Senator Frank Morse 2009 Session: Looking Back…

John Detweiler suggests that we read Sen. Morse's Newsletter, particularly his "...comments on a rainy-day-fund and his letter from a friend to get an idea of what the additional taxes will do. As this tax flap heats up, the ideas in this newsletter are good fodder for letters-to-the-editor." Senator Morse's entire newsletter (Volume 14) is reproduced below.

FURTHER REFLECTIONS ON THE 75th LEGISLATIVE ASSEMBLY
FISCAL
This legislature may ultimately be known for what it didn’t do as opposed to what it did do. At a time of unprecedented economic implosion, a time when the most glaring weaknesses in our state’s fiscal policies have been brutally exposed, what did the legislature do to address the weaknesses? Regrettably, nothing. $2.0 billion in new taxes were enacted, but nothing was done to address the lack of a meaningful Rainy Day Fund, the presence of which would have eliminated the need for new taxes.

The fact that our income tax structure is the most volatile of any tax structure is not a new concept. We have known this for years. And that our dependence on this one form of revenue is singular to all other states is also not new information. We have known this for years also. We also know that a majority of Oregonians do not want to create any new tax structure, even if it means greater stability and reduces the total tax burden now paid. In the mind of taxpayers, the legislature is not to be trusted and we have known this for years as well.

What is new is that in this time of economic stress, when the absence of an adequate Rainy Day Fund could never have been more exposed to the consciousness of Oregon’s citizens, the legislature did not seize on this opportunity to refer to voters a means to create a constitutionally dedicated Rainy Day Fund.

My highest priority this session was to refer to voters SJR 29. One hearing was held with particularly strong support from business. The bill’s summary is as follows: “Establishes reserve fund intended to provide funding in response to economic decline. Establishes mandated savings rate from surplus revenues. Transfers surplus revenue above estimate for biennium to reserve fund. Returns surplus revenue that exceeds certain thresholds to taxpayers. Refers proposed amendment to people for their approval…”

The bill would create a mandated 1% savings from current revenues which would require the legislature to budget for the 1% savings. The bill also would amend the “kicker” provision of the constitution to provide that unanticipated personal income tax evenues up to 6% in excess of the forecasted revenue, would go into the Rainy Day Fund. Any excess above the 6% would be returned to tax payers and when the fund then equals 10% of the previous general fund budget, ($1.4 billion current dollars), any excess above the forecast revenue would be returned to taxpayers. Corporate income taxpayers would be treated similarly.

Had this bill been in effect in 2007, we would have had an extra $1.4 billion to provide funding for critical services and no new taxes would have even been considered.

So, what we now have are highly contentious tax increases that dampen any expected economic recovery and likely will be referred to voters for a January 2010 election. Citizen referendums of legislative tax increases have always succeeded in Oregon and this history is not likely to change come January.

What disappoints me the most is that this legislature has sacrificed the opportunity to build desperately needed stability into funding for education, public safety and human services. If voters overturn the tax increases, the well of cynicism and distrust will have only been dug deeper, and any chance of referring SJR 29 to voters in the February session will have been lost. Quite simply, the legislature has sacrificed the opportunity for stability on the altar of an ill conceived tax increase plan. Oregon has not been well served in this legislature’s rush to new taxes.

A Poignant Letter From a Friend
Of the many excellent letters we receive, I cannot recall sharing any of them in our previous newsletters. I believe the following letter is particularly worth sharing. It was written to the leadership and Governor and shared with me as the author is a close friend.

“I write to express extreme displeasure with your votes to impose permanent Oregon income tax increases without making necessary real spending cuts or considering long overdue structural reform of our tax laws. Furthermore I have been shocked by your comments in the media reflecting a total lack of understanding regarding the unintended consequences of your actions, not to mention openly celebrating the highest income tax in the country on the floor of the legislature.

Our company is family owned with roots going back over 100 years. We are a Sub S company with over 300 employees earning generous wages and benefits, and we do not rely on the lavish tax credits and loans that you regularly dole out to trendy new endeavors with flawed business models (ethanol). Our shareholders receive a modest dividend ( they would earn more risk free if the company is sold) and the “wealth” reported on their Oregon income tax returns remains in the company to grow the business, secure jobs, and retain the confidence of our lenders during difficult times such as we are currently experiencing. We compete with the largest agribusiness companies in the country and our industry is highly capital intensive so it is imperative that we maintain a strong balance sheet. Our family is actively engaged in non-profit work and annually contributes between 3% and 5% of pretax profits to worthy organizations.

The tax and spend policies as proposed and implemented on the federal and state levels will extract over $600,000 in additional taxes from our company. In order to maintain the financial strength of the company we will reduce the dividend that goes to our shareholders and eliminate our corporate giving program. From a longer term standpoint we will not re-invest in the state, but focus our investments in other western states where we do business. My family came to Oregon in 1863 and I love our state, but with the government now totally controlled by the public employee’s union and with the repeated failure of leadership in Salem I have never been more pessimistic regarding Oregon’s economic future. I have always dismissed those who chose to move across the river and I am depressed to find myself weighing the pros and cons of retirement in another state. I am a fervent supporter of a progressive tax structure and I want to responsibly fund education, infrastructure, and public safety. But you have crossed the line by placing inordinate tax burdens on small and family owned businesses thereby stifling new job creation and precluding a balanced approach to financing our community needs.”

It is my sincere hope that the Governor and Legislature will take up the task of building the financial foundation our state so desperately needs.

Best wishes for a safe and enjoyable summer.

Frank Morse