Oregon business leaders call for sales tax

12/10/02

JEFF MAPES

Oregon's business community turned out in a massive show of force Monday to present Gov.-elect Ted Kulongoski with an economic recovery plan that included a strong plea for slashing the state's income taxes in favor of a sales tax.

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Kulongoski said he thought state government needed to focus on cutting costs before talking about tax reform, and several other political leaders said they were skeptical about pushing a sales tax that has been repeatedly rejected by voters.

At the same time, the incoming governor and the business leaders did agree to move quickly to urge the Legislature to double the state's $15-a-year vehicle registration fee to pump hundreds of millions of dollars more into road and bridge repairs.

Kulongoski said he'd also follow business recommendations to find ways to quickly free more land for industrial development and to speed the permitting process for new businesses.

The proposed recovery plan was developed by the Oregon Business Council for a meeting that the corporate leaders thought would attract 300 or 400 people. Instead, more than 1,300 showed up at the Oregon Convention Center in Portland for the daylong conference that many said was a watershed event.

Richard Reiten, the Northwest Natural Gas chairman who helped organize what was billed as the Oregon Leadership Summit, said it signaled a new determination by business to work together to heal a state economy that has been hard-hit by the recent recession. Oregon has the nation's highest unemployment rate -- 7 percent -- and faces large state budget shortfalls that are threatening schools and other services.

"The new governor has a real opportunity to grab the momentum of this and move forward," Reiten said.

The day's events were centered on a series of 13 white papers, issued by the council, that in many cases repeated what many business and political leaders have been saying since the state's economy and budget tanked in 2001.

The council urged the state to reform the financially troubled Public Employees Retirement System and to improve its efforts to recruit and keep businesses.

There also were repeated calls to quickly revamp the state's tax system, which relies heavily on one of the nation's highest income taxes.

"We believe that fixing our public finance system is the biggest single issue facing this state," said Ron Parker, president and CEO of Hampton Affiliates, a forest products firm, who delivered one of the conference's main speeches.

Parker said the income tax is volatile and that businesses are discouraged from investing in the state because of the high tax on capital gains and other forms of income. Revamping the tax code "probably means a sales tax," he said.

That theme was picked up by another speaker, Steven D. Pratt, president and chief executive officer of Portland steel-maker Esco, who drew a large, spontaneous round of applause in one of the morning's first speeches when he declared: "Personally, I believe our state needs a sales tax to stabilize our revenues."

Kulongoski did not rule out a sales tax during the campaign, but he said in an interview at the conference Monday that he is not ready to commit to tax reform. Until Oregon voters see that government is operating more efficiently, "whether you call it tax reform or revenue neutral or whatever it is, I don't think Oregon voters are going to buy it," he said.

Chuck Sheketoff , who heads the Oregon Center for Public Policy, a liberal think tank, said the business leaders were too concerned with wanting to "to feed the investor class, putting more money in the hands of the top 1 percent, the absolute richest people."

"The wealthy get huge tax cuts, and the poor actually end up paying more," Sheketoff added. "It turns the whole notion of progressivity on its head."

Vehicle registration fees There was less controversy over Kulongoski's campaign proposal to double the state's vehicle registration fee, which at $30 every two years is the nation's lowest. The business council endorsed that idea, and Kulongoski said he expected to present it to the Legislature in January shortly after he takes office.

State Rep. Bruce Starr, R-Hillsboro, said he was working with Kulongoski's transition team on a transportation package, but he declined to discuss specifics.

"It's a question of where the Legislature's going to be," Starr said. "It's a challenge to move any kind of transportation funding bill when you're asking the Legislature to raise taxes."

Kulongoski said his transition team also is working to ensure the state has an adequate supply of land that can be used for industrial development, a concern expressed by some business leaders who worry that there's little room for growth under the state's land-use laws.

In a speech at the end of the conference, Kulongoski promised that the "days of business as usual in state government are over."

He said state agencies would be forced to justify their entire budget -- not just an inflation increase -- and that he wouldn't let the Legislature go home "until we reach an agreement about PERS."

Kulongoski said he would "retool" the state's Economic and Community Development Department to focus on attracting and keeping business in the state.

He also delivered a strong defense of the timber industry, saying the state should have more freedom to develop harvest policies in national forests.

"Although I want to build a strong federal-state partnership, I consider this issue one that cries out for state's rights," said Kulongoski, adding that "Oregon is a national leader in healthy forest practices."

Kulongoski also teamed up with Sens. Ron Wyden and Gordon Smith in a seven-point plan to bring more federal dollars to bear on Oregon's economic woes.

The three intend to work together to obtain more federal research, education and work-force training funds for the state. They also hope to meet regularly to discuss trade promotion for Oregon businesses and develop a federal/state partnership that allows the state to better manage its natural resources.