The Public Employees Unions New Tax Initiatives

Right From the Start

Oregon’s public employees unions are at it again. They want to increase taxes to pay for the excessive number of public employees, their bloated wages and their gilded benefits – all of which exceed their private sector equivalents. And they want to do it again by playing the class warfare card, just as they did successfully with Measure 66 and 67.

The public employees unions have qualified five tax increase measures to gather signatures for the 2012 election. A recent article in the Oregonian described the measures as follows:

“Here are the five proposed tax initiatives that received ballot titles this week. Sponsors are now deciding which, if any, of the measures they will try to qualify for the November ballot.

“Initiative Petitions 33 and 34: These two measures are almost the same and both received identical ballot titles. The proposals would raise the state income tax from 9.9 percent to 13.6 percent on incomes of more than $500,000 for individuals and $1 million for joint returns.

“IP 35: Removes the corporate “kicker” tax rebates and instead dedicates this money to education. Businesses last received kicker checks in 2005, when a total of $101 million was sent out by the state.

“IP 39: Would raise the income tax rate for the top 1 percent of income earners from 9.9 percent to 13.6 percent.

“IP 40: Would limit tax expenditures to the total spent in the general fund. The state provides tax breaks — on everything from home mortgage deductions to business tax credits — that add up to far more than the general fund.”

One might be tempted to conclude that this is just more of the same by the public employee unions. More of the same old class warfare. More of the same tax the rich without taxing yourself. More of the one percent diatribe of the far left as exemplified by the Occupy Wall Street movements – much of which was financed by the public employee unions. The more cynical among you may see it as an attempt to capitalize on President Barack Obama’s four year campaign to raise taxes on the job producers in America. Many of you may see this as just upping the ante on Measures 66 and 67 by adding even more to the top tax bracket.

 

And all of you would be right but it is still not the most pernicious part of the public employee unions’ strategy. That is reserved for Initiative Petition 40. As described by the Oregonian it “would limit tax expenditures to the total spent in the general fund.” So just what is a “tax expenditure” and what is the value of “tax expenditures” in Oregon? You are going to be surprised by both answers.

First, a tax expenditure under Oregon law is defined as:

 

“. . . any law of the Federal Government or of this state that exempts, in whole or in part, certain persons, income, goods, services, or property from the impact of established taxes, including, but not limited to tax deductions, tax exclusions, tax subtractions, tax exemptions, tax deferrals, preferential tax rates, and tax credits.”

 

Get it? Everything that you are allowed to deduct, exclude or credit on your state or federal tax returns. It arises from a mistaken belief that what you earn belongs to the government and what the government allows you to keep is an “expenditure.” It includes such things as personal exemptions, child care credits, mortgage interest, charitable contributions, federal taxes paid, and even down to the initial amount of income that is excluded from taxes designed to aid the poorest amongst us.

 

But hold it. That’s not the most pernicious part of this. You can legitimately argue that many of the tax deductions, tax credits and income exclusions are government interference in the free market – government’s attempt to choose the winners and losers in the marketplace. A clear example of this would be the tax deductions and tax credits granted for alternative energy producers and users. But for those tax “incentives” and other government grants and waivers, the alternative energy producers could not “compete” in the marketplace. The most pernicious part is the public employee unions “solution.” The solution is not to begin a process of eliminating these tax credits, deductions and exclusion – no, the solution is to increase the amount of expenditures from the general fund. Spend more, spend more and spend more – and primarily spend it on increased numbers of public employees, increased wages and increased benefits.

 

So if Initiative Petition 40 were in effect today, how much more would state government have to spend? There is an annual report mandated by the 1995 Oregon Budget Accountability Act to define, categorize and estimate the amount of “tax expenditures.” The latest report estimates that the total “tax expenditures for 2009-11 are $$27.9 Billion and are estimated to grow to $31.3 Billion for 2011-13.

 

The general fund budget for 2009-11 was $13.4 Billion. In order to maintain current tax deductions, credits and exclusions, Oregon would have to more than double its expenditures. In order to fund

a doubling of expenditures, Oregon taxes would have to double. While it is of little consequence to the public employees unions that would effectively destroy business and employment in Oregon.

You might argue that instead of increasing expenditures you could eliminate the tax deductions, credit and exclusions. It has the same effect. By eliminating those deductions, credits and exclusions, you increase the taxes paid and that will destroy business and employment in Oregon.

In either instance more tax revenues flow to the state for expenditure on numbers of employees, wages and benefits. The greed of the public employee unions is unquenchable.

