Wednesday, April 03, 2013

Oregonian: Not Enough Money to Pay Income Tax, But Plenty for Sales Tax

This weekend Oregonian editors noted that Oregon's liberal arts graduates not only earn less than other college graduates, but earn less in Oregon than liberal arts graduates earn in other states.

The editors declared that this means that Oregon's income tax-based government is bound to be underfunded at the current level. The fix they propose is a strange one. Not to pare down government services to fit the lower income level of Oregon college grads.* Nor to raise income tax rates on the lower earning college grads. The editors somehow feel that though lower paid liberal arts grads won't have enough money to pay more in (progressive tax) income taxes, they will have enough to pay the needed amount in (flat tax) sales taxes.
But those industries alone likely won't be enough to expand the tax base adequately to sate [Oregon's] appetite for government services.
. . .
The solution is not to encourage workers with liberal arts degrees to go elsewhere. Nor is it to suggest they should work harder. If Oregon wants to keep its soul and its budget both in equilibrium, it needs a better tax system -- one that isn't dependent on income that the city probably won't attract without an overhaul of both its image and its priorities.
. . .
But a sales tax goes against Oregon's progressive soul, you say? The evidence keeps mounting that without one the state will lose the ability to feed its soul.
Does this make any sense? If Oregonians aren't gaining enough to pay extra income taxes, where will they get the funds to pay extra sales taxes?

There is a good argument for switching from the graduated income tax to a flat sales tax (as Washington state funds its government). Everyone paying a flat tax rate means everyone has a stake in how government is run and feels an equal monetary pain when government services expand.** Additionally, there is the wonderful simplicity of figuring and paying the tax.

But to say that there is somehow more money available from the same monetary pool just by adding a new tax rather than raising an old tax is at best illusion and at worst deception.

True there are the funds that would be gained from out-of-state visitors, but that it would make little, if any, real difference is shown by the budget shortfalls that both Washington state ($2.7 billion) and Oregon ($1.7 billion) had to deal with in 2012. Washington's sales tax did not shield from budget woes.

A sales tax isn't the answer. It has not settled any state's income problem. It is a diversion from the real issue that needs to be addressed: rising government costs in a time of lower personal and family income. The lack of editorial comment on the real issue shows why the Oregonian continues to decline as a widely used source of news and commentary.
*Interesting that cutting government spending is exactly the fix the Oregonian editors suggest for Oregon's public pension deficit.

**Though it doesn't seem to make much of a practical difference in Washington's and Oregon's voting habits.


Ten Mile Island said...

It seems we have a surfeit of liberal arts majors.

Driving the price of useless degrees down.

T. D. said...

Heh! Right, TMI. Driving the price received for them down. The price to get them remains high because government funds the loans. But, the editors apparently aren't concerned about the fleecing of students and their parents.

MAX Redline said...

Tuition rates rise precisely because government funds the loans. Ideally, then, students get in and out as quickly as possible - after all, they just need a degree to land a good job, so they've been told.

That Art History degree lands them a part time job as a barista. Although in New York, McDonalds recently ran an ad for a cash-register employee; it required a bachelors' degree and two years of experience.

T. D. said...

McDonalds is using BA's to screen employees in NYC? Rich! Imagine the unemployment rate under Bloomberg to sustain that.