The following excerpt is provided by The Executive Club:
6:00 pm • Wed, May 4th • Airport Shilo
The high price of “green” power
Todd Wynn, Vice President of Cascade Policy Institute, will be on hand for the May meeting to, well, illuminate the dramatic increases in Oregonians’ utility bills because of the pop-culture foolishness that passes for wisdom in Salem.
Since January 1, Pacific Power electric rates have increased by 14.5% and PGE rates by 4.2%. These increases were due largely to restrictive energy policies adopted in Salem under the state’s politically trendy “Renewable Portfolio Standard.” Cascade has just released a report showing that this energy mandate, passed in 2007, is already laying additional financial burdens on Oregonians and will certainly do much more damage over the next 15 years!
Be at the Shilo meeting to fully understand the plight facing you and other Oregon ratepayers. More to the point, learn what you can do to fight back against this state’s latest politically correct, foolish, threat to the entire Oregon economy.
(something else to make make your blood boil).
Many who benefit from the clear and sparkling water provided by the Bull Run watershed (most of you) may be surprised to hear that not all is well in the Portland Water World. That is why we will also a have a quick update from Scott Fernandez, the man who is confronting Portland City Commissioner Randy Leonard over Leonard’s determination to push a needless modification of the pristine water system.
This is a fascinating story. If Leonard prevails, water bills from that system will be rising 85% over the next 5 years! Fernandez, a trained microbiologist, in a short, concise presentation, will tell us why Leonard’s plans are so very costly and so unnecessary!
Many factors go into determining if a state is business friendly. A recent national report concludes that Oregon has the nation’s second-lowest effective business tax rate for new investments. Some commentators are jumping all over this, as if it more than offsets all the negative factors for businesses, such as the passage last year of Measures 66 and 67.
But, the report actually has only limited good news, and then only for investments in Oregon by profitable corporations that are already here. It fails to consider other factors that don’t make Oregon look nearly as good. For example:
First, it doesn’t even consider the fact that unprofitable corporations can be hit by the gross receipts tax of Measure 67.
Second, it doesn’t consider the impact of Oregon’s high personal income tax rates on the decision of corporate managers about whether they want to move here. Under Measure 66, Oregon has the highest personal income tax rate in the nation at 11 percent, not a strong selling point to move here from somewhere else.
Third, the report says nothing about Oregon having the highest personal capital gains tax rate right now, again at 11 percent.
Add such factors as the open-ended Business Income Tax in Portland and Multnomah County, and there are plenty of reasons for Oregon to be considered less than an attractive state to do business in.
A low effective tax rate for investment in Oregon by profitable corporations that are already here is great. If only it wasn’t offset by high tax rates on everything else.
Spreading like wildfire, more attempts have been made to ban Bisphenol-A (BPA) at the state level in 2011 than in any previous year. More than 50 bills have been introduced in legislatures across the country to ban a chemical that commonly lines beverage and food containers. The Oregon Senate recently passed Senate Bill 695, which would make illegal the sale, distribution or manufacturing of a child’s beverage container made or lined with BPA. The bill, now headed to the Oregon House, is a perfect example of baseless environmental hysteria leading to illogical and destructive regulations.
Year after year, despite overwhelming scientific evidence to the contrary, environmental lobbyists and activists descend upon the state capitol to convince legislators that “evil” corporations insist on using a chemical they claim is unsafe. With the emotional argument of “saving children from cancer” as their mainstay, these activists are pressuring Salem politicians to ban BPA altogether.
A number of important lessons can be gleaned from their efforts:
First, people tend to overestimate risk and to exaggerate the benefits of risk-reducing laws. Proponents of banning BPA insist that government should use the “precautionary principle.” This means that if a possibility of causing harm to the public exists, despite lack of a scientific consensus, then politicians have a “social responsibility” to protect the public by passing laws to prevent possible harm. The precautionary principle allows politicians to justify discretionary decisions based solely on public fear. In the case of BPA, politicians may choose to ban the product entirely, even if the scientific community continues to exonerate this chemical of the claims made against it.
In BPA’s defense, we know a lot about it. In wide use for over fifty years, the chemical has been extensively studied. The science has revealed that consumer exposure to BPA is far below levels of concern, even for infants and children. BPA is actually quite useful in protecting consumers against food contamination. In other words, banning BPA could create significant new risks. Products or other chemicals that would be introduced to perform the same functions may be more expensive, not work as well, and produce new safety problems that have yet to be studied. Thus, switching to a less tested and potentially less safe alternative is risky for children and infants. In this case, adherence to the precautionary principle actually should preclude the use of the precautionary principle by those concerned about public health!
