In anti-tax Oregon, voters consider tapping the rich

Oregon officials know all about anti-tax fervor.

Over the years, voters here have capped property taxes (saddling the state with two-thirds the cost of running the schools) and passed a constitutional amendment requiring rebates whenever tax receipts come in 2% over budget. Nine times they have been asked to OK a sales tax -- and said no. Proposals to increase the state income tax? Down in flames twice.

But now the Legislature is taking a tack that analysts think could finally pull the rug out from under the tax revolt: soaking the rich.

In mail-in voting that ends today, Oregon is considering measures to raise taxes on households earning $250,000 or more and on individuals earning at least $125,000, as well as hike corporate taxes. About 39,000 of the state’s 1.5 million taxpayers would be subject to the higher tax, and some big companies could see their annual bills go from $10 to $100,000.

The success or failure of Measures 66 and 67 will be a concrete test -- one of the few in the country this year -- of how willing voters are to accept tax increases targeted at those theoretically best equipped to pay them.

“These measures are the first test of a progressive solution to the recession,” said Cynthia Kain, a spokeswoman for the National Education Assn. who has been working to help pass the ballot measures.

Opponents of the tax hikes warn that they could cripple small businesses and jeopardize employment in a state that has lost 131,000 private-sector jobs during the recession.

But many voters appear willing to risk that. Polls have shown both measures ahead, although one late last week showed the gap tightening.

“I’m convinced. Let’s tax the hell out of ‘em,” said Rebecca Maxwell, a young software developer from Portland.

Kevin Looper, who is running the campaign to ratify the ballot measures, said that “when we started doing focus groups, it was amazing to hear voters demanding to know where the banks were on these measures. Because they wanted to be on the opposite side.”

The banking industry has contributed heavily to the Oregonians Against Job-Killing Taxes campaign. Billionaire Philip Knight, chairman of Beaverton-based Nike Inc., and Timothy Boyle, chief executive of Columbia Sportswear Co. in Portland, also have kicked in large donations, as have business industry groups, big timber companies, farming groups and lawyers.

The campaign in support of the tax increases has been financed mostly with contributions from small businesses and public employee unions -- including $1.65 million from the Oregon Education Assn. and more than $1 million from other local and national public employee labor unions. (They were inspired, no doubt, by the opposition’s assertion that the budget woes could be lessened if state employees demanded fewer pay increases and started paying a share of their healthcare.)

Gail Rasmussen, a classroom support worker from Eagle Point and president of the Oregon Education Assn., said teachers had been canvassing their neighborhoods to drum up support for the measures because of the crippling cuts Oregon schools had made -- and the threat of more to come.

“We know of at least two districts in southern Oregon that went to a four-day work week. We’re hearing about districts that no longer have track programs, or field trips, or speech and debate.

“And I can tell you that there is absolutely no cushion in anybody’s budget, if these measures fail, to accommodate the kinds of draconian cuts that will be required across the board,” Rasmussen said.

If Measure 66 passes, Oregon would tie with Hawaii for the highest personal income tax rate in the nation. And Measure 67 would give Oregon the highest capital gains tax and highest corporate minimum tax.

Yet that is not unreasonable, supporters say, in a state that relies almost exclusively on income taxes. Oregonian businesses pay no sales tax and only limited property taxes.

“Before this measure, we had the third-lowest corporate taxes in the country, and after this we’ll have the fifth-lowest,” said state House Speaker Dave Hunt, a Democrat.

Oregon’s minimum corporate tax is $10, an amount that hasn’t changed since 1931. Because of generous write-offs, many Fortune 500 companies pay only that amount.

Measure 67 would raise the minimum corporate tax to $150. More important, it would institute a 0.1% tax on sales receipts of corporations whose in-state revenue exceeded $500,000, with a maximum tax of $100,000.

Sole proprietorships and small companies would see little or no effect, although their owners’ personal taxes might go up if their individual annual incomes rose above $125,000.

“The short story is that 97.5% of businesses will pay just $150, or will pay no more than they do today,” said Scott Moore, communications director for the Vote Yes campaign.

Still, some critics say a tax increase could push struggling companies over the edge.

“I have a small business” with 20 employees, said Brent DeHart, who owns a gas station and aviation fueling company in Salem. “And with the new minimum, my taxes are going to go to $4,000. Let me tell you, my company doesn’t have $4,000. We’re literally going into debt right now to continue operations.”

For households, the tax rate would increase 1.8 percentage points on taxable income from $250,000 to $500,000, and 2 percentage points above $500,000. For individuals, those increases would kick in at $125,000 and $250,000.

The state’s largest newspaper, the Oregonian, is opposing both measures.

“Measure 66 is not about fairness,” the paper said in an editorial. “It is about raising $472 million in taxes during one of the worst recessions in Oregon history to cover a gaping hole in the state budget.”

Pat McCormick, spokesman for the anti-tax campaign, said Oregon’s biggest business groups voluntarily forfeited their 2% “kicker” rebate in 2007 to create a $300-million rainy day fund for the state. Last year, they proposed a “shared responsibility plan” to help get around the budget shortfalls. That plan advocated a temporary income tax increase for all wage-earners and an increase in the $10 corporate minimum tax to $300.

“Typically in these kind of budget circumstances, in recessions, there’s been a point where players are in a dark room and everybody coughs up a little, deals are made and the participants go out and get the votes to make sure that the compromise is going to be effected. That never happened,” McCormick said.

Democrats, with a 36-24 majority in the state House and an 18-12 edge in the Senate, pushed forward with little Republican support.

“They looked back at those two previous [failed] across-the-board measures and said it does not make sense in a recession to raise everybody’s taxes,” Hunt said. “It does make sense to ask those who are continuing to do well to do a little bit more to protect critical services for everybody.”

A number of business owners support the tax increases, arguing that they are a reasonable price to pay to stave off cuts that would add pressure to schools, public safety, health and welfare.

“These taxes are minuscule,” said Arthur Graham, who owns an artists’ paint manufacturing company. Graham estimated he would wind up paying $150 in corporate tax and “considerably more” in personal income tax. But he is willing to do it, he said.

“Is it going to prevent me from going out and buying a new Porsche? No, it isn’t,” Graham said. “But what about the benefits it provides to all the people in Oregon?”

kim.murphy@latimes.com