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By Roger Stark, MD, FACS

Does having health insurance actually save lives or improve health more than being uninsured? This question has not been answered until very recently.

In 2008, Oregon lawmakers decided they had enough additional public money to add 10,000 people to the state’s Medicaid program. So, Oregon officials held a lottery that ultimately signed up 6,400 new Medicaid enrollees. A further 5,800 people were eligible for the program but were not selected. People in this group had the same health and economic profile as the lottery winners. This created the perfect test case on the effectiveness of Medicaid in providing care. These 5,800 people became the control group in an objective, randomized study.

The two-year results of the health comparison study were published recently in The New England Journal of Medicine. The conclusion is surprising. It turns out that having Medicaid health insurance does not improve health outcomes, nor does it improve mortality statistics, compared with having no insurance coverage at all. The Medicaid group had no improvement in the important objective measurements of blood sugar levels, blood pressure, and cholesterol levels. The study did find that vaguely defined “mental health” did improve. However, this was done via subjective telephone interviews, not objective clinical data. For those few people requiring prolonged medical and hospital treatment, having Medicaid did improve their financial status because their medical bills were covered by federal and Oregon taxpayers.

The existing Medicaid program has 60 million enrollees nationally at a cost of $430 billion per year. Looking forward, the cost is estimated to increase to $900 billion per year by 2019. Medicaid is an extremely inefficient program, and reimbursement for doctors and other providers is about half of what private insurance pays for the same services. Doctors are not able to pay their own overhead with these low payment rates. Consequently, existing Medicaid patients have trouble getting access to health care.

The Washington State Medical Association did a recent survey of primary care providers. Results showed 18 percent had dropped all Medicaid patients, and 24 percent were not taking new Medicaid patients, due to poor payment and the complexities of Medicaid cases compared with privately insured patients. Getting access to health care is a significant problem for people in the existing Medicaid program in Washington. It turns out that having insurance on paper is not the same as actually obtaining health care services.

The Affordable Care Act, or ObamaCare, gives states the option to expand Medicaid to at least 16 million new patients nationally and 280,000 in Washington State. The law says that any adult over the age of 18 who earns less than 138 percent of the federal poverty level will be eligible for Medicaid. The estimated cost of this expansion to taxpayers is at least $450 billion over the first 10 years, beginning in 2014.

The Oregon study confirms that Medicaid does not provide better health care to people than having no health insurance at all. These terrible results not only come with a huge taxpayer cost, but also trap poor individuals in a virtually worthless health insurance plan.

The Washington State Legislature is considering expanding Medicaid in the current state budget negotiations. The federal government is bribing states with federal taxpayer money to expand Medicaid. Many state lawmakers support the expansion because it feels like “free” federal money, and they reason that Medicaid is better than no health insurance at all. The large, randomized Oregon study shows this is not true.

Of course, state taxpayers are also federal taxpayers, so ultimately the people of Washington State will pay for this Medicaid expansion. Medicaid is a pay-as-you-go program. The idea of leaving free federal money on the table makes no sense. If Medicaid doesn’t expand, the burden of taxes should be reduced for everyone.

Medical outcomes for people in the Medicaid program are no better than outcomes for people without health insurance. This fact makes it very difficult to argue that Medicaid is better than no insurance, especially considering the tremendous cost involved. Washington’s state legislators would do better to improve their existing Medicaid program; eliminate waste, fraud, and abuse; improve access; and make the program a real safety-net health insurance plan that provides quality care at a reasonable cost. Oregon’s state legislators should do the same.

Dr. Roger Stark is a health care policy analyst at Washington Policy Center in Seattle, Washington and a retired cardiothoracic surgeon. He has authored numerous in-depth studies on health care policy. Dr. Stark was one of the cofounders of the open-heart surgery program at Overlake Hospital in Bellevue and served on the hospital’s governing board. He is a guest contributor for Cascade Policy Institute, Oregon’s free market public policy research center.

By Doug DeFilipps

Imagine your government laid a tax on the entire population, one in which in the same amount is paid by virtually everyone. And people are not simply taxed the same percentage of income, but the same dollar amount. Now imagine the money raised from this tax is spent on entertainment for the upper classes. You might think this sort of thing only happened in ages past, under rulers like Marie Antoinette; but it is happening today, here in Portland, Oregon. An annual head tax of $35 per resident over the age of 18 is being levied―the only exception granted is for those living under the poverty line.

 

The funds will go first to Portland-area schools, with the goal of hiring one art teacher to every 500 students. The remainder will fund various art endeavors in the city. These endeavors include the Oregon Symphony, as well as other organizations and museums. I am by no means trying to diminish the cultural importance of any of these artistic organizations. I myself thoroughly enjoy visiting museums around the city.

 

However, I also know that many of these are patronized primarily by middle- and upper-class Portlanders―not low-income Portlanders. Nonetheless, lower-wage earners will be forced to pay for these artistic endeavors through the new tax in spite of the fact that they enjoy them far less. Though the tax is only on those making above the poverty line ($23,681 for a family of four), I think it is safe to say that not everyone making above that amount is exactly rich.

 

Equally appalling is that, as mentioned above, people with low incomes will pay the exact same amount as people with high incomes, in spite of the fact that $35 means a great deal more to them. Why should those who have the least sacrifice the most for something that will benefit them the least? Furthermore, the Portland art community is already generously supported voluntarily. If the wealthy are already willing to open their wallets, why should the poorest be forced to open theirs?

