SearchHomeMenuSign UpDonate

Grand Bargain Tax Package: It Got Worse on Monday

Blog Post
October 1, 2013

I wasn’t holding out much hope for a favorable legislative draft of the “Grand Bargain” tax package, but the bill finally released late Monday was even worse than I imagined.

Never mind that the subsidy still doesn't have any job creation or retention standards.

Never mind that the new bill now says the business owner qualifying for the subsidy need have only a single employee working just over half time (1200 hours/year) in his/her employ.

Never mind that new estimates out Monday show the state's Rainy Day Fund will get less money over the next 10 years under the scheme in the tax bill than under current law.

It's the fiscal irresponsibility that really irks me. For starters, the bill fails to place an expiration (sunset) date on the tax subsidy for some wealthy business owners that will drain revenue from the overall package. As I explained yesterday, it’s not only contrary to public policy enacted by the 2013 Legislature, but its irresponsible for lawmakers to not sunset this tax provision.

Without a sunset, this costly subsidy will live on indefinitely, with no requirement that lawmakers reexamine the wisdom of such a provision at some point down the road. Without a sunset it would take a 3/5th majority to correct their error. Put another way, sunset dates ensure that small ideological minorities in the legislature aren't in control, allowing a simple majority of the legislature to close or scale back wasteful tax expenditures. This new tax expenditure doesn't have one.

Also shocking is the wide latitude allowed if the tax subsidy for some of the wealthy turns out to cost more than projected. The bill inserts a “circuit breaker” provision to scale back the subsidy if its costs get too large, but that circuit breaker allows for a whole lot of revenue loss — up to 25 percent more than the projected cost of the subsidy — before it gets triggered. And it can only be triggered twice over the course of 10 years, after which the circuit breaker (not the bill) ironically sunsets. Adding insult to injury, the estimated costs can ratchet up over time, making the circuit breaker even less effective.

Why put in such a complicated circuit breaker? Likely, it is driven by the inconvenient truth that the legislature’s economists cannot predict accurately the costs of the complicated tax subsidy.

But how do you explain the lack of a sunset on the tax subsidy, especially when the circuit-breaker mechanism itself comes with a sunset? It’s hard to answer that without cynicism.

Whatever the reason may be, the Grand Bargain tax package keeps getting worse.


This blog post was originally posted on www.blueoregon.com on September 30, 2013. The original post can be found at http://www.blueoregon.com/2013/10/grand-bargain-tax-package-it-gets-worse/.