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September 19. 2014 12:01AM Without tax reform, state faces bleak future One of Oregon's oldest public policy problems continues to defy solution. The longer this state avoids facing up to its dysfunctional tax system, the worse the situation is likely to become. A new report from the credit rating agency Standard & Poor's lays out what everyone knows: Oregon's reliance on the income tax for the bulk of its revenue locks it into a boom-and-bust cycle that follows the ups and downs of the economy. But the report goes further, predicting that if this state does not take steps to flatten out the rollercoaster, it is doomed to a future of declining growth in state revenue, forcing it to cut services and raise tax rates, especially on the well-to-do. Gov. John Kitzhaber has been working with labor and business groups for more than year to try to hammer out a compromise that would broaden the tax structure to reduce its over-reliance on the income tax. That's been tried before, over and over again, with little success. The situation may have reached the point that the S&P report's conclusions will prompt those perennially warring factions to come to some agreement. Oregon now relies on the income tax for almost $7 of every $10 it collects. That's more than any other state in the country. Even if business and labor can agree, Oregon voters will have to be convinced as well. And it's the voters, egged on by ideologues and anti-tax activists, who have hobbled the state's ability to react to changing economic conditions. The property tax limitations inserted into the state constitution by 1990s ballot measures restrict the growth of that revenue even when property values rise. And voters' repeated rejection of any thought of a sales tax has added to the difficulty of crafting a more balanced system that could reduce income tax rates and even out the peaks and valleys. Regardless of who wins the governor's race in November, this issue is not going away. Ultimately, it will be up to voters to decide whether they want a state that is poised for future economic growth or continued decline. http://www.mailtribune.com/article/20140919/OPINION/140919661 © 2015 Copyright © 1995-2011 Crain Communications Inc. All Rights Reserved. Terms of Use Privacy Statement -->