 

The City of Portland is imitating Marie Antoinette’s follies. Most of the tax dollars that went to pay her expenses were raised through highly regressive taxation mostly imposed on poor peasants. These included the Gabelle, a tax on salt that fell most heavily on the poor. Those same poor peasants, for the most part, would never see or enjoy what their money had paid for (the Palace at Versailles was open to the public but well out of traveling distance for most). They would never see Marie Antoinette’s lavish jewels or gowns or walk through the lovely gardens outside her Petit Trianon.

 

It is also worth pointing out that this kind of tax is forbidden by the Oregon Constitution. The constitution, which supersedes any laws passed by the city, specifically forbids a head tax. The Arts Tax obviously would fall under the category of a head tax, demanding an equal amount from all adult citizens regardless of means.

 

The Portland Arts Tax is unnecessary and unfair. It taxes those who are least able to pay for something they will rarely, if ever, use. And since many Oregonians already subsidize the artistic institutions the tax will benefit of their own free will, why should everyone else be forced to?

Doug DeFilipps is a research associate at Cascade Policy Institute. He is a recent graduate of Santa Clara University.

The transit agency for Vancouver (C-TRAN) is reconsidering its support for the Columbia River Crossing Project, which includes light rail to Vancouver. In a staff report prepared for this week’s C-TRAN board meeting, the following claims are made:

• Light rail offers faster service (17 MPH) than bus rapid transit (14.5 MPH);
• The extended Yellow MAX line will arrive in Vancouver every 7.5 minutes; and
• Light rail will carry 6,100 people over the Columbia River during the peak period.

All of these answers are wrong.

C-TRAN express buses running from various points in Vancouver to Portland city center currently average 31-45 MPH (depending on the route) in the morning peak period. In the afternoon peak they average 20-30 MPH traveling northbound.

Current Yellow MAX line service is one train every 15 minutes, all day. There will be no peak-hour service to Vancouver at 7.5-minute intervals, because TriMet has reduced service by 14% in the past five years. The agency is broke.

Finally, the maximum one-way capacity of a two-car light rail train is approximately 274. Multiplying this times eight trains per hour in the peak direction is 2,192 riders, not 6,100.

The fact is, C-TRAN’s express bus service is far superior to the slow MAX, so why spend $930 million on a slow train to Vancouver? That’s the question that should be asked.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Backwards Budgeting
By Suzanne Gallagher
Chair, Oregon Republican Party

Imagine your family received a 10 percent increase in income this year. Like most Oregonians, you'd be pretty happy. Knowing your new income level, you might retool your family budget a little; pay down some debt or save for a rainy day.

Oregon government has 10 percent more to spend this year. That means $1.7 billion more for the next two years. However, Democrats who control both legislative chambers are doing things backwards compared to Oregon families.

Successful budgeting - whether for a nation, a state, a business or a family - means following basic rules of logic and common sense. We start with an estimate of our expected income and develop a list of priority areas on which to spend that income in a reasoned and equitable manner. As time goes on, we may adjust our budget as income fluctuates. None of this is rocket science.. It is good old-fashion common sense and every responsible family does it.

What conscientious business or family would start their budget process with an imaginary or ideal income number plucked out of thin air? No, we start with a reasonable estimate of our net income - these days usually from a two-income family - and go from there.

And yet, the Democratic leadership of the Oregon Legislature is basing its budget on a fictional, made-up number! It's like family budgeting based on what they want to make, not on what they actually bring home. Sure, it's nice to occasionally fantasize about what to buy after hitting the Powerball(r) jackpot, but that is not the same as responsible budgeting.

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Please join us for Cascade’s monthly Policy Picnic, led by Cascade President and CEO John A. Charles, Jr., on Wednesday, May 15, at noon.

The legislature continues to spend more than Oregonians can afford. Join John in discussing the psychology of legislative decision-making.

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to ten guests on a first come, first served basis, so sign up early. To RSVP, email Patrick Schmitt at patrick@cascadepolicy.org or call 503-242-0900.

Sponsored By

By Roger Stark, MD, FACS

President Obama signed the federal health care bill, The Affordable Care Act (ACA), into law three years ago. Let’s look at what has happened over the past three years.

The law remains extremely unpopular with Americans. Since passage, polls have consistently shown at least 50 percent of voters disapprove of the law. A recent Kaiser Family Foundation poll revealed that only 41 percent of respondents actually understood the law, while 57 percent did not.

The estimated cost of the law has gone up dramatically. Originally, the nonpartisan Congressional Budget Office (CBO) estimated ObamaCare would cost $940 billion over its first 10 years. This was based on a deception written into the law of 10 years of revenue starting in 2010 but only six years of benefits starting in 2014.

The CBO now estimates the cost to be $2 trillion over the 10 years starting in 2012. Revenue comes from a $716 billion cut to Medicare providers and over $1 trillion in new or expanded taxes. None of the significant Medicare cuts have taken place as scheduled, so the cost overrun of ObamaCare has already started. Health insurance companies are warning of 30 to 116 percent increases in premiums, and the government’s own CBO estimates at least 10 to 13 percent increases in rates.

Even President Obama sees the failure of parts of the law. He has signed the repeal of the long-term care provision, or CLASS entitlement. He also signed the repeal of the $1.7 billion Small Business Tax Reporting Requirement, which would have forced businesses to report every vendor transaction over $600 to the IRS. A bipartisan majority in the U.S. Senate recently voted 79 to 20 to repeal the 2.3 percent tax on medical device makers’ revenue (not profits).

The administration has, to date, granted 1,600 waivers to unions and various favored companies allowing them to opt out of ObamaCare. For the rest of us, the government has issued 20,000 pages of new regulations for implementation of the law and will force patients to fill out a 21-page application to receive care under the ACA (that’s the EZ form; the long form is 60 pages).

