Month: October 2012

Three Oregon Tax Measures: What They Would Do

With less than a week to go in this election cycle, Oregonians are faced with nine statewide ballot measures.

 

Here are my thoughts on the three that are primarily tax measures.

 

Measure 79 bans future state or local real estate transfer taxes. Only Washington County imposes such a tax now, as anyone who has sold a home there knows. The realtors who put Measure 79 on the ballot don’t want to see such taxes spread to the rest of the state. Government always looks for ways to raise revenue, but taxing home sales isn’t a good idea now or later. I voted Yes.

 

Measure 84 phases out Oregon’s estate tax and forbids taxes on property transfers between family members. Working all your life to build up an estate valued over the $1 million estate tax exemption should not give government the right to tax what you or your family have paid taxes on all your lives. I voted Yes.

 

Measure 85 takes any future corporate kicker money from the companies that earned it and places it in the state General Fund. Nothing in the measure assures that the money will benefit public education as the public employee unions that put it on the ballot claim. Special interests will be in Salem lobbying for that money just as they do now. Measure 85 simply takes money from the private sector and grows government. I voted No.

 

Steve Buckstein is founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Women’s 2012 “Pocketbook Issue”—Free Contraception?

Common sense should intuit that suppressing the healthy operations of a normal human body is not “preventive” medicine. One might also think it could be an offensive political point to call doing so requisite for women’s workplace advancement. However, the Department of Health and Human Services and President Obama think otherwise. Many women disagree with them.

 

The Affordable Care Act’s contraceptive services mandate requires all insurers to provide as “preventive care,” and without cost to the user, every FDA-approved method of female birth control, potentially abortifacient “morning-after” drugs, and surgical sterilization. In keeping with contraception’s new status as “preventive care,” President Obama recast it as a women’s workplace equity issue during the October 16 presidential debate. He further concluded that not having to pay the bills for their personal choices is an important economic issue for American women:

 

“Now, there are some other issues that have a bearing on how women succeed in the workplace. For example, their health care….In my health care bill, I said insurance companies need to provide contraceptive coverage to everybody who is insured. Because this is not just a—a health issue, it’s an economic issue for women. It makes a difference. This is money out of that family’s pocket….

 

“That’s a pocketbook issue for women and families all across the country.”

 

“Preventive care” guards against diseases or disorders. In contrast, contraception, sterilization, and abortion suppress the normal functioning of a healthy reproductive system or end a pregnancy already begun. Therefore, these services are not preventive care―unless women’s fertility is considered a disorder, and pregnancy a disease. This is a medically inaccurate and denigrating way to think about women and babies.

 

Does it not offend women that government policymakers believe that contraception is considered matter-of-course for achieving career success today and so, by big-government logic, it must be provided to them for free? Fertility and motherhood shouldn’t be considered incompatible with women’s success. Women need workplace policies that accommodate their nature, as opposed to requiring them to imitate men’s. Suggesting otherwise means policymakers think women can’t be women and live a successful 21st century life.

 

Women are diverse, and no one can speak for all women. However, free birth control is most likely not the fundamental “pocketbook issue” facing American women and their families. Many other things, however, could be. To succeed in the workplace and to care for their families, women need the freedom to make responsible choices in every aspect of life.

 

For both women and men to succeed in life and to support their families, government should facilitate an economic and cultural climate in which people can start and expand businesses, try new ideas, find solutions to problems, and keep more of their own hard-earned money. Government should reduce burdensome regulations, lower taxes and fees, refrain from wasting taxpayer funds, and reform entitlement programs that discourage responsibility and encourage multigenerational government dependence. Those are pocketbook issues for American women.

 

Access to affordable quality education is another. In the new movie Won’t Back Down, Jamie (Maggie Gyllenhaal), a low-income mother, wants to stop her daughter from failing in school. In a key scene, she states with determination, “Have you heard about those mothers that lift one-ton trucks off their babies? They’re nothing compared to me.” Women want to send their children to the schools they, not the government, believe are best for them. They want schools to expect excellence, to reinforce their values, and to prepare kids to lead lives of integrity and generosity.

