Difficult, but not impossible

When Gov. John Kitzhaber let it be known last week that he's taking another stab at tax reform, he probably didn't expect the sky to fill with fireworks. But neither, we're sure, did he expect longtime tax reform advocate Frank Morse to give up the cause almost immediately and resign his Senate seat.

Talk about sobering. No wonder Rep. Peter Buckley, D-Ashland, wants to legalize pot.

Losing a moderate Republican like Morse will make fixing what he calls a "damn serious" problem more difficult. The job won't be impossible, though, if Oregonians learn from the failure of Morse's recent efforts.

Morse and Sen. Ginny Burdick, D-Portland, worked last year on a fairly complicated proposal that made a lot of sense and — who knows? — may have won over voters. Instead, it died in committee.

The proposal was designed to smooth out the state's revenue stream and involved both kickers, a state spending limit, a rainy day fund and capital gains tax cuts. Half of the personal income tax kicker would have gone into a rainy day fund, along general fund revenue in excess of a predetermined limit. This spending cap would have been relaxed and the full personal income tax kicker returned to taxpayers as soon as the rainy day fund reached 14 percent of the general fund.

The proposal would have eliminated the corporate kicker, which would have been set aside for higher education. Finally, the state's capital gains tax rate — one of the nation's highest — would have been halved for long-term Oregon investments and cut by 40 percent over a number of years for other long-term investments.

The package contained both pleasure and pain for most constituencies, but it suffered ultimately from what Burdick calls an "enthusiasm problem." Most people thought it was a good proposal, she says. But organized labor didn't like the capital gains piece, and businesses didn't like it enough to compensate for labor's concern.

The enthusiasm problem mattered, says Burdick, because the central piece of the package, kicker reform, would have gone to the ballot, at which point "you have to have everybody jumping up and down to have a chance."

Throw a sales tax into the debate, as the governor has, and the enthusiasm problem becomes potentially enormous.

So why bother at all? Because, to borrow Morse's words, the problems related to Oregon's tax structure are damn serious. If Oregonians can agree on that much, at least, there's some hope for improvement.

To move beyond the hope stage, Oregonians must accept that they'll have to give up something — whether it's a kicker refund or reflexive opposition (from the right and left) to other tax code changes. Creating a sales tax isn't necessarily a stealth attempt to boost people's total tax bills, and cutting the capital gains tax isn't simply a "giveaway" to the rich. The latter, as Morse notes, is a good way to make the state's tax code more competitive for small businesses.

If the groups involved in Kitzhaber's tax-reform effort won't compromise, the world won't end. Instead, the state will limp along with a tax structure about which no one is enthusiastic, and public services will exist in a near-perpetual budget crisis. Oregonians can do better than this.

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