Medicaid expansion and new government-run insurance brokerages, or exchanges, are fundamental provisions of ObamaCare. Yet, 18 states have opted not to expand Medicaid, and 26 states have no plans to set up a state-run exchange.

The proponents of ObamaCare cling to a number of inconsequential benefits. Young adults from ages 19 to 25 now can be covered on their parents’ health insurance plans. These are the young and healthy, however, and the vast majority don’t need health care and don’t have much impact on health care costs. Also, when they turn 26 their parents’ coverage ends. They then will have to pay more than their fair share for health insurance because of the community rating requirement that forces young, healthier people to pay the same premium as older, sicker individuals.

Proponents also tout the mandated preventive care in the law. Yearly physical examinations and other preventive care are not “free,” and for large numbers of patients have no impact on health outcomes, nor do they save money.

We are also told the law prohibits insurance companies from denying coverage to patients because of pre-existing conditions. Research shows that only 62,000 people in the United States are in this group with no insurance and a pre-existing health problem. Spending $2 trillion to provide coverage to this small group is irresponsible and could be handled by shared-risk pools like the one Washington State already has.

The ACA is a 2,700-page, achingly complex, monstrous law that will soon control one-sixth of our economy. The country continues to dislike ObamaCare and remains puzzled by its mind-numbing complexity.

Everyone agrees health care needs to be reformed. Patients making informed choices in a free market―not top-down government mandates that will only result in higher costs, not better care―will put patients in charge of their health care decisions and their own health care dollars.

Dr. Roger Stark is a health care policy analyst at Washington Policy Center in Seattle, Washington and a retired physician. He has authored numerous in-depth studies on health care policy. Dr. Stark was one of the cofounders of the open-heart surgery program at Overlake Hospital in Bellevue and served on the hospital’s governing board. He is a guest contributor for Cascade Policy Institute, Oregon’s free market public policy research center.

By Doug DeFilipps

The Beaverton City Council is considering exempting non-profit organizations that open new affordable housing units from paying the city’s property tax. An associate planner for the city said that “affordable units [are] going to be a major challenge in the future” because “[t]he housing market is tight, and a lot of affordable units in Beaverton are occupied by residents who could pay more but opt for cheaper housing.”

If the goal is affordable housing, then the city should ease the tax and regulatory burden on all development and businesses. That way it would be easier for developers to build new housing, and housing would become more affordable. If a major cause of the lack of affordable housing is “people who could pay more but opt for cheaper housing,” then it makes sense to try to give everyone more, less expensive options.

Developers of affordable housing should not be given special treatment. Why should other developers, not to mention businesses and residents, be taxed more than these affordable housing groups? Why should they be forced to make up the shortfall?

Government entities, including the Beaverton City Council, have an obligation to treat all citizens and businesses fairly and equally, and not to pick favorites.

Doug DeFilipps is a research associate at Cascade Policy Institute. He is a graduate of Santa Clara University.

John A. Charles, Jr. submitted testimony on Monday to the Senate Committee on Finance and Revenue, speaking against a proposal to allow counties to impose local tobacco taxes.

Testimony of John A. Charles, Jr.

President & CEO 

Before the Senate Committee on Finance and Revenue

Regarding HB 2870-A

April 29, 2012 

 

I am writing in opposition to HB 2870-A.

This bill suffers from an inherent contradiction in its twin policy objectives: raising money and reducing tobacco consumption. For one to succeed, the other must fail.

None of the proponents want to admit this. They prefer to claim that the primary goal is “public health.” However,  the bill only requires that a minimum of 40% of the proceeds be spent on tobacco use prevention and cessation programs, which means that 60% of the funds will go for other uses. This clearly shows that public health is not the primary motivation behind the bill, revenue generation is.

If we admit that this is just a money bill, then there is no compelling argument in favor of taxing a product used by only a fifth of the population, in order to create a revenue stream that will likely benefit everyone. The only reason such bills get introduced is because it is politically easy to pick on a minority group engaged in a habit that is publicly scorned.  But we should not tax minorities just because we can.

If local governments genuinely want to spend more money on tobacco cessation programs, they already have access to the MSA settlement funds. Oregon has received over $1 billion in MSA money since 1998, but virtually none of it has gone to directly help smokers. Since that was one of the express purposes of creating the fund, I’d suggest local governments direct their lobbying efforts at state legislators who continue to use revenue from the MSA as an all-purpose slush fund.

Between state and federal tobacco taxes, plus the price hikes needed by the major tobacco companies to make the MSA payments, tobacco users have paid more than their fair share for any so-called “negative social externalities” associated with smoking. Please leave them alone by tabling HB 2870.

February marked the four-year anniversary of the Westside Express Service (WES), the 14.7-mile commuter rail line that runs from Wilsonville to Beaverton. While the train’s owner, TriMet, has emphasized the steady growth in ridership over time, the truth is that WES has been a failure. Daily boardings are still far below the opening-day forecast, and taxpayers subsidize each rider by nearly $40 per round trip.

Although WES was 15 years in the making, it was always a project in search of a purpose. At various times the train was promoted as: (1) a congestion relief tool for HWY 217; (2) a catalyst for so-called “Transit-Oriented Development;” or (3) a way of providing “another option” for travelers. None of these arguments holds up to scrutiny.

During legislative hearings in Salem, representatives from Washington County claimed that WES would take 5,000 motor vehicles per day off of nearby highways. But WES is not even capable of doing that because it only runs 8 times (each direction) over a four-hour period in the morning, and 8 more times in the afternoon, with seating capacity limited to 154 or less on each trip. The train does not run at all on weekends.