 

Stable families are the ultimate women’s economic issue. A widely cited Brookings Institution study demonstrates that those who graduate from high school, get a job, and marry before having children almost never live in poverty (98%). Brookings’ Ron Haskins recently testified before Congress, “In 2009, the poverty rate for children in married-couple families was 11.0 percent. By contrast, the poverty rate for children in female-headed families was 44.3 percent. The difference between these two poverty rates is a specter haunting American social policy….” Government cannot replace the family as the basic unit of a healthy, upwardly mobile society. A welfare check is a Band-Aid, not a substitute for proactive and responsible decision-making between a woman and a man, marriage, and breadwinning parents in the home. Ever-expanding government programs have not produced the “Great Society,” and free “morning-after” pills don’t mend broken hearts or unhealthy relationships.

 

Women want their daughters to aspire to life-long love and commitment, to nurture high expectations for themselves and their boyfriends, and to create a good environment into which to bring their children. Some also would prefer to spend less time in the paid workforce and more at home with their children. Breathless political rhetoric about a new contraception entitlement is out of touch with women who eagerly hope that soon they and their husbands can afford to have a baby. Higher take-home pay, rather than free birth control, empowers individual women to bring about their unique personal dreams.

 

Women’s aspirations and concerns are not for themselves alone but for all those they love―spouses, children, parents, friends―who need economic and educational opportunities today. Public figures should stop reinforcing the insulting (and false) narrative that women’s economic and social advancement depend on free contraception. They also might reflect on that ancient truth about government promises of which the poet Samuel Johnson hauntingly wrote: “How small, of all that human hearts endure, / That part which laws or kings can cause or cure!”

 Kathryn Hickok is Publications Director at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Steve Buckstein debates the merits of Measure 85

Steve Buckstein spoke to the Washington County Public Affairs Forum in September where he spoke out in opposition to Measure 85, a ballot initiative tasked with taking away Oregon’s corporate kicker.

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Measure 81 Would Take Salmon off the Table

By Thomas Dulcich and Michael Barton

Oregonians are most fortunate to border the Columbia River, prized for its scenic beauty, recreational opportunities, power generation, irrigation, fishing resources, transportation, and a long list of additional values. We pay for the management of this complex resource with our taxes and utility bills; but if Measure 81 passes this November, Oregonians will have another distinction. We alone will be prohibited from enjoying Columbia River salmon and other fish caught by non-tribal commercial fishers.

 

Measure 81 bans a method of commercial harvest known as gillnetting, but it also includes a stealth provision: a purchase ban for Oregonians only. The “purchase ban,” found in Section 2 (2) of Measure 81, would prevent Oregon buyers and consumers from buying non-tribal net-caught fish from the Columbia River. If you live in Washington, you still would be able to enjoy Columbia River salmon. The same is true if you live in Washington, D.C., or California, or…well, anywhere but Oregon. What justification is offered for prohibiting Oregon buyers and consumers from purchasing Columbia River-caught salmon? None.

 

Measure 81 is the latest effort by sports fishing interests to increase their share of Columbia River fish at the expense of commercial fishing that supplies product to grocery stores and restaurants. Currently, fish are allocated among the small commercial fleet, sports fishers, and tribal fishers (who also oppose Measure 81).

 

What is the source of the conflict? Perhaps it stems from the industrialization of sports fishery and the resulting overcapitalization. The Columbia River commercial fleet, which fishes for consumers, is restricted by “limited entry” laws to a specified number of licenses (only 200 in Oregon). The “guide industry,” which markets day trips for hobby fishermen, is not limited in number by Oregon law. The financial barriers to entry to become a for-profit fishing “guide” are relatively low (a $50 Marine Board license, a pick-up truck, and a boat), so it has been easy, in the absence of limited entry, for this “commercial sport fishing” endeavor to become overcapitalized. Over the past 10 years, hobby fishers got 80% of the Columbia River Spring Chinook and 80% of the sturgeon, while the non-tribal consumer access fleet got 20%. The allocation of other runs also favors recreational fishers. Does it make sense for consumers to get even less?

 

The rationale offered by the backers of Measure 81 includes the claim that removing gillnets from the Columbia River will enhance fish conservation. This idea has been promoted with scary-sounding but unsubstantiated claims of widespread killing of other wildlife by gillnets. In fact, gillnets long have been the only method allowed by law and regulation for the commercial harvest of Columbia River fish, in large part because this is the method which has the least negative impact.

 

While he opposes Measure 81, Governor John Kitzhaber has ordered the Oregon Fish and Wildlife Commission (and has “suggested” to the Washington Commission) that it adopt administrative rules severely restricting the commercial fleet by taking away the mainstream Columbia River and limiting commercial fishing only to very tiny back waters or side channels known as the “select areas.” The governor’s plan also will reduce consumer access to products of the Columbia River, such as the Spring Chinook salmon, Summer Chinook salmon, sturgeon, Fall Chinook salmon, and Coho salmon. The commercial fleet, composed of a few hundred small family businesses and several fish processors (mostly in rural Oregon and Washington), is of the opinion that Governor Kitzhaber’s plan will kill their industry and jobs―not in an overt, sudden way, but instead by slow death.

