Lessons from the 2005 Session and a timely tax trade.
As a freshman in the 2005 legislative session, my learning curve was steep. Not a day went by that I didn’t learn something important about the process. These could be positive or negative aspects and usually were not things discussed in any political science book or class that I’ve ever seen.
One of those aspects, that I now appreciate in hindsight, was that so many of our actions were conducted in a vacuum. What I mean by this is that issues and bills were discussed, often voted on, without any wholistic or synergistic perspective. Again, in many cases, it as if the debate and process related to too many of the bills was void of any connection to the outside “real” world. This is not the same as saying we were “out of touch.” It is simply the recognition that successful politics is not a singularity, but instead a blending of many actions and ideas. Again, it is — or at least should be — wholistic.
Let me give you an example of what I’m talking about: To me, the most important thing we could do as a state to promote economic growth, job creation and wealth creation, would be to lower our state capital gains tax rate. Right now, at 9%, Oregon has the highest capital gains tax rate in the nation. In effect, we are disproportion ally punishing those risk takers and entrepreneurs that are vital to the future health of this state. As a result, we have fewer risk takers and job creating investors in Oregon.
We voted on capital gain tax reductions in the Republican-led Oregon House where of course it passed. However, not one of us Republicans had a doubt in our mind that the bill was DOA in the Democrat-led Oregon Senate and governor’s office. Yet we went through the motions anyway. We acted in a vacuum.
A better approach in my mind on this particular issue would have been this: We know that Democrats hate the idea of a stand alone capital gains tax cut, however some of them do admit that there would be economic gains. We also know that Democrats hate the corporate kicker and the corporate minimum income tax even more. Why then shouldn’t we trade the corporate kicker and the corporate minimum for a capital gains tax cut?
For me the answer is simple. I have spent my entire adult lifetime studying growth-oriented economics. I am a proud supply-sider! I want a capital gain tax cut because it will incentivize new investment and business expansion in Oregon. I also know that not a single investment decision, not a single decision by a business regarding growth and expansion will be made based on the corporate kicker or the corporate minimum. Sure, as a businessperson I’ll take a kicker tax refund, but I’m not going to plan for expansion and take risks because of it. Whereas, if I know that my return-on-investment will be enhanced because of the capital gains tax reduction, then I am motivated to expand and take risks. Simply put, the formula for a businessperson is this: I get something that I want and give up something I could care-less about. What an easy decision!
I’m hopeful that the idea of acting wholistically, rather than simplistically, will take root in the next legislative session. If we want Oregon to be exceptional rather than mediocre — especially from a business perspective – it’s imperative. I for one will be working in that direction.
Rep. Scott Bruun