In contrast, both HWY 217 and I-5 are heavily used throughout the day, every day of the week, by passenger cars, trucks, buses and emergency service vehicles. WES only caters to passengers.

During its best hours of performance, the total number of passengers traveling on WES is less than 0.5% the number of motorists traveling on HWY 217/I-5 at those same hours. Moreover, every time WES crosses Scholls Ferry Road or any of the other busy East-West thoroughfares, it ties up dozens of vehicles for 40 seconds or more. Since the train itself typically only carries 20-50 passengers per trip, this means that WES actually has made Washington County congestion worse than it was before the train opened.

WES also will not be a catalyst for “transit-oriented development,” because the train stations are a nuisance, not an amenity. The noise associated with train arrivals was always underestimated and has proven to be a significant problem for nearby businesses and residents.

As for the hope that WES would provide “another transit option,” there were already two TriMet bus lines providing over 4,000 boardings per day in parallel routes prior to the opening of WES. Commuter rail simply replaced inexpensive bus service with a massively subsidized train.

Several key statistics summarize the problems with the train:

• WES was originally projected to cost $65 million and open in 2000. It actually cost $161.2 million and opened in 2009.

• TriMet projected an average daily ridership of 2,400 weekday boardings in the first year; actual weekday ridership was 1,156 in 2009 and has grown to 1,639 in 2013. Since each rider typically boards twice daily, only about 820 people actually use WES regularly.

To truly appreciate the high cost of commuter rail, we need to compare it with other types of service offered by TriMet: light rail and bus. The following are averages for the month of January 2013.

Operating cost per

Vehicle-hour

Operating cost per

Originating ride

Operating cost per

Vehicle-mile

Bus

    102.14

    3.97

    7.94

MAX

     282.13

    2.52

   18.84

WES

$ 1,251.94

$ 20.31

$ 57.30

The operating costs for WES are 12 times higher per hour than bus service, but the public benefits are not 12 times higher. In fact, WES is not even equal to bus service; it is far less flexible, and the equipment is unused most of the time.

TriMet recently predicted that within the next decade, more than half of all bus routes will be eliminated due to operating losses if something doesn’t change. The Board places the blame for this on a labor union contract that saddles the agency with the costliest employee benefits package in the nation. But the union did not force management to build an absurd commuter rail line; that was a choice made by the Board alone, without any consideration of the legacy costs it would impose on future riders.

There will be no happy ending to this story. WES is destined to be a one-hit wonder―an expensive monument to the egos of Westside politicians and TriMet managers. Taxpayers would be better served over the long term if we simply cancelled WES, repaid grant funds to the federal government, and moved the few WES customers back to buses.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

School choice programs empower parents to choose the schools their children attend―public or private―by allowing parents to direct a portion of public education funding for their child through tax credits, scholarships, vouchers, and education savings accounts. School choice programs are among the most prominent and successful reforms in education today.

The Friedman Foundation for Educational Choice has released a new report examining 23 empirical studies of school choice programs. The report is authored by scholars at the University of Arkansas, Harvard University, the Federal Reserve Bank, Stanford University, and Cornell University.

According to the study, “[o]pponents frequently claim school choice does not benefit participants, hurts public schools, costs taxpayers, facilitates segregation, and even undermines democracy. However, the empirical evidence consistently shows that choice improves academic outcomes for participants and public schools, saves taxpayer money, moves students into more integrated classrooms, and strengthens the shared civic values and practices essential to American democracy.”

More than 250,000 students attend private schools through 41 school choice programs in 22 states and Washington, D.C. Expanding educational options through widely accessible school choice programs for all children can deliver the kind of dramatic improvement American schools desperately need to meet the diverse needs and aptitudes of all students. Putting parents back in charge is the way to revolutionize education today.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

Since 1995, Metro has been steadily buying up thousands of acres of undeveloped land with bond money approved by the voters. Most of the large parcels are located far from population centers, often outside the Portland urban growth boundary.

In addition to their being geographically remote, Metro has made little effort to provide public access to these lands. Entrances are frequently gated and locked, signage is poor, and there are few parking lots or restrooms.

Unfortunately, this problem will not be addressed with Metro’s proposed levy (Measure 26-152) that will be on the May 21 ballot. Metro officials have stated that if the operating levy passes, only 5-15% of the money will be used to make natural areas more accessible to the public.

According to the levy proponents, the rest of the estimated $10 million in annual tax funding will go to the following uses:

• improving water quality in rivers for salmon and other native fish;
• restoring wildlife habitat;
• removing weeds;
• restoring wetlands; and
• providing nature education programs.

While some of these uses sound good, we are already paying for similar programs through other taxes. For instance, we pay electricity surcharges of $650 million annually to finance the Columbia River Basin Fish and Wildlife Program (administered through the Northwest Power Council). Since 1978 we’ve spent more than $14 billion on regional fish and wildlife habitat improvements. There is no justification for spending an additional $10 million through the Metro levy.

Moreover, Metro’s conception of “habitat restoration” is not very compelling. It includes projects such as clear-cutting politically incorrect tree species (Douglas fir) in order to re-plant with Oregon white oak. There is no scientific reason to replace one tree species with another; it is simply an aesthetic preference of Metro planners.

Given that taxpayers already have provided more than $300 million for Metro to buy up lands, a more respectful approach would be for Metro to make public access the top priority and to pay for it out of Metro’s general fund. Over the past decade the Metro budget has grown steadily, and more than 60 new full-time employees have been hired. Obviously, Metro could pay for parks maintenance without a levy.