Second, the consumer market is already adjusting to meet the demands of chemical hypochondriacs. Numerous manufacturers produce BPA-free beverage containers, and major retailers such as Walmart are asking for alternatives to meet consumer demand. BPA-free manufacturers openly advertise their products as BPA-free. When a consumer desire becomes mainstream, regardless of whether it is scientifically justified, a free market will meet that demand. This should make one wonder why politicians in Salem think they need legislation to address BPA worries.
Finally, BPA is just today’s target in a never-ending war by environmentalists to eliminate from the environment anything humanly manufactured. This attitude can be summed up with one word: chemophobia – the unreasonable conviction that all chemicals are bad and that all things loosely defined as “natural” are good. Fear makes it difficult for anyone – let alone politicians – to take a rational look at the issue, especially when ban proponents are pulling the “Do you hate children?” card.
Although reason and objectivity eventually should win a debate, they often don’t. That is yet another reason why it is so important to limit government interference. As more state politicians pressured by hard-charging environmentalists and misguided parents move to ban BPA, pressure will build on those who hold out. Unjustified bans become the rationale for more bans. Sadly, it won’t stop with BPA, as special interests always will strive to use government to control fellow citizens and to limit their choices.
Watch part II of Dan Lucas’s Oregon Budget 101 series. This episode discusses regional spending comparisons between Oregon, Idaho, Washington, Utah, and California.
On April 21, 2011, John Charles testified before the Joint Ways and Means Transportation Subcommittee. He suggested ways to cut spending from ODOT’s budget, including ending the $1.5 million “Drive Less. Save More” ad campaign.
Listen here, John’s testimony starts at 35:40.
John’s testimony before the Ways/Means subcommittee on Transportation on 4/20/2011 at 9:30am.
Listen to the audio here. John begins at 30:21.
Members of the committee, I am a lifelong transit user and take transit to Salem on most days (TriMet’s commuter rail from Beaverton to Wilsonville, connecting with an express bus to Salem operated by SMART or Cherriots). However, notwithstanding my personal preferences, there is no compelling state interest that would justify subsidies for rail programs through the ODOT budget.
Passenger rail is simply irrelevant in a low-density state like Oregon. The Portland rail program has failed because it is too slow, too expensive, and too inflexible. My daily ride on WES costs TriMet $18 per one-way trip, but I only pay $2.35. None of the capital costs are paid for by users. That is not a “sustainable” business model.
Rubber-tired transit continues to carry two-thirds of daily transit trips in the Portland region, despite being virtually ignored by TriMet. With low capital cost, this is the only mode that makes sense for transit in Portland.
For inter-city transit, we already have unsubsidized private bus companies operating, and further subsidies to Amtrak will be counter-productive.
For freight movement, rail is a for-profit business that should be supported by its customers. If that is not possible, then the business is not viable.
In looking at the specifics of HB 5046, I have the following brief comments:
- The Connect Oregon programs have relied so much on spending future lottery funds that the lottery is now tapped out. I’m sure you have all seen the February 11 memo from the state Treasury regarding the need to re-finance debt. Continuing to fund transit projects that are inherently uneconomic with lottery funds simply forecloses future uses of that money.
- Expansion of the Portland Streetcar to the south end of the South Waterfront district was financed in part with a $2.1 million Connect Oregon grant. The grant application promised a 30% market share of all district trips for the streetcar and 40% market share for commute trips. Having just completed field research in the district, I can assure you that actual transit use is far lower; on a typical weekday, the streetcar accounts for only 9% of all passenger-trips to and from the district during the hours of 6:00 a.m. to 10:00 p.m. (summary results attached).
- Oregon should stop chasing federal dollars for the Obama “medium-speed” rail program. Passenger rail will never be competitive or cost-effective in Oregon, and there is no willingness on the part of customers to pay for true “high-speed” rail.
- The ODOT “Oregon Rail Funding Research Task Force” should be disbanded. There is already an obvious source of funding: customers. If they are not willing to pay the cost of capital expansion and maintenance, the business is not viable.
- There should be no more funding for the OTC “flex funds” program; this has already been abused by TriMet to promote Milwaukie LR at the expense of more effective bus service.
- The $250 million previously appropriated for lottery-backed bonds to pay for Milwaukie LR was an egregious waste of money and should never be repeated. In its Fall 2010 Financial Forecast TriMet predicts 13,000 average weekday boardings for the opening year of this project, 2015. Of those, 4,500 are estimated to be former bus passengers switching due to the loss of bus service. Since one customer usually creates two “boardings” per day, the total number of new daily passengers is estimated to be only 4,250. At a total capital cost of roughly $1.5 billion, that works out to be $333,333 per new rider. I suspect that if we could locate these speculative new riders and ask them how they would like us to spend $333,333 to improve their mobility, few would actually vote for a slow train from Milwaukie.
