Monday, November 13, 2006

Tax Reform Ideas (for Oregon)

Recently, Governor Kulongoski of Oregon announced that, after the education system, his next target for reform is the tax system.

I'll back the governor on this one.

But I still don't like the idea of a sales tax, and I never will. I bring this up because the governor has brought up the idea of a statewide sales tax in the past. I support local restaurant sales taxes, such as Ashland's, and wouldn't mind too terribly much if, say, Portland decided to go this route as a means to raise additional revenue for city beautification efforts.

I'd much rather see a wholesale goods transfer tax (wholesale delivery tax), however -- that is, a tax on wholesale items that is levied somewhere along the wholesale supply chain, either at point of delivery or somewhere else.

The point would be that items that get delivered via trucks or rail would be taxed, partially to pay for the impact of the fact of their delivery on the transportation system, and, perhaps, partially to help hold up the general fund.

Consumers wouldn't see a point-of-sale tax, however. The price of goods would go up, where the market could bear the increase, but it would be up to businesses to pay the tax. Also, items not subject to wholesale delivery would not be subject to the tax (i.e. wines sold at a winery, beer sold at a brewery, chocolate sold at the chocolate factory, etc.).

It would also make sense to raise the gas tax a bit, and index it to inflation. I know that Oregon has been studying the idea of switching from a gas tax to a mileage-based tax; however, I think that the good ole' gas tax is a better way to go for now, simply because it is the most efficient way to tax the consumption of fossil fuels. If people want to buy hybrids or ride their bicycles to escape this tax, great -- the state should be encouraging this behavior anyways. As a part of tax reform, the wholesale delivery tax mentioned above could help to offset any future lost revenue from general societal shifts away from petroleum usage.

A good question is this: What is the difference between a wholesale delivery tax and a value-added tax (VAT)? I'd attempt to answer this by saying that a wholesale delivery tax is an attempt to be more progressive than the VAT, though I have no analysis to back up this assertion yet.

Closing corporate tax loopholes should also be a part of any tax reform strategy, as well as individual tax loopholes whose only function seems to be to benefit wealthier individuals.

Might legalizing marijuana, in order to tax it, also bring in a pretty good amount of tax revenue to the state? Arguably, this requires a change in federal law, but what better way to push the issue than to first legalize it at the state level, then use that as a vehicle to broach the subject in the U.S. House of Reps?

Finally, there's the somewhat separate issue of how to finance an expansion of a statewide passenger rail system, which I think would best be financed by bonding off of a combination of expected TIF (Tax Increment Financing) revenues in station areas plus system access charges (passenger fares plus any cargo fees for cargo shipped on a new system).

Other ideas for tax reform? I'm looking for ideas that don't necessarily reduce the existing tax burden on anybody (I think all citizens should do their part in keeping the state running), but do focus on progressive taxation (taxing those with a greater ability to pay more highly, and taxing those activities which have a detrimental impact on society or the environment more highly).

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