We also know that maintenance should not cost $10 million annually, because in 2011, Metro’s net operating cost of managing seven natural areas was only $630,747. Even if Metro had to maintain 25 areas instead of seven (as would be the case under this levy), maintenance costs should be closer to $3 million, not $10 million.

As the national recession continues, Oregon families have had to make difficult choices in order to stay afloat. Many people have lost homes to foreclosure or had their electricity shut off. Metro councilors need to do some belt-tightening of their own. They should pay for operations of natural areas out of existing revenues and make public access to those areas the top priority.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

In 2007 Governor Ted Kulongoski appointed me to represent taxpayers on the legislatively created Comprehensive Revenue Restructuring Task Force. The Task Force reviewed and analyzed revenue and spending streams in the state, but did not recommend comprehensive reforms to the tax system.

At the first Task Force meeting in November 2007, Portland pollster Adam Davis presented his focus group work around tax reform. He told us that public negativity on government and politics was higher than he’d ever seen in his 30-year career.

One key finding stood out, and I believe this is an accurate paraphrase:

“Any sales tax is dead in this state―unless coupled with elimination of another tax. Reducing other tax rates won’t sell a sales tax.”

“Even when it was explained that reduced income and/or property tax rates could be locked into the Constitution, voters responded that ‘They’ll find a way to jack the rates back up.’”

Adam Davis recently told me that his firm later did more quantitative analysis which confirmed his focus group findings that Oregonians will not accept a third tax…period.

With that realization in mind, I proposed to the Task Force, and I propose now, that Oregonians should have a serious discussion about replacing our economically harmful income tax system with a less harmful sales tax system. Research finds states without an income tax have experienced higher economic and job growth than states with high income tax rates like Oregon. Last year, two economists who study this trend said:

“Every year for the past 40, the states without income taxes had faster output growth (measured on a decadal basis) than the states with the highest income taxes….

“Over the past decade, states without an income tax have seen 58% higher population growth than the national average, and more than double the growth of states with the highest income tax rates….

“The transfer of economic power and political influence from high-tax states toward low-tax, right-to-work ones is one of America’s most momentous demographic changes in decades. Liberal utopias are losing the race for capital.”*

While it seems clear that income taxes do harm our economy, sales taxes appear to do less damage, and therefore may be preferable when we cannot find voluntary ways to fund government services.

This month a state senate committee held two public hearings on bills that would impose a five percent retail sales tax while somewhat reducing income and property tax burdens. At the first hearing, Governor John Kitzhaber suggested that sales tax advocates (he among them) should first get a better sense of what voters think is wrong with the current system—and then get a “better handle on spending.”

One state senator suggested that a better handle on spending could be achieved by tying state spending to inflation and population growth, as a 2006 defeated initiative would have done. If it had passed, legislators would be sitting in Salem today with a significant budget surplus, instead of wondering how to wring more tax dollars out of a struggling economy. That may not be the kind of handle on spending the Governor had in mind, but it sure beats having no handle at all.

I testified at the second hearing, proposing that the bills (SJR 36 and SB 824) be amended so that they not only create a state sales tax, but that they prohibit income taxes in the Oregon Constitution (Article IV, section 32). If Oregon voters understand that it would be unconstitutional to tax their incomes, they might render a different verdict on a sales tax than they did when rejecting them nine times at the polls since 1933.

Eliminating the income tax completely is important for economic reasons, but also because, as focus groups and polls have shown, Oregonians simply don’t trust their elected officials to keep rates on other taxes down once a new sales tax is in place. I also believe they understand that states with so-called “three-legged tax stools” have budget problems, too, such as our neighbor to the south, California.

One of the perceived advantages of adding a sales tax to currently existing taxes appears to be that the mix of different taxes seems to reduce instability in the system. A number of people testified that budget stability is important to them, especially for local school budgets which are funded significantly from the state General Fund.

But at the hearings, I was the only person who questioned why the state budget should be more stable than our own business and family budgets. As a former and current member of the Governor’s Council of Economic Advisors wrote in 2007:

“It is not clear why government budgets should be more stable than private budgets. It is already the case, with the kicker and without any rainy day fund, that public employment in the state is 20% more stable than private employment.”**

If legislators are not careful, making state revenue more stable will make their constituents’ after-tax family budgets even less stable, and many of them will not appreciate that.

In conclusion, until we reduce the size and scope of state government, no third source of tax revenue will solve our state’s financial problems. It will simply mask them.

* “Laffer and Moore: A 50-State Tax Lesson for the President,” Arthur Laffer and Stephen Moore, Wall Street Journal, April 20, 2012.

** Excerpt from an email to then-State Senator Ryan Deckert from economist Randall Pozdena, Ph.D., dated March 6, 2007.

Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Congress is poised to raise taxes again, this time by allowing states to impose sales taxes on online sales. Senators Ron Wyden (D-OR), Max Baucus (D-MT), and Kelly Ayotte (R-RH)―all representing states without sales taxes―oppose the Senate’s “Marketplace Fairness Act” as “taxation without representation.” The proposed legislation would burden online businesses with enforcing potentially thousands of state and local taxes across the country at the point of sale.

 

Andrew Moylan, senior fellow with the R Street Institute in Washington, D.C., writes, “This means quizzing purchasers about their location, looking up the appropriate rules and regulations in more than 9,600 taxing jurisdictions across the country, and then collecting and remitting sales tax for that distant authority. No brick-and-mortar shop has to do this for in-store sales, and yet every online retailer would have to do it for remote sales.”

