Westlund calls for Oregon tax reform

Sen. Ben Westlund told a gathering of school supporters in Sisters last week that the only way to solve the school finance problem is through "fundamental tax reform." He defined it this way:

"Yes, I'm talking about a consumption tax. I don't care if it's a VAT (value added tax), a business activity tax or a sales tax...We need to cut the capital gains tax in half, cut the income tax in half, and lower property taxes."

His own plan, which incorporates a 5 percent retail sales tax, would accomplish those goals, he believes, plus give "every taxpaying Oregonian a tax reduction" and increase state revenue by $1 billion.

Westlund, a Republican from Tumalo, was the principal speaker at a Wednesday evening session attended by about 80 citizens. It was sponsored by the Committee for Sisters School Children. Also appearing were David Williams of the Oregon School Boards Association and Sarah Pope of the Portland-based Stand for Children organization

Westlund attributed Oregon's fiscal problems to three main factors -- term limits, which replaced experienced leaders with inexperienced legislators in the mid-1990s; the initiative process, which during the '90s saddled the state with large new spending responsibilities but provided no new ways of paying for them; and a bad tax structure.

"The way we tax people in this state is stupid, it's insane," Westlund declared. "It's not that Oregonians are undertaxed, it's that we are poorly taxed...We have the highest dependency in the nation on one tax and that one tax (the personal income tax) happens to be the most volatile tax."

When the economy rises, Westlund explained, the income tax produces too much money; when the economy slips, income tax revenue falls like a wounded duck.

To dramatize the problem in recent times, the senator noted that, "In 1990 we had a state general fund of $5 billion." Then, thanks to "the greatest economy in the history of the planet, that general fund (including lottery revenue) grew 100 percent. So by the time we got to 2000, it had grown by $5 billion, (to $10 billion total). But of that $5 billion, we the people spent $4.3 billion before it ever got to the Legislature. We spent almost all of the growth."

He was referring to initiatives that imposed new costs, primarily Measure 11, which created a need for "the greatest construction project in the history of Oregon," building new prisons.

Westlund praised those who will lobby the next Legislature in an attempt to obtain more for public schools than the $5 billion Governor Ted Kulongoski has proposed for 2005-07. But he said no long-term solution will be achieved without major tax reform.

When asked after the meeting how his plan could produce more revenue but give everyone a tax cut, the senator said he was careful to specify "all taxpaying Oregonians." The new money would come from two sources, a smaller amount from tourists and a larger amount from "the cash economy." He said he and others have been astounded at how much income is received in cash, most of it flying under the income tax.

He also said he hopes to have some version of tax reform on the ballot in "a year and a half." The timing is dictated by the expiration of a special local income tax for schools adopted in Multnomah County. Residents of the state's most populous county likely won't be interested in statewide tax reform until their own local tax disappears.