- TriMet successfully manipulated the legislature into approving substantial payroll tax rate hikes in both 2003 and 2009 for the stated purpose of paying for the operating cost of new rail service such as the I-205 MAX line, but that line is operating at 33% below the service level promised to FTA. Therefore TriMet is defrauding the federal government, which paid for more than 70% of capital expenses (New Starts grants + flex funds used for the local match), and breaking promises made to the state legislature when the payroll tax rate was approved.
This pattern is about to repeat itself with the Milwaukie project, where planned levels of operating service have already been lowered due to TriMet’s financial problems.
- Contrary to claims made by TriMet, passenger rail is not “high-capacity” transit; it is “low-capacity, high-cost” transit, which is the exact opposite of what we need.
- Local transit districts should be raising operating and capital funds locally through customer fares; there is no role for ODOT to play in local matters unless it is simply passing through federal funds.
Are Oregon citizens able to engage with the legislature in a meaningful way? The flurry of bills and amendments can be overwhelming for a professional lobbyist, so it is easy to understand why a citizen or group of volunteer citizens want to throw up their hands.
Tracking a bill in the legislature would seem to be relatively easy with access to the internet. But, as many folks are finding out, it isn’t quite that easy. Once a hearing is scheduled for a bill, a person may have to commute hundreds of miles to Salem to testify. Written testimony can and should be provided on a bill, but actually being present seems to give more deference to an argument. Then, amendments often have been added to the bill that weren’t available on the web, and a citizen’s comments might no longer be pertinent. In fact, with cutoffs approaching, committee members often haven’t even seen amendments before they arrive at the hearing.
Many new citizen activist groups are recognizing that for them to be effective at the legislature, they must have someone at the Capitol on a daily basis monitoring activities. Even then, it is difficult to be effective. Small unofficial workgroups of lobbyists may be working on new language for bills that you may or may not be invited to participate in. This can result in amendments being introduced as “compromise language,” even though interested private citizens never saw the language.
The Oregon legislature could be more accessible to the average citizen. Here are few ideas that could make great strides in that direction:
- Establish video conference areas around the state for citizens to provide testimony. This is currently being done by the Redistricting Committee, so it is possible. Facilities with this technology already exist at most college facilities throughout the state, so the infrastructure need would be limited.
- Require all amendments to be posted electronically 24 hours before they can be considered in a work session, and the work session must open a public hearing for comments on those amendments.
- The number of bills a legislator can introduce should be further limited to three, as well as those introduced on behalf of agencies. However, this has to be well thought-out. The last thing that should be encouraged is large omnibus bills with very general relating clauses.
These changes won’t eliminate the power of professional lobbyists, but they would begin to create a more accessible process for citizens. As legislators contemplate rules by which to conduct business at the beginning of each session, they not only should consider how to make the session most productive for the body, but also how to make their process more conducive to citizen participation.
This testimony was given April 19, 2011 before the House Committee on Revenue. It is in response to HB 3420, HB 3282, HB 3283, HB 2562, HB 2730 and HB 3296.
Co-chairs Berger and Barnhart and members of the Committee, my name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a non-partisan, non-profit public policy research organization based in Portland. Our mission is to promote policies that enhance individual liberty, personal responsibility and economic opportunity in Oregon.
I’m here to testify in favor of reducing Oregon’s capital gains tax rate, which is currently the highest rate in the country. This high rate has the effect of discouraging investment and hiring activity in the state.
Previous research by a member of the Governor’s Council of Economic Advisors calculated that cutting the capital gains tax rate to 4.5 percent would add approximately 6,000 new jobs a year and increase venture capital activity in the state by approximately $300 million a year. This is consistent with more recent research suggesting that completely eliminating the capital gains tax would add approximately 14,000 more jobs by 2013.*
As I’m sure you already know, the capital gains tax is the most volatile segment of Oregon’s tax structure. Between 2007 and 2008, revenue from capital gains declined by 60 percent. Capital gains accounted for 10 percent of state income in 2007, dropping to 4 percent in 2008, and I believe it was as little as 2 percent of income in 2009. In fact, because of tax-loss carry-forwards, in a deeper recession it wouldn’t be impossible to see capital gains income actually turn negative.
From a legislator’s standpoint, I think the best time to reduce or eliminate the capital gains tax is when there aren’t many gains to be taken. Like now.