 

In an editorial this week, The Wall Street Journal added: “Small online sellers will therefore have to comply with tax laws created by distant governments in which they have no representation, and in places where they consume no local services.”

 

Senator Dick Durbin (D-IL) claims tax accounting software makes it easier for smaller businesses to comply with the proposed law than opponents allege. Still, forcing retailers to enforce the tax laws of thousands of different localities across the country is a massive change in the way we do business―one that will have far-reaching consequences for small businesses and consumers alike.

 

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

The Elephant in the Room
By Suzanne Gallagher
Chair, Oregon Republican Party

The "Elephant in the room" is an English metaphorical idiom for an obvious truth that is either being ignored or going unaddressed, applies to an obvious problem or risk no one wants to discuss. The “Elephant in the Room” is not a Republican. It is a Democrat.

Oregon has a system of one party rule which now cannot effectively address the PERS crisis which threatens to financially hamstring Oregon Government at every level, from Governor John Kitzhaber’s State Agencies right down to your kid’s classroom.

Years of Democrat control has created an unfunded Public Employee Retirement System (PERS) that goes beyond taxpayers’ ability to support. Fundamental reforms are necessary and obvious, except to the Democrats who created the problem and are unwilling to make the necessary reforms.

Meaningful PERS Reform is possible, IF there were political will.

Senate Bill 754, would create and retain the most jobs right away -- with real savings equivalent to 5,000-10,000 teachers, police officers, firefighters, and other public servants. The Democrat leaders will not allow it a hearing.  This bill, supported by numerous non-partisan groups including Oregon School Boards Association representing schools statewide, Stand for Children, the Oregon Business Association, and the Oregon Business Plan, will not see the light of day. Meanwhile, all local government jurisdictions including schools, cities and counties will continue plan cuts to core services replaced by PERS – Oregon’s out of control utopian retirement plan.

Democrat legislators in both Houses who receive PERS themselves, are conflicted beyond their ability to solve the most pressing public problem facing our state. We sent them to Salem to solve problems, not provide themselves and their political allies’ overgenerous retirements at the expense of virtually everyone else.

Every other public priority is now a hostage to this political one-party stand-off. In their frantic efforts to ‘feed the beast’ Democratic leaders choose to do what they have always done: introduce regressive tax and fee proposals to raise revenue, including cigarette taxes, bird seed taxes, and sugar-sweetened beverage taxes. They think they know better than you how to live your lives, and they need your cash.

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By Todd Myers
On April 22, in cities across America, some environmental activists will celebrate Earth Day, claiming only increased government control can protect the environment. Those celebrations will expose a couple ironies.

First, many activists will arrive in a Toyota Prius, which has become the symbol of environmental consciousness. Ironically, however, the Prius is not a triumph of political planning but of the free market. In the 1990s, while California was requiring “zero-emission” vehicles, leaders at Toyota and Honda saw an opportunity to sell cars to people who want to spend less on gasoline, drive a car that emits less carbon dioxide, or both. Thus was born the hybrid vehicle. Even though it did not meet California’s regulation, it sold well, causing Golden State politicians to change the law.

Jumping on the bandwagon, politicians began to give preferences to hybrids. Politicians did not lead, but followed the innovation of the free market. Most Prius drivers, however, don’t know that history; and some will spend Earth Day opposing the free-market policies that created the car they are so proud of.

Many activists on the left will also spend Earth Day complaining that people who see the benefits of the free market don’t care about the environment. A look at the national political map, however, tells a different story.

Across the country, the parts of the nation that most consistently support free-market candidates are those surrounded by stunning natural beauty. The most vocal environmental activists —who are quick to lecture others about caring for nature—tend to live in cities, where nature has been thoroughly controlled, constrained, and paved.

How, we should ask, can environmental activists get away with this? How can they continue to advocate top-down policies that don’t help the environment? How can those who live where nature has been subjugated lecture those who live in it and with it every day?

Environmentalism has become trendy and a way to show you are a good person, rather than actually helping the environment. Environmental activists and politicians choose government-mandated approaches not because they help the environment, but because the policies make them feel good about themselves and make them look good to others. The strategy is as simple as the fourth-grade playground: Build up your own environmental credentials by tearing others down and calling names.

Rather than pointing out these ironies, however, free-market conservatives often fall into the trap of arguing there are no risks to the environment, fitting perfectly into the stereotype imposed on them by the left. Some conservatives fear that by admitting they care about the environment, they must then endorse a range of leftwing policies they oppose.

In fact, a strong concern for the environment is part of believing in personal responsibility and the free market. Conservatives believe people have freedom, but must take responsibility for the impact they cause. If you commit a crime, you don’t get to blame society. A reason conservatives live near nature is that we love to hike, hunt, fish, and marvel at the awe-inspiring natural beauty with which our nation is so blessed.

Finally, the free market is the greatest system for allocating scarce resources and doing more with less, both of which are at the heart of a true environmental ethic. Rather than forcing behavior change, conservatives promote technological solutions that respect the freedom of individuals while reducing environmental impact. Rather than falling for the latest trendy environmental policy, conservatives demand that the government measure success or failure.

Better yet, we promote the creative competition that discovers options that we never imagined. As politicians spend billions on rail and buses that carry few people, the market is creating driverless, fuel-efficient cars that will more efficiently take people exactly where they want to go.

For energy efficiency, clean air, clean water, and smart resource use, the free market combines prosperity and innovation to successfully protect natural resources. April 22 may be a one-day event for some; but for those who embrace the free market and its push to do more with less, every day is Earth Day.