 

Why should Oregon consumers care about this? First, locally caught salmon is a very healthful source of natural protein, teeming with omega-3 heart-healthy vitamins. Second, Oregon taxpayers (and ratepayers) contribute through their taxes and utility bills to the ongoing work to sustain salmon runs, which must migrate through the hydropower system on the Columbia River and its tributaries. Given this financial investment, it is reasonable that all Oregon consumers―not just hobby fishermen―be able to enjoy Columbia River salmon. Measure 81 and Governor Kitzhaber’s plan are anti-consumer and anti-Oregon, and both should be defeated.

 

Thomas Dulcich is an attorney and one of the 200 Oregon gillnet fishing permit holders. Michael Barton is a member of Cascade Policy Institute’s board of directors.

 

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Taxpayers Should Be ReVolted by Green Business Subsidies

Last week another publicly subsidized “green business” company filed for bankruptcy in Portland. ReVolt Technology had received $6.8 million in state and local subsidies, plus another $5 million from the Obama administration, for its electric car battery technology, but could not get the product to market.

 

One would hope that the repeated failures of subsidized companies would induce a modicum of humility among the political class, but this does not appear to be happening. The director of the Portland Development Commission, which approved a $1.3 million loan to ReVolt, told The Oregonian, “It’s obviously disappointing, but we certainly know we’re going to have a few of these.”

 

Taxpayers should be outraged by this attitude. The Oregon Constitution prohibits public investment in private companies, so none of the companies being propped up with taxpayer money should have ever received a penny in the first place. Yet, the Portland Development Commission is fully expecting to have more public money lost in private sector bankruptcies.

 

There is an important role for government to play in technological innovation, but it’s not to serve as a venture capital fund. In the daily competition among market participants, government should simply call the balls and strikes and enforce the rules of the game. Players should come from the private sector; and the best products should be determined by consumers in the market process, not by government cronyism.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Taxpayers Pay the Difference for ODOT’s Solar Power “Champagne”

By Chris Barton

Imagine heading out to your favorite bar one evening to celebrate the completion of another toiling week at work. Rather than indulging in the comfort of your favorite beer, you decide to loosen up your purse strings and order some champagne. So with only a slight sense of apprehension, you ask the bartender to serve you the best champagne in the house. The glass arrives and you take an inquiring sip. The flavor is unbelievable. The sophisticated mix of flavors is without rival. When the check comes to the table, take a deep breath and prepare for the shock of the sticker price. You flip the bill over and are instantly overcome with incredulity. Only four dollars? You assume the bartender made a mistake. Much to your surprise, he confirms the price. You have had a glass of champagne for the price of a beer.

 

Now, this story may seem purely fictional. Only a business bent on self-destruction would offer such a deal. However, in the world of the Oregon Department of Transportation (ODOT) and the Oregon Solar Highway Project, this is reality. ODOT really is able to get champagne for the price of beer, but one of the unfortunate burdens of living in reality is that someone must pay the difference for the actual cost of the champagne. Who will pick up that tab? The taxpayers.

 

The Oregon Solar Highway Project is the brainchild of Allison Hamilton, an ODOT project director, who was inspired by the solar panels straddling the autobahn highways in Germany.  Oregon Governor Ted Kulongoski declared early in 2008 that Oregon would build the world’s largest solar highway project, consisting of more than 17,000 solar panels with the productive capability of over 3.2 million kilowatt hours per year. This directive was in line with the policies enacted by the Oregon legislature in 2007 calling for a reduction in so-called “greenhouse gas emissions.”

 

The first project of the Solar Highway Program was completed in December 2008 near Tualatin at an intersection between the I-5 and 205 highways. The site, a public-private partnership between PGE and ODOT, has 594 solar panels generating 116,000 kilowatt hours annually. It powers around 30% of the night illumination of the ODOT-run interchange. The total cost of the project was $1.28 million, with most of that heavily subsidized by federal and state tax credits, along with grants including $175,000 from the Energy Trust of Oregon. The estimated cost of this solar energy, measured over a 20-year lifespan, is about $0.55 per kilowatt-hour. On average, the retail cost of energy to Oregon residents is roughly $0.10 per kilowatt-hour.