I’m not a fan of putting conditions on any capital gains rate reduction, as all these bill being heard today do. Requiring investors to reinvest in specific businesses may be well-intentioned, but it’s not necessary. Reducing or eliminating Oregon’s capital gains rate would send a positive message to business people and investors everywhere. It not only would unleash more economic activity from those already living in Oregon, it would help attract such people to relocate to Oregon and bring their capital with them.
The more strings you put on the deal, the less likely enough people will want to take advantage of your offer.
So, rather than trying to pick winners and losers, in this case trying to direct more capital to Oregon businesses through favors in the tax code, simply ensure a level playing field and then trust in the market’s ability to evaluate good deals and invest in them. The more attractive you make Oregon as a place to do business, the more business and investment capital will flow here.
So, in closing, please reduce or eliminate Oregon’s capital gains rate, and then watch the economy pick up. Watch jobs be created. And watch state revenue increase as a result. This is a perfect example of where asking for less will result in generating more.
* All numbers from “Facing Reality: Ideas to Reset Oregon’s Budget and Recharge its Economy”, Cascade Policy Institute and Americans for Prosperity-Oregon.
Testimony given before the Senate Finance and Revenue Committee regarding SB 692, which covers:
- Removes prohibition against imposition of taxes by county on cigarettes and tobacco products.
- Requires at least 20 percent of any tax imposed by county on cigarettes or tobacco products to be used for public health programs or services.
Chair Burdick and members of the Committee, my name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a non-partisan, non-profit public policy research organization based in Portland. Our mission is to promote policies that enhance individual liberty, personal responsibility and economic opportunity in Oregon.
I cannot attend your hearing on SB 692 so I wanted to submit brief written testimony in opposition.
I noted in this week’s Oregonian editorial in favor of this bill a telling paragraph:
“Try walking around your own neighborhood and you’ll quickly discover,
as Multnomah County did in a price survey, that cigarette prices are
extremely varied. Moral of the story: People addicted to a product are
inclined to run in and pay the going rate and ask questions later, at least
until they get fed up enough to seek help and quit.”*
So, at least some of the bill’s supporters assume that counties will be able to impose a tax on smokers and they either won’t notice, won’t care or won’t have a choice in the short run. In the long run…well, you know what economist John Maynard Keynes said about that.
If taxing a relatively low-income, less-educated, more minority population is bad public policy on the state level, which I think it is, then it is equally bad public policy on the county level.
Governments too often see smokers as a minority that the rest of us will tax because we don’t smoke, so who cares. Well, the defeat of Measure 50 in 2007 should put that canard to rest. I don’t believe it was the heavy spending against the measure that swung voters to the No side on that tobacco tax. I believe it was a realization that it simply isn’t fair to tax a small minority just because we can.
And, if it isn’t fair to tax a small minority at the state level, then it isn’t fair at the county level either.
So, it isn’t good public policy, and it isn’t fair to tax smokers just because we can. SB 692 tries to look like it’s for the smoker’s own good by requiring at least 20% of the revenue be spent on public health programs, presumably to help smokers quit. But that means that up to 80% of the revenue could be spent on anything else counties want to spend it on. It seems to me that this is simply a way to let counties impose a tax on a minority of their citizens with very little connection to the needs or wants of that minority.
I’m all for local control; in fact, I think the best local control is control by the individual over his or her own life. That includes the decision to smoke or not smoke without facing unfair taxation of that choice.
Governor Kitzhaber is seeking to consolidate power over education. Early childhood, K-12 and post-secondary education would be overseen by a single board, the Oregon Investment Board.
Surprisingly, most of the education establishment approves of these changes, saying they will improve things at the ground level. Yet, how would shifting power upward improve educational outcomes for children at the bottom? For decades, we have tried that as the state and federal governments have gotten increasingly involved in our neighborhoods’ classrooms. Likewise, consolidating school districts to find savings and improve outcomes has not borne fruit.
But empowering individuals at the bottom – kids and parents – has made a world of difference to those on the ground level. Likewise, it has freed teachers to use their talents and passion to innovate at the classroom level. Choice programs like charter schools, vouchers and K-12 education tax credits have improved outcomes for kids, saved money and made parents happier in places like Milwaukie, Florida and Washington, D.C. Oregon parents, too, see the value of choice as waiting lists at local charter schools persist even as charter schools grow.
This issue boils down to your belief in freedom and governance. Do you believe a handful of elite individuals can determine best how to meet your children’s needs? Or do you believe that you know your children’s needs better than a distant group of bureaucrats?