Conservatively Speaking

You do not tax your way out of a recession

Posted by Mary Lazich on Aug. 23, 2010

Taxes, Economy

Just ask Oregon. The Beaver State has had a long history of scorning taxes.

Nine times residents went to the polls to consider implementing a state sales tax. Nine times voters rejected the idea. Oregon’s constitution contains a ceiling on property taxes. If revenues surpass projections by two percent or more, taxpayers get automatic rebates thanks to an amendment adopted by voters.

It is stunning Oregon residents voted for large income tax increases during January 2010 rather than accept possible spending cuts. It was the first time since the decade of the Depression that Oregon voters approved tax increases.

With an increase of $727 million poring into Oregon coffers, it is the end of budget problems, right? Wrong.

Stateline reports, “In May, stunned lawmakers listened as the state economist outlined a new, $577 million shortfall in the current, two-year budget — the result of continued hemorrhaging in income tax collections. Last month, the National Conference of State Legislatures released a report showing Oregon and Illinois as the only states projecting shortfalls at the end of the budget year that ends next summer.”

What happened to the money from the January tax increases? 

The January tax increase ballots provide a lesson, and will be a hot campaign issue this fall in Oregon. Read more here.