Measure 97: A $30 Billion Gamble Oregon Voters Shouldn’t Make

CascadeNewLogoBy Steve Buckstein

The massive gross receipts tax Measure 97 on Oregon’s November ballot (previously known as Initiative Petition 28) is guaranteed to suck more than three billion dollars a year out of the productive private sector and deposit them in state coffers. What isn’t guaranteed is how all this new government spending might impact the state economy.

While union proponents of this “sales tax on steroids” argue that putting more money into education and other public services will be good for the state, two reputable economic studies don’t show it.

A nonpartisan Legislative Revenue Office report looks ahead five years and sees no positive economic effects showing up by then. While LRO economists may believe there will be positive effects later, that assumes the money will be spent effectively by a state that has a poor track record of doing so.

A Portland State University report, actually paid for by the measure’s public employee union proponents, looked ahead ten years and still found no positive economic effects showing up. Again, the PSU economists assume there will be positive effects eventually, but their model doesn’t show them.

So, we’re left with this inconvenient truth: If Measure 97 passes, taxpayers will send more than $30 billion to the state over the next ten years without any noticeable positive economic effects to show for it. That’s a $30 billion gamble that Oregon voters should turn down.

Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Posted by at 05:00 | Posted in 2016 Election, Economy, Initiative & Referendum, IP28, Oregon Government, Public Employee Unions, State Budget, State Government, State Taxes, Taxes | Tagged | 19 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Native Intelligence

    Just say and vote hell no to the fiasco ballot measure sponsored by OPM spending addicts. These insurgents we don’t need, for surely they’re worsen than any dubiously prescribed weed.

  • HBguy

    Is a better educated and healthier population an “economic benefit”?
    How do you measure that exactly?

    • Ask the economists at the Legislative Revenue Office and at PSU. They do believe that such benefits can be measured, so you might ask them how they would do it.

      But, they probably believe, as I do, that simply spending more tax dollars on education and health care doesn’t guarantee “a better educated and healthier population.” That result depends on whether the money is spent effectively, and that is not a given here.

      • HBguy

        I actually don’t think the PSU report considers those recommendations. (I remembered that issue when I first read the report. I had to go back to it. And here is the relevant text from the end of the report regarding it’s limitations.
        ” A complete examination of the tradeoffs involved with higher taxes and increased
        government revenue would also include, for example, the possible future benefits associated with
        higher funding for public resources like education, infrastructure, and safety. As this impact analyses
        only looks ahead to 2027, the well-documented economic effects of improved funding for K-12
        education or safer neighborhoods would simply not be realized by the end of the forecast period.”

        It states other limitations as well.

        Here is the limitation text in the report from the LRO (in the exec. summary)
        “Ultimately the impact of IP 28 on the state economy will be determined by both its
        revenue raising mechanism and the state expenditures funded by the additional
        revenue. Our economic simulations account for spending shifts from the private sector
        to the public sector but do not incorporate the potential longer term economic capacity
        expanding effects of public investments in education and infrastructure”

        So….I believe you’re incorrect on your assumption.
        But, I do agree that the long term eventual societal value of the additional gov’t spending will be highly sensative to how the funds are spent. But neither of these reports really analyzed the non economic, or long term societal benefits from what I can tell.

        • Exactly! These are economists. Their analysis is limited to economic costs and benefits.

          The point you left out of the PSU report quote is that that those economists do expect positive economic benefits eventually, but their forecast period only goes out ten years – to 2027.

          My point is that voters should not approve a measure that transfers $30 billion or more from the private sector to the public sector without any economic benefits being realized for more than ten years. And, if the money isn’t spent effectively, not a wild assumption, those economic benefits may never show up.

          The only certain beneficiaries of Measure 97 are the public employees who will be paid by its tax revenue and get to spend all that revenue in ways that may or may not benefit the rest of us.

          • HBguy

            But If you read the economic reports they basically say they didn’t study it. Even in the first ten years, because they seemed to think you couldn’t measure it for ten years. So to say there won’t be any other benefits is assuming too much IMO.
            If we can extend school days and school hours, and reduce class size I bet you couldn’t find a parent in Oregon who would say they can’t see any benefit in that. But the LRO and PSU didn’t refer to any of those benefits.
            And for a senior with better health care, or more access to food assistance? I don’t know how you quantify that as a matter of Gross State Product. But it’s real to that person served.

          • Perhaps, but all these economists are public employees. IMO if they could have measured positive economic benefits from the measure over their 5 year and ten year forecast periods they would have.

            And, of course if someone offers to spend other people’s money on a service you want I assume you’ll see a benefit in that. On the opposite side, if someone makes you spend your money on a service you wouldn’t pay for otherwise I assume you’ll see that as a cost to you, not a benefit.

