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Oregonians can see that Measure 41 is fool’s gold

August 31, 2006By Chuck Sheketoff

Some people joke that there was a fork in the trail that led prospectors to the nation’s West Coast during the gold rush. Those who could read the sign made it to Oregon and those who couldn’t ended up in California.

This November, Oregonians will have a chance to prove that true when they read Measure 41 on the November 2006 ballot.

Touted by its out-of-state proponents as a “family tax cut,” the measure would make Oregon’s tax system more complicated and cause cuts in public services that Oregonians rely upon every day, such as schools, the Oregon Health Plan, senior assistance programs, and public safety initiatives. Measure 41 is fool’s gold.

Ballot measures aren’t supposed to pick winners and losers, but Measure 41 does just that. For example, elderly Oregonians lose out. Most elderly Oregonians – about six out of 10 – would receive no tax cut from Measure 41. Aren’t seniors “family?”

And the winners won’t even get the gold that the measure’s proponents promise. Almost seven out of ten elderly Oregonians (69 percent) are low- and middle-income. Their average tax cut would be just $31 a year, or less than $3 a month, and three-quarters of those elderly Oregonians would not see their taxes go down at all.

The ballot title alone tests the gold rush literacy lore: “allows income tax deduction equal to federal exemptions deduction to substitute for state exemption credit.”

What does that mean?

It means that taxpayers must calculate whether taking a certain dollar-for-dollar reduction in taxes (the current exemption credit) is more valuable than taking a certain deduction from income before calculating tax liability (the Measure 41 alternative).

One out of five taxpayers get nothing or would do better using the tax credit allowed under current law than using the alternative deduction provided by Measure 41.

A review of who wins under the measure also shows that it is linked to the Bush tax cuts: the wealthy would do better over time. Because Measure 41 creates an alternative tax calculation based on the size of a taxpayer’s federal exemption deduction, the highest-income Oregonians would see their tax cut from Measure 41 increase through the end of this decade as a Bush tax cut fully takes effect.

Fool’s gold looks better than it’s worth. Measure 41, while being sold as a “tax cut” will also increase the federal taxes Oregonians send to Washington, D.C. each year. And you know that kicker refund you are expecting in November 2007? Measure 41 will reduce that by about $150 million.

Oregonians would see popular public services scaled back in the next budget period if Measure 41 passes. With about nine out of every ten dollars spent in the state budget supporting education, senior programs, health care, and public safety, it is difficult to imagine any Oregonians not feeling the impact of the $792 million in budget cuts that Measure 41 would force. Because Seniors and People with Disabilities is the second largest cluster in the Department of Human Services budget, seniors would be particularly hard hit by the cuts in public services.

The claim made by proponents of Measure 41 that the “typical Oregonian” would pay “several hundred dollars a year in lower taxes” is overstated. The typical Oregonian would save only $69 in taxes each year because the typical taxpayer saves $138 a year and has two people in his or her household.

Among the wealthiest 40 percent of Oregon taxpayers, by contrast, the average net tax cut would be $349 a year, and only 5 percent of those richer taxpayers would receive no tax reduction.

Measure 41 is complicated, but Oregonians can figure out that there ain’t no gold for them down the path the measure offers.