Minnesotan Garrison Keillor once joked, “I believe in looking reality straight in the eye and denying it.” When it comes to their tax system, Minnesotans have the luxury of denying reality if they wish. That’s because the “tax incidence” report published by their Department of Revenue every two years allows Minnesotans — unlike Oregonians — to look tax reality straight in the eye.
Minnesota’s tax incidence report examines a crucial question: Who pays state and local taxes? In so doing, it shines a light on Minnesota’s tax system.
By reading the report, Minnesotans can learn what share of taxes households pay and what share businesses pay. They can learn the extent to which business taxes are shifted to consumers (through higher prices) or labor (in the form of lower wages) rather than being borne by stockholders (through lower rates of return). They can learn the extent to which taxes are being “exported” to nonresident stockholders or nonresident consumers. Having out-of-state residents bear the cost of taxes is an ideal scenario for any state.
The report also looks to the future, reporting on who will be paying taxes over the coming years under existing law. It discloses, for example, whether business taxes as a share of all taxes or of the economy are expected to increase or fall and how taxes will affect households at different income levels.
The information in the report also allows Minnesotans to determine the fairness of their tax system, because it shows whether taxes are being assessed based on ability to pay. The latest report, for instance, revealed that Minnesota’s tax system has become less fair over the past 18 years.
Taking transparency one step further, the Minnesota legislature requires the Department of Revenue to disclose the cost of producing the report. The most recent edition cost only $75,000 to research and write. Considering that Minnesota state and local taxes total about $24 billion a year, $75,000 every two years is a small price to pay for such valuable information.
Oregon takes pride in its pioneer spirit, but in this case it would do well to follow Minnesota’s lead and produce a biennial tax incidence report.
Today, no law stops the Oregon Department of Revenue from doing so. While they are busy producing some very useful reports, they haven’t yet followed Minnesota’s example.
So maybe we need the legislature to pass a bill requiring the agency to produce a tax incidence report and providing the necessary resources to get it off the ground. Producing the first such report likely would have some small upfront costs. But once the template is set, the report should be about as affordable for Oregon as for the North Star State.
History confirms the value of transparency in tax matters. In 1995, the legislature directed the governor to produce a report every two years on “tax expenditures” — encompassing tax credits, deductions and exclusions — as part of the budget presentation. That report has led to increased scrutiny of tax breaks.
A tax incidence report similarly would promote better public policy in Oregon. It would provide hard facts to legislators voting on a tax bill and to voters deciding on ballot measures — such as Measure 59 on the November ballot — that impact revenue and the distributional balance of taxes.
Ultimately, a tax incidence report would help Oregonians reform the tax system so that it works for all Oregonians, fairly providing adequate revenues for our public structures. For a mere $75,000, Oregon taxpayers would be looking at a bargain.
Chuck Sheketoff is executive director of the Oregon Center for Public Policy, which does in-depth research and analysis on budget, tax, and economic issues with the goal to improve decision making and generate more opportunities for all Oregonians.
