Hoodwinking Our Way Out of Recession

Hoodwinking our way out of recession:
Oregon DHS uses economic sleight of hand
to sell a billion dollars of new taxes

by Eric Fruits, Ph.D.


Over the next four years, Oregonians will face $2.6 billion in new taxes. That’s an average of $1,750 in additional state taxes per household.

In January 2010, Oregonians will vote on ballot measures that will raise personal income taxes by $847 million and raise corporate income taxes by $530 million over the next four years. The campaigns for and against these new taxes ensure that nearly every Oregonian will know about them by Christmas.

$1.2 Billion in Taxes on Health Insurance and Hospital Care

Less well known are the massive tax increases””$1.2 billion””affecting health insurance and hospital care provided in Oregon. These new taxes are set in stone. There will be no vote and they go into effect soon.

Oregon HB 2116 (PDF) raises taxes through a tax on hospitals and a tax on health insurance providers. The figure above shows that the hospital tax is projected to raise $307 million in 2009-11 and the health insurer tax will raise $107 million in 2009-11. In 2011-13, the increased hospital taxes will amount to $550 million and the health insurance tax will amount to $345 million.

State Agency Fudges Employment Impacts””Again

Such huge tax increases in the middle of one of the worst recessions in memory will slow Oregon’s recovery from the current recession and damage employment growth in the state.

That is why it is so surprising that Oregon’s Department of Human Services (DHS) has reported to Oregon Business magazine that the tax increases will boost employment in the state by 3,600 jobs.

In response to a public records request, DHS has provided documents describing how the agency came up with results that are contrary to fundamental economic analysis.

As it turns out, the agency employed the Broken Window Fallacy to its benefit. The agency counted only the estimated additional money that would flow into the state from Federal sources, such as matching funds. The agency did not account for the tax money that will be extracted from taxpayers by the State of Oregon. Thus, the agency considered only the benefits of the program, but did not consider the costs.

This is not the first time that state agencies have cooked to books to fudge the economic and fiscal impacts of its tax policies.

“¢ Oregon officials get caught fudging the costs of energy tax credits Reports that agency officials low-balled the fiscal impacts of the state’s energy tax credit programs. The actual costs are 40 times higher than the agency’s projections.

“¢ BETC: Do Oregon’s energy tax credits help or hurt the economy? Highlights a consultant’s offer to hide the fact that some of spending on Oregon’s energy tax credits actually lowered employment in the state.

The Bend Bulletin (registration required) has picked up these stories and provides a summary of the recent rounds of economic sleight of hand.


Eric Fruits is an economist, adjunct professor in the Pacific Northwest, adjunct scholar with Cascade Policy Institute and the President of Economics International Corp. This post is republished with permission from Dr. Fruits’ Econ International Blog.


Steve Buckstein is founder and senior policy analyst at Cascade Policy Institute, Oregon’s free market public policy research center.

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Posted by at 06:05 | Posted in Measure 37 | 28 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Zero

    Does not DHS need to grow during times of highest dependency when most people are in poverty and needing state services? I think this to be true.

  • Steve Plunk

    Don’t forget the higher gas tax and registration fees. Far from “user fees” these taxes will go to an already inefficient ODOT where our bang for buck is pitiful.

    The sad fact is government routinely lies to citizens in order to promote it’s own progressive agenda. It’s bad enough one side of the political spectrum advocates failed policies but when the government itself gets in the business of advocacy we never know the truth.

    • Duck fan

      Afraid the trucks might actually have to pay a fraction of the damage they do banging up the highways?

      • Steve Plunk

        Nice try. Anyone who understands the Oregon weight mile system knows a cost responsibility commission determines the share trucks pay in proportion to cars. You’re running with people who understand things like this. Trolling elsewhere would be more productive.

        • Duck fan

          Aha, a cost accountability commission. One of those government agencies you’re always praising. Touching.

          No, the truckers are some of the biggest parasites around.

          • Steve Plunk

            Duck fan, I don’t praise the cost responsibility commission at all. I mentioned them to point out your ignorance concerning who pays for highway wear and tear. Ignorance that you have confirmed with your rant about truckers being parasites. I would expect better.

            Once again the liberal trolls come up short on logic, reason, and facts. To make up for that the name calling begins.

          • Duck fan

            “lies, trolls”. All above the post where I used the word “parasites”. And I’m supposed to be the name caller! You are sure good at dishing it out, not taking it in return. And see our friend Stupert’s post from the GAO. I stand by what I said about (heavy) trucks. You guys don’t pull your own weight. Yet you’re always bellyaching about how the government is picking on you, how dishonest and stupid government and its employees are. A bunch of phonies. No wonder people see through you at election time.

