Is the 10th Time the Charm?

Since 1932, Oregonians have decided they do not want a state sales tax–nine times! The most recent attempt to gain voter approval came in 1993 and failed horribly with 72 percent against the tax. Of course the state government has a $3.5 billion budget deficit to worry about, but other arguments must be made to convince people to support such a change.

A huge factor in Oregonians reluctance to approve even a moderate sales tax is the simple changes it would have on everyday living. No longer would that $29 item cost its sticker price. Oregonians would take out $29 only to be told, “that will be $30.75”. Coupons that budget conscious consumers stash away for planned shopping would no longer reduce the amount they expect to pay because a sales tax would mostly offset a 5 to 10 percent savings. And what would we do at local restaurants? Do you calculate a tip from the total bill, or from the pre-tax price? The frequent traveler might know just what to do, but for the majority of Oregonians, they would be living and shopping in an unfamiliar place.

The State of Oregon relies on personal income taxes for 73 percent of its revenue. If an investor put 73 percent of his money in one basket, that would be considered risky. So why should a state government be vulnerable to things like 10 percent unemployment? I think income tax is pretty low for the unemployed and property taxes account for just less than one percent of state revenue (o.3%). A point made by Oregon state representative Chris Garrett is pretty convincing. Garrett says, “The point is to diversify and stabilize our tax structure. Much as a sound investment portfolio should be diversified, so should a revenue base.”

A sales tax will not immediately solve state budget problems. In order for any legislation to have a chance at passing a sales tax, rate reductions and exemptions would need to be made in other areas. Recent projections suggest $1 billion could be gained by changing the way Oregonians pay taxes. Oregon would benefit more from tourist dollars as well. Considering the Woodburn Company Stores have previously been named Oregon’s largest tourist attraction (at least in terms of revenue) the state would benefit from sales tax dollars. I wonder how large this benefit would be in the long run. Once consumers account for a tax Washington residents no longer make as many purchases in Oregon. Travelers on a budget decide not to purchase an extra souvenir. Oregonians consume less and save a larger percentage of their–less taxed–income. A savings increase would be beneficial to individuals thinking long-term and credit markets might also get a boost from higher savings.

The benefits of enacting a sales tax in Oregon really depend upon changes in consumer spending and saving, the effect on businesses (which pay a portion of those taxes), and the overall diversification of Oregon’s tax revenue sources. I think I am fairly convinced a sales tax would be a good thing for voters to finally say, “Yes” to after all these years. Lawmakers will just have to change the minds of those who have voted, “No” the last three or four times.

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