Take Those Kulaks Down a Peg or Two!
Over at Blue Oregon, Chuck Sheketoff joins the “spread the wealth” chorus:
Today’s revenue forecast shows that Oregon is in a revenue crisis, not a spending crisis. The Governor and legislators should address it with revenue solutions.
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Oregon should turn first to its reserves, but these reserves will not be adequate… the state would still be far from having enough money to provide the services Oregonians demand and need. [emphasis added]
So… the state is far from having enough money to provide the services it’s promised to citizens, but somehow the problem is not that the state is spending too much, it’s that it’s not taking enough money from taxpayers.
Times are tough, though. The economy’s not doing so well at the moment, so squeezing the regular guy probably won’t be popular. Thankfully, Oregon has an under-utilized resource that it can exploit: rich people!
The most effective policy for raising revenue in this recessionary context is get revenue from those with the greatest ability to pay — both wealthy individuals and large, profitable corporations. That’s where the money is.
A tax increase on very wealthy individuals, who are best able to ride out the economic storm, would tap money that would more likely be saved rather than spent.
Another good option is to raise revenue from those profitable, large corporations, most of which are located out of state, who today escape paying their fair share of Oregon’s taxes. [emphasis added]
Fleecing the wealthy and shaking down large employers hardly seems like a wise solution to Oregon’s budget problems. The most obvious problem is that, in today’s global economy, “profitable, large corporations” have a lot of options when it comes to choosing where to set up shop. I’m going to hazard a guess and say that a massive tax increase to pay for an ever-increasing list of state “services” is probably going to make Oregon a less attractive place to do business. Not only will this have the side-effect of discouraging development, but there are likely to be a number of companies who will decide to relocate to other states or other countries.
They will then be lambasted for outsourcing jobs to more profitable locales and demonized for their greed. All the while, Oregon workers will be losing their jobs, further reducing the income tax till and adding to the burden on taxpayers. Sheketoff obliquely recognizes this (“They will claim, contrary to reality, that a tax will ‘pull money out of the economy.’”), but he ignores the criticism and offers no rebuttal or argument to the contrary.
Second, “redistributing” wealthy people’s money and increasing taxes on corporations does nothing to solve the real long term problem. By his own admission (and despite his assertion to the contrary), the problem is not one of revenue. The problem is that the State of Oregon is spending taxpayer dollars like there’s no tomorrow and then claiming there’s not enough to go around.
Maybe it’s time for public employees to face up to the same realities that Detroit’s beleaguered auto unions are eventually going to: At some point, accepting a cut in wages and/or benefits is going to be necessary for them to keep their jobs and for the state to remain solvent. Bail-outs are useless, expensive band-aids, and the government coming down with a case of economic vampirism every time there’s a budget crunch is no better.
Taxpayers may very well have to come to a similar realization. Demanding ever-more of the government requires an ever-increasing revenue stream. That money has to come from somewhere, but taxpayers rarely seem willing (or able) to pony up the cash.
After acknowledging that his ideas are sure to meet with resistance from free-market types (“The suggestion of a tax increase undoubtedly will elicit howls from those who fail to acknowledge the important role that government plays in the economy.” [I'd say that most of us do acknowledge the government's role in the economy, and don't much care for it. -ed.]), Sheketoff says “the current economic crisis demands smart, practical solutions, not ideological sound bites.”
I would agree, though I’m not sure how “raising revenues from those who can best afford to pay” amounts to anything resembling “smart, practical solution.” To be fair to Chuck Sheketoff, it’s not really a sound bite either. These days, “tax the rich, tax the greedy corporations, spread the weath” resembles more of a liturgy for progressives than anything else.
At least BlueOregon has something to write about other than how much beer I may or may not drink.
Excellent post. Now, I don’t particularly agree with Sheketoff’s: “the rich have money, let’s take that!” argument, there are some important nuances to “spreading the wealth” not adequately addressed here.
There’s a whole assertion about how “higher tax rates drive away business.” There is some evidence to suggest this can be true, and business taxes are without doubt a major factor in corporate locating decisions. But they are not, of course, the only factor.
Taxes pay for things, and often these things are important to corporations. If a higher tax rate means they can save on healthcare costs through government-subsidized healthcare, it might help their bottom line. If it means a more expensive school system that turns out a more educated workforce, it again can be a corporate benefit. If it means that their distribution costs are lower because roads are more abundant and of higher quality, it might be worth it for companies to take the hit (also, it’s not unreasonable, considering their benefits, for them to be expected to). Quality of life, traffic congestion, educational and research resources, an environment which attracts an ambitious workforce… all of these are important factors for the profit-motivated firm to consider in addition to the bottom-line tax rate. Sometimes corporations are aware that what they lose in tax expenses they get back in worker productivity and innovations (and therefore, hopefully, better profits).
For example, my home state of Washington was ranked #13 for its business tax climate by the Tax Foundation, but nonetheless ascended to #3 on Forbes’s ranking of “Best States for Business.” Forbes reported Washington’s “labor rank” of educational attainment and projected population growth as a key supporting factor behind this ranking. Wyoming, the state ranked by the Tax Foundation as #1 to avoid pesky business taxes, only achieved #31 on the Forbes list, meaning more than half of the states are considered to have a better business climate than Wyoming.
Of course, neither Forbes nor the Tax Foundation should be considered the final word on this issue. It’s just to point out an important nuance to the argument that “lower taxes = better economy,” is that sometimes lower taxes mean poorer services, which can hurt business. Not always, but it’s worth considering.
Otherwise, yeah, we do need to get rid of government waste or figure out a way to start paying for it. Continuing the deficit game is really not an option, and hopefully both liberals and conservatives can agree on that.
“At some point, accepting a cut in wages and/or benefits is going to be necessary for them to keep their jobs and for the state to remain solvent.”
At the U of O this has been happening already. For instance, when I was working as a staff member and not faculty, the union agreed to years of wage freezes. Insurance has also been lowered for part-time employees…as in you don’t get certain benefits if you’re working somewhere between .5 and 1.0 FTE.
I agree that the issues here are still important, but I think it should be noted that the state employees (especially unionized) are not sitting around sucking non-stop from the teat of the government.
There were some interesting ways that upper-level administration gave themselves and highly-coveted faculty raises during the wage freeze years as well. I imagine that some of this is the same now, and I also imagine that with all of the money being invested in our numerous Vice Presidents, Provosts, Vice Provosts, Assistants to the (Vice) Provosts, Presidents and so on down the line….that the U of O should be operating far more efficiently and competing more than it does with its ‘peer’ universities.
In other words, what’s good for the secretary is good for upper-level administration as well. In fact, the secretary probably does more in any given year to make sure things work smoothly than some members of upper-administration do in their highly paid careers in the upper echelons of the ivory tower. (emphasis on “some”…there are people who are worth their salt in these positions)
Matt:
Good points, all.
Chris:
“In other words, what
“On paper, this sounds good
Pretty much.
[...] isn’t so “shockingly large”, you know. It’s a “revenue problem” not a “spending problem”, after [...]