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.”