 

Alternative energy like solar power comes with a premium price tag because the technology is expensive and inefficient, but ODOT does not pay the full price. Thanks to the generosity of taxpayers through various subsidies, ODOT pays standard commercial rates for their solar energy. PGE and ODOT get to drink their champagne cheap while stiffing the taxpayers with the rest of the bill.

 

The Oregon Solar Highway’s next project was completed in January 2012 at the Baldock Safety Rest Area, and it dwarfs the Tualatin site in stature. For $10 million, the Baldock site has a massive 6,994 panels that can generate up to 1.97 million kilowatt-hours annually. PGE and ODOT once again combined to bring this project to fruition, utilizing the same federal and state tax subsidies to finance it. Over a 20-year lifespan, the cost of the solar energy produced will be $0.25 per kilowatt-hour―still more than double the average retail cost of electricity.

 

The cost is likely to be even greater than that, due to the inherent intermittency of solar energy. Since solar panels can produce energy only when the sun is shining, they always must be backed up with a traditional energy source, like natural gas or coal, in order to keep pace with the demands of consumers at night. These traditional power plants must be kept idling, severely reducing their efficiency.

 

A site in West Linn is the next proposed area for a solar energy installation. However, due to the 2012 sunset of the Business Energy Tax Credit (BETC)―a state program that provided a 50% tax break for alternative energy projects―the site is facing difficulties finding financing. The BETC was instrumental in building the other two solar energy highway installations. The expiration of this tax subsidy makes commercial solar power infeasible for private investors. Martin Shain, a consultant with BacGen Solar Group who was involved in structuring a deal for installing solar power on Oregon University System campuses, emphasized the importance of the BETC: “This wouldn’t have happened without the BETC, I can tell you that point blank.”

 

SolarWorld is a local company that provided the solar panels for both the Tualatin and Baldock highway installations and has recently made headlines for its increasing financial instability in the wake of Chinese competition. Founded in Germany, SolarWorld installed a state-of-the-art solar panel factory in Hillsboro to take advantage of the BETC and other local tax subsidies. That investment may turn out to be a failure since SolarWorld is currently being pummeled by the onslaught of cheaper Chinese-produced solar panels. SolarWorld has seen its share price fall to an eight-year low and reported a loss of 159 million euros for the first half of 2012. The company is on the ropes and might have been even closer to an early grave if it had not compelled the U.S. government to impose a 31% tariff on Chinese solar products.

 

Solar power is a clean, renewable source of energy, but it is also much more expensive than energy from traditional sources. Taxpayers should not be forced to pay for these boutique projects through import tariffs, tax credits, and other types of subsidies.

 

Chris Barton is a research associate at Cascade Policy Institute, Oregon’s free market public policy think tank.

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Like Moths to the Flame

Recently, The Oregonian published a feature story about the Portland Seed Fund. This is a two-year-old “public-private” venture capital fund designed to help start-up companies. To date, the Fund has chosen 17 companies to work with, and each one has received $25,000. The public money includes $800,000 from Portland, $500,000 from the Oregon Growth Account (a state-run fund financed with Oregon Lottery dollars), and $250,000 from Hillsboro. This is blended with roughly equal amounts of money from private investors.

 

The Oregonian put a very positive spin on the concept. “We’ve learned that the model can really work in Portland,” said Jim Houston, one of the two fund managers. Amber Case, whose company Geoloqi received support last year, said, “I think it’s really important for the city [Portland] to be involved because it shows that they care.” Jefferson Smith, a state legislator running for mayor of Portland, added that the fund represents an opportunity to “build on what we’re good at.”

 

This is the way it always is with public slush funds. Politicians, fund managers, grant recipients, and editorial board writers all think it’s a great idea to hire smart people to sit at a roulette wheel with public money and pretend that they are making great public investments. There is never a concern that maybe this is not a proper role for government, nor is there a willingness to learn from history. And one doesn’t have to go too far back in time to learn.

 

The Oregon Growth Account, for example, was created by the state legislature in 1995. It was funded with state lottery dollars, and its mission was to “launch and expand young Oregon companies” (funds could not be spent out of state, even if the in-state opportunities were mediocre). As of March 2011, the fund had $105 million in various accounts.

 

In a January 2011 memo to the Oregon legislative assembly, fund managers admitted, “The internal rate of return since inception is negative 7.9%. The current value of the OGA portfolio is less than the money that has been invested to date.”

