Labor takes tax fairness campaign to legislators
By Don McIntosh, Associate Editor
"We believe it is only fair that businesses pay the same tax rate on their profits that workers pay on their wages."
Thus spoke Oregon AFL-CIO President Tim Nesbitt at a Feb. 7 hearing of the House Revenue Committee - one of several state legislative hearings in which labor and business lobbies traded warring proposals for tax reform.
Earlier, representatives from two powerful business lobby organizations - Associated Oregon Industries and the National Federation of Independent Business - told legislators that what Oregon needs is more tax cuts for business and the wealthy - capital gains tax cuts, estate tax cuts, and more tax breaks to reward businesses for doing what businesses do. These tax cuts, business lobbyists argued, would help all Oregonians because they would lead to jobs.
Taking businesses' word for it that jobs have been created is not good enough, say lobbyists for a united front of labor and community organizations who are targeting corporate tax breaks this legislative session. Critics of corporate tax loopholes say the tax code in Oregon is like Swiss cheese: For every dollar of taxes levied on corporations, 42 cents is collected, and 58 cents given away in the form of tax breaks.
Nesbitt challenged the business lobby to "show us the jobs" or give up the tax breaks. "We never hear corporate lobbyists argue for tax breaks by saying they want to make their clients rich," Nesbitt said. "It's always about jobs."
"It's because they know we care about jobs," added Laurie Wimmer-Whelan, lobbyist for the Oregon Education Association.
Nesbitt and the others say they're not opposed on principle to using tax policy to stimulate jobs. The trouble is that most tax breaks have been given away in the past with very little actual evidence that they would stimulate jobs, no commitment to do so, and no follow-up research to determine whether they did.
"You end up paying for things that happen anyway," Nesbitt told the NW Labor Press. "It's like throwing money into a strong wind."
The Oregon AFL-CIO is looking closely at the tax code, asking "How many jobs" could these tax breaks be creating, and at what cost.
Nesbitt said the agriculture industry, for example, will receive $268 million in tax breaks in the next two years. With 54,200 workers in the industry, that amounts to a $2,500-a-year subsidy per job - and most of the jobs in agriculture are low-wage.
"The price of these giveaways is sure," Whelan told legislators. "The potential for economic stimulus is too much a matter of faith, not data, and the cost to the very infrastructure and services that make Oregon attractive to businesses is too devastating."
Oregon a low-tax state for business
Those expenditures - roads, prisons, schools, and public services - are the reason tax policy is so important to organized labor. Taxes support those things, so cutting taxes means cutting the things taxes pay for.
The proportion of taxes in Oregon paid by businesses has been shrinking for a decade, Nesbitt told lawmakers. Oregon businesses now pay the lowest taxes of all the 11 Western states. And over the past four years, tax breaks have increased by 27 percent. If tax breaks had just held to a constant percentage of overall revenue, over the past two years Oregon and its local governments would have collected an additional $1.4 billion in revenue this biennium - more than enough to rebalance the state budget and keep schools open on a full-time basis. The net result is that individuals shoulder most of the tax burden in Oregon.
Business lobbyists told legislators that new cuts in taxes paid by corporations will stimulate the economy. It's an argument Chuck Sheketoff, executive director of the labor-allied think tank Oregon Center for Public Policy, called "the same old tired song."
In her testimony before the House Revenue Committee, Whelan made the case that spending - on education, infrastructure, and other public services - has a much clearer stimulus effect on the economy than tax breaks.
She cited former U.S. Treasury Secretary Paul O'Neill, a businessman who told Congress during confirmation hearings; "I have never made an investment based on the tax code Ÿ. If you are giving money away, I will take it. If you want to give me inducements for something I am going to do anyway, I will take it. But good business people do not do things because of inducements."
Labor pushes reform
At the Feb. 7 hearing, Nesbitt and lobbyists from three unions and one public interest group aired a set of specific proposals, each of which will be introduced as bills by labor-friendly legislators. Their proposals would:
* Increase the corporate income tax to the level now paid by individuals.
* Either establish a statewide property tax on commercial and industrial property, or refer to voters a proposal to remove property tax limits on commercial and industrial property. [Voters may have had individual owner-occupied homes in mind when they passed property tax limits in 1990 and 1996, but property taxes paid by businesses were also slashed. More than any other measure, backers say, this proposal would restore business tax support for schools, stabilize the tax system, and give more resources and control to local school districts. Nesbitt projected a tax of $3 per $1,000 on such property would raise $645 million in the next two years.]
* Disconnect the Oregon tax code from the federal tax code. [Right now tax decisions made by Congress, most of which recently have benefitted the very wealthy, also result in enormous revenue cuts to the State of Oregon.]
* Require public disclosure of all state taxes paid by Oregon corporations.
Because of the seriousness of the state's revenue shortfall, labor lobbyists are hopeful that the Legislature will enact long-delayed reform of the tax system this year. If they fail, however, says lobbyist Ralph Groener of the American Federation of State County and Municipal Employees, labor may go to the public with ballot initiatives on tax reform proposals that have proven popular.
Last fall, labor and its allies formed and funded a new non-partisan educational organization, Citizens for Oregon's Future, to better educate Oregonians about the state's tax system and provide a forum for studying proposals for tax reform. The group has a Web site - www.fororegon.org - and backers hope its work will lay the groundwork for any attempt to take tax reform directly to the public.
What one million dollars buys
All too often, in discussions of taxes, big numbers can seem very abstract. When legislators consider millions of dollars in tax breaks, they may not always be keeping in mind what that money would otherwise buy for Oregon residents. So the Oregon AFL-CIO is developing a tool to educate legislators, members, and the public: a list known as "What a million dollars buys":
A day of school for 53,000 students
Summer school for 3,000 students not reaching benchmarks
A year in prison for 39 inmates
14 state troopers on the job for a year
Crisis services for 1,700 persons battling mental illness
In-home care for 160 seniors for a year*
A year of medical care (Oregon Health Plan) for 269 Oregonians*
General assistance and health care for a year for 110 persons with disabilities who live in poverty
Note: These numbers are based on total costs, including federal funds. Services noted by an asterisk receive $1.50 in federal funds for each dollar in state general funds. So $1 million in state funds, augmented by $1.5 million in federal funds, funds services for 2.5 times the numbers indicated above.
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