Kulongoski now cooler toward major tax overhaul


Gov. Ted Kulongoski says he has modified his belief that Oregon needs a major tax overhaul, saying Oregon could have enough cash for years to come without a sales tax or dramatic restructuring of the system.

He did say in an interview with The Oregonian that he would like a bigger state savings account and more flexibility for local governments.

"I'm just saying there is another way to bring stability to our current state tax system," Kulongoski said.

Oregon depends heavily on income and property taxes, lottery revenues and federal timber payments to counties.

During last year's re-election campaign he suggested a need for a more radical revision that would include "a substantial reduction in the income tax, and looking at a consumption tax of some kind."

More recently, he said he has looked at state economic projections that show steadily growing revenue and a burgeoning savings account as well.

The ideas drew fire from some lawmakers who have worked for years to bring Oregon's tax system more in line with other states.

"It's tough to think creatively when times are good," said Sen. Kurt Schrader, a state budget expert and a leading proponent of a sales tax.

"When times are bad, people like me think this thing (Oregon's tax system) is stupid. We're going to be in another recession in two years, four years. It's going to happen. We're totally unprepared for that."

Any rainy day fund would be quickly depleted, Schrader said.

Schrader, D-Canby, is part of a bipartisan Senate group that has proposed big reductions in income tax rates, cuts in residential property taxes and a 5 percent sales tax to more than make up the difference.

He said a broader source for state revenue would make the tax structure less volatile.

He said a sales tax also would capture money from sources that don't pay now, such as tourists.

But Kulongoski notes that Oregon voters have rejected sales tax proposals nine times and that he sees no change in sentiment.

"It is very easy for me to say, 'Let's just go to a sales tax,' and we'll all run up the hill and we'll find out where the public's going to go on it," he said. "But it may not solve the problem."

A report last week by the Oregon Center for Public Policy, which advocates for low-income Oregonians, says Oregon would be ill prepared to face a recession like the one in 2001.

With the current rate of savings, Oregon would have only about half of what it needs to protect itself, the report said.

The center suggested a change in the state's unique "kicker" law, which gives rebates to taxpayers when revenue collections exceed projections by more than 2 percent.

The Oregon Revenue Department is to mail about $1.1 billion in kicker refund checks to individual taxpayers in December. Although lawmakers agreed to a one-time diversion of about $300 million in corporate kicker refunds to a rainy day fund, it left the personal refunds alone.

"We missed a golden opportunity to set our house in order," said Chuck Sheketoff, executive director of the public policy center. "Sometime in the future Oregonians will be kicking themselves for not saving this year's kicker."

Oregon's tax laws soon will get scrutiny from new state revenue task force that is supposed to recommend a series of changes to the 2009 Legislature.

Kulongoski also wants the task force to look for ways that cities and counties can generate new revenue. Cities face severe restrictions under Oregon's voter-approved property tax limits, he said.

And some counties in Oregon face potential catastrophe if Congress decides to end a federal program that gives them millions of dollars to make up for lost timber harvest payments.

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