          • HBguy

            Of course you’re a Libertarian and a taxpayer, so should I discount your analysis as well? Since you have something to gain if M97 fails? I don’t however, I look at the argument, data how your apply it and use some common sense.

          • If you truly have no self-interest in whether M97 passes or fails you’re a rare individual indeed.

          • HBguy

            Exactly my point. All sources have an interest, public employees taxpayers, researchers who get paid by interests groups. So you can’t discount a report 100% because of the self interest of the authors. Otherwise, you’re assuming lack of integrity with no evidence.

          • But I was saying the opposite. The public employees who wrote the LRO and PSU reports might have an economic interest in finding economic benefits from M97, but they apparently do have integrity and didn’t find them, at least over the forecast periods these looked at.

            As noted in the press, the proponents even apparently tried to influence the PSU economists to frame M97 in a more positive light and they resisted those pressures and reported what they actually found.

          • thevillageidiot

            welfare is always real to the person receiving the benefits from the producers.

        • thevillageidiot

          if you are referring to such studies such as “Pennsylvania’s Best Investment: The social and economic benefits of public education” in the abstract all the statistics mentioned are correlation. they are not causation. another stat from the same research article “The United States is in the middle of the pack when it comes to school expenditures—contributing 5 percent of its gross domestic product (GDP) to public education, which is average among the 34 top industrial nations [5]. State governments in the U.S. contribute an average of 48 percent of this overall cost, with local communities paying for 44 percent.” link here https://www.elc-pa.org/wp-content/uploads/2011/06/BestInvestment_Full_Report_6.27.11.pdf and yet the US has one of the highest per capita income of all and the highest GDP of all. So government spending on education does not prove higher incomes or gross GDP.

          In the conclusion of America’s Graduation from High School: The Evolution and Spread of Secondary Schooling in the Twentieth Century
          https://dash.harvard.edu/bitstream/handle/1/2664307/Goldin_AmericaGraduation.pdf?sequence=4
          ” Education mattered at the individual level and
          at that of the state. That higher levels of education caused the United States to
          grow more rapidly than other countries is a more difficult proposition to prove.
          One fact is certain, however. In the 1910 to 1940 period America pulled far ahead
          of other industrial economies in both education and income.”

          There are other major factors such as very low taxes and regulation that significantly contributed to the extreme growth of the US.

          neither of these “extensive studies” prove that more spending on education correlates with economic growth.

          So much for your quote “the well-documented economic effects of improved funding for K-12”. It ain’t so. as a personnel note I have a college education as and engineer. my brother has a college education as an entomologist. He has a significantly higher income farming potatoes than I do as an engineer. so even with seemingly equal levels of education a self employed farmer raising a crop not subsidized by the US Department of agriculture is far more successful than someone working in the aerospace industry.

          • HBguy

            Those quotes were from the LRO and PSU studies. Which is what we were discussing. Perhaps we should spend less on education then? Maybe we should cut school days? Or should we make sure Oregon is at least average in the US?

          • thevillageidiot

            No they were not. they were different studies at different times by different people. If these were quotes from the PSU study then somebody lifted the quotes from these earlier reports. if PSU came to similar conclusions then there no discernible direct benefit of increased spending on education at any time in history.

          • HBguy

            Yes they were. I cut and pasted. But you obviously believe they are direct quotes from somewhere else, can you site the source?

  • Jack Lord God

    A citizenry that contends throwing more money at education results in a better educated populace demonstrates nothing other than what money was spent on their education was largely wasted.

  • raven6

    This state has been making political decisions, derogatory to economic reality. Even unions will fail if this continues. NO peron should be voting for the tax bills, as we are an amalgimation of citizenry.
    As well, the idea of supposedly spending more on education, when the Sustainability/Common Core process is corrupt, starts with the wrong precepts.

  • Myke

    As one who works educating kids, no I don’t get PERS, what money won’t fix is public accountability for their own actions, or inactions, as the case may be. It’s opportunity after education that is lacking. Jobs that don’t cover housing cost, or medical insurance, or the multitude of social things that make a life worth living, regardless of the social stigma associated. Taxation robs people of the choices, the freedoms to find their own paths at a certain level. Sure, some level of social combining is required, but at what point is it just a means to creating an elitist class. One that gets opportunity with the benefits guaranteed at the expense of those who have no guarantee, but still work with a belief that self-sufficiency is worth the pride of choice? Money cannot fix stupid or lazy. Fact! And, yes. My kids, 30 in a class, do do better than most, because effort on their part is required where I teach.

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