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Senate committee leader says flattening budget cycle is goal

Photo Credit: SUBMITTED PHOTO - State Sen. Mark Hass is the incoming chairman of the Senate Finance and Revenue Committee for the new legislative session.As a news reporter and as a legislator, Mark Hass has seen Oregon’s economic ups and downs and how they affect the income taxes that schools and state services rely on.

Now, as the incoming chairman of the Senate Finance and Revenue Committee Senate Finance and Revenue Committee for the new legislative session, Hass says he is determined to do what he can to help reduce the peaks and troughs of the state budget cycle.

“Nobody is better prepared,” says Senate President Peter Courtney (D-Salem), who made the appointment. “Nobody out-thinks him.”

Hass is a Democrat whose district includes Beaverton district includes Beaverton, where schools laid off hundreds of teachers during the economic downturn. Federal aid enabled Oregon schools to delay layoffs for a couple of years, until the aid ended in 2011 — and then rehire many positions as the economy recovered.

Even worse, Hass says, hundreds found themselves teaching a new grade or subject as a result of “bumping,” allowing teachers to replace those with less seniority.

“It’s like generals looking at the casualty lists, which do not truly depict the chaos to a school system and the damage to the mojo of our state when it happens,” he says.

“We have to discontinue this boom-and-bust cycle. We have to fix a (tax) system that brings in too much in the good times, and not enough in bad times. We have a tax code that cannot absorb economic downturns.”

Hass, who just turned 58, grew up in Tigard has a son, Samuel, and daughter, Isabelle. His wife, Tamra, is a speech pathologist. He is an account manager at the advertising firm of Cappelli Miles, which has offices in Portland, Eugene and Denver.

Dependence on income tax

Oregon voters limited local property taxes in the 1990s and shifted school operating costs to the state budget, which relies almost exclusively (89 percent) on personal and corporate income taxes for the funds lawmakers have the most discretion over. That budget includes Oregon Lottery proceeds, which have some restrictions.

School aid was on top of other state education, human services and public safety programs.

“No other state is as dependent on one tax as Oregon is on the income tax,” Hass says.

According to the Legislative Revenue Office, Oregon ranked second among the states in 2010-11 in personal income taxes measured by percentage of income, and fifth measured per capita. In total taxes, however, Oregon ranked 31st among the states measured by percentage of income and 30th measured per capita.

‘Nothing off the table’

HassAs recently as 2013, Hass sponsored a bill creating a 5 percent sales tax, which Oregon and four other states do not have — and which voters rejected nine times between 1933 and 1993.

Hass’s predecessor as leader of the Senate committee, Sen. Ginny Burdick of Portland, failed to get a vote of the full Senate on committee proposals to modify Oregon’s “kicker.” That’s the law, which voters made part of the Oregon Constitution in 2000, that requires rebates if actual collections of income taxes exceed 2-year-old projections. Voters did agree in 2012 to retain excess corporate income tax collections for state school aid.

In the most recent “kicker,” $1.1 billion was rebated to individual taxpayers in late 2007 just as the economic downturn began.

A public opinion survey conducted in 2013 by DHM Research in Portland for a coalition of agencies and nonprofits concluded that Oregonians are dissatisfied with the state tax system and agreed that it is unfair. But the survey also reported that poll participants disagree about how to change it.

Hass says he and Rep. Phil Barnhart, a Eugene Democrat who leads the House Revenue Committee, have agreed to a review of all proposed tax system changes.

“We think there is really nothing that is on or off the table,” Hass says. “It is important to me to resume a dialogue with the goal of making our tax system less volatile.”

He also says the changes should be “revenue-neutral,” not resulting in more money being collected, although that may result in different means of taxation.

Other issues

Other potential changes Hass wants to examine are a tax on carbon emissions, as outlined in a recent report presented to the revenue committees by the Northwest Economic Research Center based at Portland State University, and a tax break on some capital gains.

Gov. John Kitzhaber says he wants to renew a 2011 proposal, which went nowhere, for a limited reduction in the tax rate on capital gains that result when stock or other assets are sold. Oregon taxes capital-gains profits at 9 percent, the same top rate as ordinary income.

Kitzhaber’s 2011 proposal would have required the profits to be reinvested in Oregon, and would cap the total at $25 million.

In Oregon’s two economic downturns of the past 15 years, reduced income-tax collections were made worse by higher-income households not taking capital gains, in addition to workers who were laid off or employed less than full time.

“A high rate on capital gains definitely contributes to the volatility of our system,” Hass says.

Hass also says that the revenue committees would take a look at the effects of an Oct. 2 decision by the Oregon Supreme Court that subjects cable companies to central assessment by the Oregon Department of Revenue. That shift from county-based taxation could cost millions to Comcast, which sued the state, and other providers — although the high court returned the case for further proceedings in the Oregon Tax Court.

An elusive goal

Oregon has had tax system debates for more than half a century, ever since Gov. Mark Hatfield proclaimed in his 1959 inaugural address that the No. 1 problem in education is how to pay for it.

Although there have been some changes over the years — including voter support of property tax limits in the 1990s — large-scale solutions have eluded governors and lawmakers ever since.

While Kitzhaber has backed off discussion of a sales tax this session, given its lack of support in polls, he negotiated a truce between business groups and labor unions to keep several tax-related measures from reaching a statewide ballot this year.

Hass says he wants to take advantage of that pause for a fuller discussion of taxes.

“We want to take a significant cut at a problem that a lot of people have written off as just too impossible to try,” Hass says.

“It may be. But I would rather go down swinging than not get up to bat.

“It’s not glamorous. It’s not going to propel anyone’s political career, but it’s probably the most vexing problem on Oregon’s radar right now.”

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