          • Steve Plunk

            The troll description is an accurate one, not name calling. Liberals come here and post misdirection on a regular basis. They fail to substantiate claims made and use a heavy dose of snark. The hit and run technique is trolling. It’s not much different than saying a person is an instigator or agitator.

            But I still see no substance to your claims. Accusations but no facts, logic, or reason. Throw some of that out and the real debate can begin.

          • Duck fan

            Yes, and owners of big trucks are freeloaders. See the info that Supert kindly posted below. Not much different from calling them parasites. Especially when they are constantly making vicious accusations against government and its employees.

      • Rupert in Springfield

        Yep, this old chestnut will never die.

        Please, check out your facts a little before pumping this bilge water.

        Trucks pay very close to or above the taxes that their vehicles cause.

        This is from a 1994 GAO report ( note that taxes and fees for trucks have gone up substantially since this time ) ( https://archive.gao.gov/t2pbat3/151856.pdf )

        Vehicle class
        Passenger vehicles
        Ratio of fees paid to cost responsibility
        Large automobiles 1.2
        Small automobiles 0.7
        Motorcvcles 0.5
        Intercity buses 1.2
        Other buses 0.3
        Pickups/vans 1.2
        All passenger vehicles 1.1
        Trucks
        Single unit trucks under 26,000 pounds 1.3
        Single unit trucks over 26,000 pounds 1.7
        Combination trucks under 50,000 0.8
        Combination trucks, 50,000-70.000
        pounds 0.9
        Combination trucks, 70,000-75,000
        pounds 0.6
        Combination trucks over 75,000 pounds 0.5
        All trucks 0.8
        All vehicles 1.0

        Note: A ratio greater than 1 .O indicates that a vehicle class is overpaying its fair share, and a ratio
        less than 1 .O indicates that it is underpaying its fair share relative to the pavement wear that
        category causes. The total cost responsibilities of all vehicles were assumed to equal the total
        user charge payments, in order to illuminate relative differences between the cost responsibilities
        and tax payments among the vehicle classes.

        • Duck fan

          Rupert you dufus! By your own source — since when did you learn to trust government agencies? — but by your own source, large trucks are underpaying, by a lot! The bigger the truck, the more it is freeloading. And trucks as a whole underpay, considerably. But what I had in mind, of course, is the big trucks. One of our friends here will know what I’m getting at.

          Just plain stupert!

          • Anonymous

            Tri Met buses don’t pay weight and mile or fuel taxes for the damage they do.

          • Duck fan

            You may be right about buses. They’re government vehicles, no? So if they did pay gas taxes, it would just be taking money and putting it back in the same pocket, right? Do police vehicles pay gas taxes?

            Anyhow, that doesn’t change things about heavy trucks.

  • Jim Ray

    “Don’t forget the higher gas tax and registration fees. Far from “user fees” these taxes will go to an already inefficient ODOT where our bang for buck is pitiful.”

    Thanks Steve for giving me another opportunity to “thank” Bruce Starr & Larry George for voting AYE on these TAX Increases. Thanks a lot boys!

  • v person

    “Over the next four years, Oregonians will face $2.6 billion in new taxes. That’s an average of $1,750 in additional state taxes per household.”

    Yes. And if Bill gates walks into a bar the average income of all the people in the bar goes from $50 a year up to $50 million. Who cares what the “average” cost to Oregon taxpayers is when 95% of them will be paying 0?

    • Steve Buckstein

      v person, I think you’ve gotten ahead of yourself, and of Oregon’s economic reality. The average income of people in the bar won’t get down to just $50 a year until after our legislative “leadership” fully implements its long-term economic agenda. All these tax increases are just the beginning.

      Seriously, the “average” taxpayer may pay zero directly, but indirectly they will pay dearly.

      • Rupert in Springfield

        >Who cares what the “average” cost to Oregon taxpayers is when 95% of them will be paying 0?

        Interesting to see the kind of mindset that socialism ( taking from those with the ability to pay and giving to those based on their need ) develops.

        Works great, until those being taken from get a little sick and tired of it and either move, or shift their systems to those that are subject to less tax. Socialism is great, until you run out of other peoples money.

        Look at what we see here. Who cares if we are taking other peoples money so long as it isn’t taken from me? That’s the sad part. The delusional part is how these people twist themselves into thinking what they are doing is altruistic moral and good. Much like the shoplifter who only steals from big box stores or the slip and fall artist who only is stealing from rich insurance companies. The self justification is not much different at all really.

        >Seriously, the “average” taxpayer may pay zero directly, but indirectly they will pay dearly.

        The average taxpayer will only pay dearly if, in the case of business tax increases, they are passed on to the consumer. Will that happen? There are two possibilities:

        One, the people running the business simply do with less so others can have more, the cost is not passed along to consumers. Your mom and pop store on the corner? Mom and pop get less, you get more. Will they be praised as heroes for actually paying for the altruism of the greedy set who wanted to fulfill need with others money? Of course not. They will simple come after the business for more in short order.

