For you small business owners, farmers and ranchers who thought you were about to get some relief from Oregon’s burdensome inheritance tax — in the immortal words of Soprano’s regular, Pauley Walnuts – FUGHEDABOUTIT.
One of the problems in writing a political column is that because of deadlines, “stuff happens” between submission and publication. In this case, I had noted in last week’s column that the Senate Republicans had forced a deal in which there was a trade-off for eliminating the kicker for large business to “fund” a rainy day fund. (I say “fund” advisedly because the state is already awash in cash and didn’t need additional revenue to create a rainy day fund.) The trade-off was to double the amount of an estate that is exempt from Oregon’s high inheritance tax.
But “stuff happens” and, unfortunately it is always the same “stuff.” There always seems to be a couple of Republicans who are incapable of sticking with their caucus to drive a hard bargain and wind up caving in to the Democrats to desert their own caucus and join the Democrats in raising taxes. That’s what happened when the Democrats, while in the minority, were able to enact the two largest tax increases in Oregon’s history. And that’s what happened again over last weekend when a couple of the lesser lights deserted their own leadership and gave the Democrats the necessary votes for yet another tax increase.
And for what? Randy Pozdena, one of the state’s leading economist and a person so politically neutral that all sides seek the use of his studies and expertise, best laid out the case against trading the kicker for a rainy day fund:
“I am strongly in FAVOR of the corporate kicker, if we must have a corporate income tax. The kicker imparts useful discipline on a system that otherwise is biased toward overspending. One need only look at the pattern of State spending during the dotcom revenue boom as evidence of this tendency. The kicker disciplines spending by creating an offsetting claim on revenues should those revenues be unexpectedly high.”
“The rainy day fund will not stand against the (increased) desire to spend all available resources.
“The business community was foolish, in my opinion, to offer a one-year concession of the kicker. The action on the Senate floor today to eliminate the kicker perpetually shows, as Machiavelli once said, “A prince never lacks legitimate reasons to break his promise.”
The importance of the rainy day fund is questionable. The state has survived for over a hundred years without one. The periodic fiscal crises that state government endures due to economic downturns simply parallels the fiscal crises endured by its citizens as their jobs are threatened and their incomes go down. That fiscal crises that state government must endure serves as a curb on the legislature’s prior overspending and lack of fiscal discipline.
Look, I’m not saying that a rainy day fund is not a prudent element of fiscal management. Every person ought to be putting away some amount in savings for those periodic economic downturns and other emergencies. The idea that the state would do similarly is a good thing. But the point raised by Posdena and others is where is the balance? Particularly, where is the balance when you eliminate one of the best tools against overspending to create a fund that encourages overspending.
Two years ago, and four years ago, the rainy day fund was talked about as the balance for a spending limit. The idea was that the legislature would limit the annual increase in spending by some methodology (my favorite has always been the growth in total personal income) and, in exchange, a rainy day fund would be created to smooth out the volatile tax revenue flow during economic downturns.
But limiting spending doesn’t fit with the political agenda of the Democrats and particularly their handlers in the public employee unions. The more money they spend, the more public employee jobs you can create. The more money you spend, the higher the salaries you can give public employees. The more money you spend, the higher the benefits for public employees can go. Right now, the public employees’ wages exceed comparable positions in the private world. Right now, the public employees’ benefits (health insurance and retirement benefits) far exceed anything in the private sector. And right now blue collar workers and salaried white collar workers in the private sector are paying for those wages and benefits that exceed their own.
For this you can thank those Republicans who deserted their own caucus.