 

Not satisfied with this failure, in 2001 the state legislature created the Oregon Resource and Technology Development Subaccount (ORTDS) within the OGA. The legislative mandate was to “make seed capital investments in emerging growth businesses,” which sounds a lot like the mission of the OGA itself. The legislation stipulated that the first $4 million of funds credited to the OGA be allocated to the subaccount, in addition to a direct allocation of $5 million from the legislature. As of September 20, 2010, this fund had a return of negative 17.8%.

 

Of course these are just parochial Oregon experiences, but history repeats itself everywhere. Few people remember, but at the turn of 19th century, consumers could buy new-fangled horseless carriages from three distinct categories―steam-powered, electric, or gasoline-powered with the internal combustion engine. It was not at all clear which technology would become dominant. A great deal of money was lost by private investors betting on steam-powered or electric cars.

 

If a politician had decided to pick the internal combustion engine and wanted to spend tax funds subsidizing hot start-ups, the name Henry Ford probably would have emerged. In retrospect, this sounds like it really would have paid off―except for the fact that between 1899 and 1903 Henry Ford founded, and bankrupted, two motor vehicle companies. He didn’t become successful until he formed the Ford Motor Company in June of 1903.

 

So how would politicians have known in 1899 which of the Ford companies was going to change the world? They wouldn’t have. Nor could they have successfully picked any other great companies. Between 1900 and 1908, 502 car manufacturers were launched in the U.S., and 302 either folded or shifted to another line of business. Most companies formed before 1905 never paid back a cent to investors, and the majority never built a single car.

 

This should be humbling to anyone charged with managing public funds, but Oregon politicians are infatuated with the idea of designating certain economic sectors as “the next big thing” and then subsidizing them with tax dollars. Sometimes they even double down by mandating that we also buy the products of politically chosen industries, such as the requirement that Oregon electric utilities purchase 25% of their electricity from money-losing “green power” sources like windmills and solar panels.

 

Unfortunately, a dynamic market economy doesn’t work that way. Consumer preferences can change in a moment, technology becomes obsolete, and old businesses are supplanted by competitors in a never-ending process of “creative destruction.” It’s a fool’s errand to think that politicians and their appointed underlings can predict the future successfully. Nobody can predict the future, so the only people who should invest in start-ups are private individuals gambling with their own money.

 

The state legislature will reconvene in February. One of the first orders of business should be to euthanize every state-sponsored “investment” fund. Subsidizing politically chosen private firms is simply not a proper role for government, regardless of the return on investment.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Wind Energy Can’t Stand Alone

A new Cascade Policy Institute–Reason Foundation study finds that wind energy is not suited to be the lone or primary source of a grid’s total electricity, due to its variable nature. If used to produce more than 10-20 percent of a system’s electricity, wind power increases operating costs because it requires expensive storage facilities or continuously available carbon dioxide-emitting backup power generation facilities.

 

In the Pacific Northwest, the backup to wind power has been provided by the Columbia River hydro system. However, hydroelectricity has even less carbon dioxide associated with it than does wind power. Displacing hydropower from the grid in favor of wind is actually a step backwards from the standpoint of reducing greenhouse gas emissions.

 

Two factors drive Oregon’s policy preference for wind power: subsidies to producers and Senate Bill 838’s Renewable Portfolio Standards. The Renewable Portfolio Standards force large utilities to procure 25% of their total power from politically designated “green power” sources by 2025. Both policies amount to a multi-billion-dollar tax on ratepayers, with net negative benefits for environmental quality.

 

As this study shows, policies favoring wind power are a mistake from both an environmental and an economic standpoint. Oregon legislators should repeal SB 838 and all wind power incentives in 2013.

 

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Cascade Update

Want to know the latest happenings at Cascade Policy Institute? Click here to see our Fall newsletter!

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Why we Left the Left

Please join us for Cascade’s monthly Policy Picnic Wednesday, October 17 at noon. Cascade CEO John A. Charles, Jr. will discuss his intellectual journey from leading a well-known environmental group to becoming the president of Oregon’s only free market think tank.

Why is central planning such a seductive concept? And why do some people embrace planning and then leave it behind? John recently published an essay on this topic in the book Why we Left the Left, and participants in the Wednesday lunch will receive a shortened version of the essay.

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to ten guests on a first come, first served basis, so sign up early. To RSVP, email Kathryn Hickok at kathryn@cascadepolicy.org or call 503-242-0900.

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