Todd Myers is director of the Center for the Environment at Washington Policy Center and a guest contributor at Cascade Policy Institute. He is the author of the book Eco-Fads: How the Rise of Trendy Environmentalism Is Harming the Environment and is designated a Wall Street Journal Expert panelist for energy and the environment.

Join Cascade Policy Institute and Atlas Economic Research Foundation as we welcome world-renowned speaker and Vice President for the Atlas Foundation Tom G. Palmer to discuss his new book, After the Welfare State.

 

 

Price for admission includes assorted appetizers, dessert, coffee, tea and a complimentary copy of the book.  A no host bar will also be offered.

To attend, RSVP with admission payment to Patrick Schmitt at 503-242-0900 or patrick@cascadepolicy.org by May 3, 2013.

Tom G. Palmer is the Executive Vice President for International Programs at Atlas Economic Research Foundation. He previously served as Vice President for International Programs at the Cato Institute and Director of the Center for Promotion of Human Rights. He is a Senior Fellow at the Cato Institute and Director of Cato University, the Institute’s educational arm. He is the author of Realizing Freedom: The Theory, History, and Practice of Liberty. He received his BA from St. Johns College, MD, his MA in philosophy from The Catholic University of America, and his doctorate from Oxford University.

By Doug DeFilipps

Bike share is a rental system in which bicycles are made available to individuals at low cost for a short period of time. City planners across the United States like bike share programs. Proponents claim that such systems, once created or subsidized by the government, will reduce traffic congestion and pollution.

Portland’s bike share program, run by a company called Alta Bicycle Share, has already received two million dollars from the federal government. Apparently, this was not enough “free” money to be successful, as the program has been hampered by delays. It is also short about three million dollars in equipment costs, and private sector investment has not been forthcoming.

However, the bike share program’s delays may be good for Portland’s bicycle rental companies. The Oregonian reported last year that regular bike rental companies worried about losing money to government-subsidized competition.

If demand for a bike share program in Portland were so great, wouldn’t private investors be lining up to fund it? And why should Portland bike businesses be damaged by a rival with a distinctly unfair advantage―namely, taxpayer money? Portland is a city that values bicyclists. It also should value its private rental companies, not undercut them with taxpayer money. Portland should not throw more good money after bad for government-funded bicycles.

Doug DeFilipps is a research associate at Cascade Policy Institute. He is a graduate of Santa Clara University.

The Oregon legislature is struggling to balance the state budget while meeting the perceived need to adequately fund education, health care, public safety, and other services. In 2010, Cascade and Americans for Prosperity – Oregon published our first Facing Reality report, offering state legislators an opportunity to “reset” state government using the time-tested principles of limited government and pro-growth economic policies. While this opportunity was mostly ignored in the 2011 legislative session, we decided to update several key proposals from that report, add one more, and present them to the 2013 legislature.

We have just released our new report, Facing Reality 2013. Together, its proposals can save over one billion dollars in the state budget, and add 50,000 jobs over the next five years without any cost to taxpayers. These savings and economic benefits more than counter any claims that we need to raise taxes on hardworking Oregonians and businesses.

Here, in brief, are these proposals and their potential benefits:

FACING REALITY 2013 Components

Benefit Summary

Privatize liquor distribution and sales

$8 million biennial revenue

Reduce corrections costs

$68 million biennial savings

Eliminate the PERS pick-up

$772 million biennial savings

Align state employee compensation with private sector compensation

$160 million biennial savings

Enact Right-to-Work legislation

50,000 more people working in five years; 110,000 more working in ten years.

 

$2.7 billion more in wage and salary income in five years; $7.0 billion more in ten years.

 

14 percent more taxpaying families per year moving into Oregon from non-right-to-work states.

 

Our Right to Work proposal stems from Cascade’s 2012 report, Right to Work Is Right for Oregon, which broke new ground by covering 70 years of data and every state, and relying on what we believe to be the largest datasets ever used to study the impacts of right-to-work laws. Coincidentally, an initiative petition may be circulated soon to grant such freedom to all Oregon public employees. If that happens, Cascade will be in the forefront of making the economic and moral case for its approval.

Decades of well-meaning politicians, bureaucrats, and special interests have grown state government spending without regard for long-term consequences, producing an unsustainable budgetary premise that threatens Oregon’s financial stability. Long-term debt, unfunded liabilities, inefficient programs, unnecessary spending, and bloated bureaucracies all contribute to this bleak future. Along with higher tax rates, fee increases, and unfunded mandates that make it harder for businesses to produce a profit, we face the perfect storm that manifests itself in Oregon’s budget and economy today. Without a drastic change in direction, it will only get worse.

Unfortunately, the demonization of corporations and small businesses during the debate over tax-increase Measures 66 and 67 which passed in 2010, along with proposed regulations and higher state fees, has reinforced the impression that Oregon is not business-friendly. This must be addressed immediately if long-term investments in expanded business capacity are to occur.

The proposals in Facing Reality 2013 represent significant changes in the way Oregon government operates. More will need to be done, but these are a good start. We encourage all Oregonians to study them and ask their state legislators to do the same. It is not too late to refocus Oregon government on its core functions, reduce its costs, and remove it from areas in which it has no business, such as the distribution of liquor.

While we recognize the enormity of the politics that surround these concepts, we believe they are essential if we are to “recharge” our economy and ensure Oregon’s long-term future. Without them, Oregon’s future looks dim. With them, the future is as bright as we want it to be. 

Steve Buckstein is founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Testimony before the Senate Committee
on Finance and Revenue
regarding sales tax bills SJR 36 and SB 824
by Steve Buckstein

[This testimony was submitted for the April 15, 2013 hearing, but was held over for the April 17, 2013 hearing. My prepared April 17th testimony is posted at the end.]