        Two, the business will simply pass along the tax to the consumer. In that eventuality of course then the greed of the business’s will be complained about. The owners did not do with less so as to provide for others. How astonishing.

        For some reason this is an incredibly hard lesson to learn. Getting others to pay for your needs is very difficult. Getting those who pay to feel good about doing so while praising the altruism of those who stole from them rather than paying for the charitable endeavor they insist is so crucial, yet do not feel they should pay for themselves, is impossible.

        • v person

          “All these tax increases are just the beginning. ”

          Says who? There is a secret plan to keep squeezing the goose? I’d like to hear about it.

          “Who cares if we are taking other peoples money so long as it isn’t taken from me? ”

          Who said I’m not in the 5% affected? I don’t think I’ll qualify this year, but its possible. Should I be so lucky I promise you that I will not complain.

          I don’t buy the argument that raising taxes a small amount on upper incomes and businesses that currently are paying squat (the businesses that is) will result in financial disaster. Its more likely letting our schools deteriorate or prisons emptied would be the worse choice in that respect.

          If businesses pass their tax along to the consumer, and the consumer is willing to pay the additional cost, then there is no harm and no foul.

          And by the way Rupert, you left out a 3rd option. A business with an increased expense can learn to produce their product more efficiently and avoid losing profit. That is actually the story of capitalism. Forward progress based on increased productivity based on competitive stress.

          • Steve Plunk

            Oregon business face competition from other states so it’s not quite as simple as just passing along costs. There is also competition for capital based upon expected returns and what alternatives are available. In my lifetime I have seen business efficiencies confiscated by ever higher taxes and offset by more onerous regulations.

            You are still woefully uneducated about many things. Hang around and you might learn some.

          • Steve Buckstein

            >There is a secret plan to keep squeezing the goose? I’d like to hear about it.

            I don’t think it’s so secret. Gubernatorial candidate Bill Bradbury has stated publicly that he wants to go beyond the two measures on the ballot. Specifically he’s talking about a business gross receipts tax similar to Washington states, on top of what he hopes will be M67’s increase in the corporate profits tax and corporate minimum tax based on gross Oregon sales.

          • Rupert in Springfield

            Blah Blah – Business pays squat – No surprise you still persist in this wholly untrue statement. They guy who can never admit he is wrong can never learn. It is clear you still know nothing about corporate taxation. Not a lot new here.

            >If businesses pass their tax along to the consumer, and the consumer is willing to pay the additional cost, then there is no harm and no foul.

            And here we see the greed surfacing again.

            Gee, and what if the consumer doesn’t pay it? Well, I guess the business goes under.

            >And by the way Rupert, you left out a 3rd option. A business with an increased expense can learn to produce their product more efficiently and avoid losing profit

            Gee, wonder why you would never ask the same of government?

            Why can’t it increase its efficiency and thus not have to tax? Seems way easier than asking businesses hard hit by the recession to pay more in harder times.

            Can’t do away with Davis Bacon, oh no, we have to pay flaggers union scale.

            How about something else? Schools? Nope, can’t do without that top heavy administration.

            How about simply paying less in government benefit programs? We are asking business that might be running at a loss to pay more in taxes, why not ask those riding in the boat to give up so freebies?

            Seems pretty simple to me, I’m getting tired of standing behind Oregon Trailers in the grocery store buying a bag a chips on my dime.

          • Voter

            You’re an ignorant chump!

  • Joe

    Taxes are good I think. They help the little people.

  • joe jericho

    Thanks for the article. I am sick of these state idiots. Government is it’s own living, breathing, sucking beast. It’s time to kill it off.

  • Eddie

    Hmm… Looks like the personal/corporate income tax portion of the DHS budget actually DECREASES according to the chart.

    Is that correct? If so, it seems like DHS is moving to a more user-fee oriented model rather than a tax-subsidy model. I would think that conservatives could appreciate that direction.

    • Steve Plunk

      Some, if not all, of those reductions are a result of the recession. When the economy rebounds personal income tax receipts will rebound as well.

  • cecil91

    Been living in tis state since 1948. Graduated from high school and college here. Worked and retired here, and planning on pushing up daisies in the same place. I have thought of moving to Nevada so I can escape the income taxes, but think I will just vote every tax inrease down, same as usual. If they try to come and get me, I’ll just hole up in the house and stand them off and check out in a blaze of glory. Well, I hope they wait until I’m 85 or so, then at least I won’t be giving up very much.

    • Anonymous

      GOOD PLAN CECIL. SHOOT’EM UP! THAT’LL FIX DEM IGNANT LIBRALS.

      YOU BEEN HEAR LONG TIME NOW, AIN;T NOBODY TELL YOU WHAT TO DO KNOW HOW.

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