unsurprisingly, the program has gotten screwed up because of the recession.  Tax repayments are no longer adequate to front the money to counties, and the state has to either find a way to reduce fronted expenses or get into the business of subsidizing senior property taxes.

The legislature opted for the former (emphasis mine),

The Revenue Committee's response to this temporary downturn was to eliminate 5,000 people from program rolls -- by capping enrollment, raising interest rates, changing eligibility rules and excluding anyone with a reverse mortgage. The cruelest response was to apply these changes retroactively to existing program participants.

The result was to disqualify nearly half of the 10,500 families in the program, including many lower-income homeowners -- the very people it was designed to help. Most participants had assumed that once certified for assistance, they could be reasonably secure in their retirement years and safe from the threat of tax defaults.

 I don't fault the legislature for refusing to create a subsidy, that money doesn't come out of the air.  It comes out of budgets for other priorities like education, healthcare, and social services which have already been slashed.  Prioritizing public spending, deciding what should be paid for and what should not is pretty much the legislature's job.

And that shows the difference between public and private insurance:  A public insurance program has no guaranty, it exists at the whim of lawmakers.  As a program it necessarily competes with other public spending for priority and its benefits and costs can be changed unilaterally with the stroke of a pen.  In contrast, private insurance is spelled out by contract and can be changed only with mutual consent.  People who buy private insurance don't have to justify its benefit against money for schools or Medicaid or whatever the public thinks is more important.

As participants in the tax deferral program are discovering, that is no small thing.