Good afternoon, Chair Burdick, Vice-Chair George, and members of the Committee. My name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, which is a non-profit, non-partisan think tank based in Portland.

In 2007 I was appointed by Governor Kulongoski to represent taxpayers on the legislatively created Comprehensive Revenue Restructuring Task Force. The Task Force reviewed and analyzed revenue and spending streams in the state, but did not recommend comprehensive reforms to the tax system.

At the first Task Force meeting in November 2007, we heard from Portland pollster Adam Davis about his focus group work around tax reform. One key finding stood out, and I believe this is an accurate paraphrase:

“Any sales tax is dead in this state – unless coupled with elimination of another tax. Reducing other tax rates won’t sell a sales tax.”

“Even when it was explained that reduced income and/or property tax rates could be locked into the Constitution, voters responded that ‘They’ll find a way to jack the rates back up.’”

Mr. Davis recently told me that his firm did more quantitative analysis for two state senators which confirmed his focus group findings that Oregonians will not accept a third tax…period.

With that realization in mind, I proposed then, and I propose now, that we should have a serious discussion about replacing Oregon’s economically harmful income tax system with a less harmful sales tax system.

Research finds states without an income tax have experienced higher economic and job growth than states with high income tax rates like Oregon.

I want to be clear that I don’t like sales taxes very much either, but I’m convinced that they do less damage to the economy than do income taxes.

I suggest that SJR 36 and SB 824 be amended so that they not only create a state sales tax, but they prohibit income taxes in the Oregon Constitution (Article IV, section 32).

Once Oregon voters understand that it will be unconstitutional to tax their income, they may render a different verdict on a retail sales tax than they have nine times in the past.

If you worry that this proposal may not raise enough revenue, then you should shelve any talk of tax restructuring until the legislature and the Governor, or the people, have comprehensively restructured and reduced state spending.

I know that many of you don’t want to hear this, but simply adding a sales tax to our current income and property taxes never has been, and I believe never will be, acceptable to Oregon voters. They know that states with so-called three-legged tax stools have budget problems, too.

Until we reduce the size and scope of state government, no third source of tax revenue will solve our problems, it will simply mask them.

Thank you.
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April 17, 2013    Buckstein testimony on SJR 36 and SB 824

I want to highlight key points in my written testimony [above] that you already have, and respond to several issues raised here on Monday, April 15th.

First, I appreciated the Governor’s suggestion that sales tax advocates should first get a better sense of what voters think is wrong with the current system — and then get a better handle on spending.

Senator George suggested a spending limit like the one voters rejected in 2006, which would have tied state spending to inflation and population growth.  If that limit had passed, you’d be sitting here today with a significant budget surplus instead of wondering how to wring more tax dollars out of a struggling economy.

That may not be the kind of handle on spending the Governor has in mind, but it sure beats having no handle at all.

As to what voters think is wrong with the current tax system, you heard from the chair of Governor Kulongoski’s Comprehensive Revenue Restructuring Task Force.

Lane Shetterly told you that the Task Force discussed sales tax proposals, but chose not to recommend one based partly on polling data.

I was a member of that Task Force, appointed by the Governor to represent the taxpayers.

At the first Task Force meeting in November 2007, we heard from Portland pollster Adam Davis about his focus group work. He told us that public negativity on government and politics was higher than he’d ever seen in his 30 year career.

One key finding stood out, and I believe this is an accurate paraphrase:

“Any sales tax is dead in this state – unless coupled with Elimination of another tax. Reducing other tax rates won’t sell a sales tax.”

“Even when it was explained that reduced income and/or property tax rates could be locked into the Constitution, voters responded that ‘They’ll find a way to jack the rates back up.’”

These findings mirror a concern several people mentioned here on Monday — the lack of Trust in government. Voters simply won’t trust you to keep income and property taxes down once they give you a Sales Tax.

Adam Davis recently told me that his firm did more quantitative analysis later, which confirmed his focus group findings that Oregonians will not accept a third tax…period.

With that realization in mind, I proposed then, and I propose now, that we should have a serious discussion about replacing Oregon’s economically harmful income tax with a less harmful sales tax.

Research finds states without an income tax have experienced higher economic and job growth than states with high income tax rates like Oregon.

I want to be clear that I don’t like sales taxes very much either, but I’m convinced that they do less damage to the economy than do income taxes.

I suggest that SJR 36 and SB 824 be amended to PROHIBIT income taxes in the Oregon Constitution.

Once Oregon voters understand that it will be unconstitutional to tax their incomes, they may muster up enough trust to finally approve a retail sales tax.

There was quite a bit of discussion on Monday about devising a more stable source of revenue for state government. Paul ably showed you that a mix of different taxes could reduce instability in the system.

But there was no discussion about why the state budget should be more stable than our own business and family budgets. As a member of the Governor’s Council of Economic Advisors wrote then Senator Ryan Deckert in 2007:

“It is not clear why government budgets should be more stable than private budgets.  It is already the case, with the kicker and without any rainy day fund, that public employment in the state is 20% more stable than private employment.”

If you’re not careful, I fear that making state revenue more stable will make your constituent’s after-tax family budgets even less stable, and I doubt many of them will appreciate that.

Finally, the last person to testify on Monday, representing the League of Women Voters, told you that she wanted to see a so-called three legged tax stool in Oregon. But as you know, states with three legged tax stools have budget problems too. Just look south to California to see why the three legged stool is no panacea.

Until we reduce the size and scope of state government, no third source of tax revenue will solve our problems, it will simply mask them.

Thank you.