The only solution should the public employee unions prevail is to eliminate all tax deductions, credits and exclusions and move to a flat tax at a rate designed to maintain revenue neutrality at the current general fund budget level. But that is never going to happen in a state is under the full control of its public employee unions.

Welcome to Oregon, a wholly owned subsidiary of the public employee unions whose motto is now “Sit up, pay up and shut up.”

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Posted by at 05:00 | Posted in Public Employee Unions, State Taxes, Taxes | 9 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Uniongoon

    These unions are in charge for a reason. Oregonians want them in charge or they would change how they vote.
    Simple as that.
    Keep the gravy coming.

  • Bob Clark

    It does hit back at the initiative process.  Or, maybe, these are bargaining chips to lever against the Governor and legislators.  I don’t even think public employees themselves would overwhelmingly vote for 40, seeing how who doesn’t or hasn’t benefitted from things like the mortgage interest deduction, federal income tax deduction, and just the plain old standard deduction.

    I get the selling point of making the top 1% pay a state income surcharge, but how would tax administration actually be executed on such a moving target.  You don’t know exactly who the 1% are until well after income taxes have been filed.

    You know the timing of these initiatives might play in the Portland Public Schools’ timing of when they bring back their bond/tax measure.  If there’s a barrage of tax increase measures before voters this November, I think voters are likely to say no to all new taxes.  So, maybe PPS might push off the bond/tax until next May…wouldn’t impact actual property tax bills until November 2013 either way.

    We need to bring back Bill Sizemore in some new way so as to give some push back in the initiative process.  Maybe, it’s time for a right-to-work petition.

    Just the publicity of these eggregious tax initiatives is probably enough to materially hurt the Oregon private sector economy.  I kind of think not even a majority of public employees support these measures their unions are launching.  Maybe another push-back initiative would be to cut off the state government’s collection of public employee union dues for these unions.

    The fight against government takeover never ends.  It is the never ending Terminator tale.

  • 3H

    They want to increase taxes to pay for the excessive number of public employees, their bloated wages and their gilded benefits – all of which exceed their private sector equivalents. 

    Actually, wages of public employees is below that of the private sector for comparable jobs.  


    When the analysis focuses on comparable jobs and education levels, the total compensation of state employees is slightly less than their private-sector counterparts and slightly more than public employees at other levels of government and in neighboring states. That conclusion is consistent whether the data comes from the state’s compensation surveys, academic and private-sector analyses, or federal data.”
    http://www.oregonlive.com/politics/index.ssf/2010/10/hard_choices_oregon_state_work.html 

  • HBguy

    3H. I read your link. It says that there will be severe increases in the cost of PERS in the next several years. Sure, a lot is for employees already retired, but money is fungible, and we all know that taxpayers are going to see those skyrocketing costs and want to take it out on current employees compensation.

    It’s clear why the public employees need more income. There will, at some time, be a tipping point between retired and tier one and two public employees on one side, and those non tier one and two public employees hired since 2003 on the other side. 

    When the post 2003 public employees wake up and realize their wages and even their medical coverage are at risk to take care of the tier one and two and retired public employees, then we’re going to see some real negotiations.

    • 3H

      Do you mean negotiations with state and local governments?  Or with with Tier 1 and 2 retirees?  The benefits for Tier 1 and 2 employees is a matter of contract, and I’m not sure where there would be room for negotiation. 

      There is going to be payment due.. and it will be expensive.  How that will effect the new public employees I have no idea.  I suspect that people like Larry will continue to beat the drum for lowering the wages and benefits of public employees, even though they’re not the beneficiaries of Tier 1 and 2 PERS.   Sadly, I think Larry, et. al.,  know better but that won’t stop them.  I sometimes get the impression that they won’t be happy until public employees are paid minimum wage.

      • HBguy

        Negotiations between government and unions. If they told the unions, you can have wage increases or we can modify tier one and two. Once 51% of union members are non tier one and two, the unions may renegotiate. The contract is between the government and the union. So it can negotiate changes. Perhaps not as to those already retired, but to those not yet retired certainly. That’s why they call it collective bargaining.

        Now, there is a real problem in practice, since those negotiating on behalf of the government are they themselves tier one and two. Just as the courts and AAGs “defending” the 2003 PERS changes were PERS tier one and two. Though judges have their own exquisite retirement through PERS.

        • 3H

          PERS has already been changed. I don’t think you can retroactively change a past agreement like that. I’m not an attorney, so I could be wrong on that.

  • Myke

    The luster of Oregon is tarnishing. Sadly, not because of the rain.

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