Options to Improve Oregon's Economy

Jason Bligh on www.blueoregon.com said that:
"So if we adjust the fees down for local (and international) businesses, who's going to pay for the roads? Having low property taxes for poor people and families is also a public benefit. Are we going to give up that benefit? Shouldn't the people causing the impact (those eating the pizza) pay for building the public infrastructure required?"

In most other states, the solution is to levy a sales tax on the business transaction. Part of this tax is to pay for the maintenance and upkeep of the transportation system. In some places, like California, each county has the authority to ask its residents to levy a tax specifically for transportation purposes, which must pass with 2/3 of the vote. Many of these are 1/2 cent sales taxes.

In Oregon, the suggestion of a sales tax is political suicide. Just ask any politician anywhere in the state who has ever seriously attempted to propose such a thing, except those in the City of Ashland. Ashland has gotten away with having a municipal sales tax (or perhaps it's a luxury tax -- same difference, a sales tax generally only applies to a specific set of goods and services, excluding such things as groceries) for many years, and this is one of the reasons that town is so well-kept and generally nice-looking. Go visit Ashland to see what I'm talking about.

Is a sales tax the only option for Oregon or communities within this great state who wish to raise additional revenue to maintain the transportation system and other essential public services? No. However, the other options are limited. The property tax is pretty much maxed out in terms of its revenue-generating potential, due to a series of voter-approved limitations on it. The income tax could perhaps be broadened to raise additional revenue, but with a limited in-state tax base, especially of wealthy income-earners, this route is full of peril. Other income possibilities include public-private partnerships and options of limited geographical scope, such as Local Improvement Districts (LIDs).

The Employer Payroll Tax currently only pays for transit operations. It could perhaps be expanded (that is, increased) to pay for additional transportation services (such as capital improvements to and upkeep of the transportation system). However, this has the potential to make Oregon even less business-friendly.

The last option for raising revenue is to raise the overall size of the economy in such a way that the tax revenue generated exceeds the cost to the public sector of accommodating the additional burden of the resources required to support such an expanded economy. The best way to do this is probably to follow the path called "Smart Growth," which focuses new growth around existing infrastructure, especially transit, in order to maximize the revenue to government from the public resources that already exist. A good example of Smart Growth is all of the development that is taking place (and has taken place) since the opening of the Westside Light Rail Line in 1998 between Hillsboro and downtown Portland. A good example of the opportunities for further development, expansion of the economy and therefore additional revenue for the public sector lies with the remaining under-developed parcels near transit along the Westside Corridor, near the Portland Airport along the Airport MAX corridor, and in the Interstate MAX light rail corridor in N/NE Portland. Building out these three corridors with small business with a high potential for growth should be a top priority for the entire state. Small business incubators, loans for business start-up and business improvements, bridge financing and construction financing for developments, and other such policies probably represent the best "bang for the buck" for the state to revive and expand its economy over the next half-decade.

Longer-term, investments in transportation infrastructure to link the disparate sections of the state more closely together will allow for this model of economic expansion to continue in Oregon, as the state slowly climbs out of its economic hole and builds a solid economic foundation upon which to provide employment for its citizens and revenue for the public sector. The next opportunities for such investment could include:

* A higher-speed rail connection between Astoria and some point to the east, perhaps The Dalles or Pendeleton, via St. Helens, Portland, Troutdale and Hood River. Double-tracked higher-speed passenger and freight rail service in this corridor would allow for more transit-oriented development near stations, goods shipment, and even long-distance commuting. I heard a well-founded report that Google is opening a new campus in The Dalles. If so, those employees would be well-served by a passenger rail connection to downtown Portland, where they could transfer to Westside Light Rail to reach the Silicon Forest. Similarly, a new public university campus in Astoria could spur that city's economy, and with a rail connection into downtown Portland, tie it together with the outside world.

* A commuter rail link between the communities of the Rogue Valley (Ashland, Medford, Central Point and Grants Pass, with a possible northern spur to Eagle Point and Shady Cove) would allow for non-automotive transportation options, as well as bring about the potential for transit-oriented development. This is another region where another institution of higher education would do worlds of good for the economy.

* A high-speed rail link between Portland and Bend could help the Central Oregon High Desert communities expand their economies without clogging the state highway system further.

To fund all of this would require vision and leadership, as well as floating capital bonds to pay for construction. The construction would create jobs, as would the operation. Tax Increment Financing in station area locations could help pay for retiring the debt, as well as potentially help to cover operational costs. An expansion of the Employer Payroll Tax to a statewide basis could also help cover the operational costs.

There are many opportunities for the State of Oregon to exert leadership to turn its economy around and still provide the services that its citizens expect. The sales tax is not the only answer. However, this discussion needs to take place, and the sales tax needs to be on the table as a discussion option, so that everybody can weigh all options and choose the one that best reflects the spirit and desires of the state as a whole. Ultimately, I would guess that Oregonians would choose to remain a sales-tax-free state, but only if some of the other options that I have laid out here are brought to fruition to help maintain the services provided by the public sector.