A Sales Tax in Oregon?


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Oregon is one of five states that don't have a statewide sales tax-- and its tax system is less regressive than most. There's been irregular talk, over the years, of enacting a sales tax-- but Oregon voters have repeatedly shot down this idea. Now this issue is back in the news, since incumbent Governor Ted Kulongoski (a Democrat) said in a primary debate the other day that it might be a good idea:
We need to have a tax system that provides stability over the long term, which would include, in my opinion, a substantial reduction in the income tax and looking at a consumption tax of some kind.
While his staff seemed to be backpedaling slightly from this statement afterwards, Republican leaders aren't eager to let this one go:
"This is a linchpin, a turning point in this election," Kevin Mannix, a Republican candidate for governor, told a King City Republican women's group. "For the rest of this campaign, we need to remind voters it is Ted "Sales Tax" Kulongoski who will be running."
Meanwhile, the folks at Blue Oregon are discussing whether the state's current income-tax-based system is (in the moderator's words) "a recipe for instability."

It's been well-documented that Oregon has been a fiscal basket case in recent years. But the "income tax instability" argument is a red herring. As contributors to Blue Oregon have noted repeatedly, the real cause of Oregon's fiscal instability is the "kicker," its automatic rebate of surplus revenues. If a family is not permitted to sock away extra money during good times, it stands to reason they'll have more difficulty getting by when times are tough. And that's basically what Oregon faces with its restrictive kicker law, which prevents the state from accumulating a meaningful, effective rainy day fund. The Oregon Center for Public Policy has more on the kicker here. For more on rainy day funds, check out ITEP's policy brief here.
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