Editorial: Kicker issue highlights state's troubled tax system

Published Mar 15, 2013 at 05:00AM

If you’re a gambler — and we’re not — you might want to lay a wager on whether or not Oregon businesses will be eligible to collect the corporate income tax kicker this year.

The chances that they will apparently are just about even. Once again, the possibility highlights just how badly Oregon’s taxing system needs an overhaul.

The kicker is only part of the problem. Voters made the kicker — which refunds a portion of income taxes when state revenues exceed projections by 2 percent or more — part of the constitution more than a dozen years ago. Last fall they agreed to use funds that would have gone to corporations to help finance schools, though the law doesn’t go into effect until the next state budget cycle.

The kicker isn’t Oregon’s only quirk, unfortunately.

The state’s property tax system, which is the major source of income for municipalities, fire districts, law enforcement districts and others, is even more arcane. Taxable property values are set using a formula based on 20-year-old numbers, there are caps on how much an individual taxpayer must shell out for categories of services, and there are exceptions to those figures. And so on.

As for income taxes, Oregon’s brackets are high across the board, and the top three brackets are reached at relatively low income levels. And, of course, there is no statewide consumption tax.

If there’s logic in the current system, it’s hard to find.

Gov. John Kitzhaber is among those who recognize the problems. He also knows this: The difficulty comes in trying to create a new system that is both fair and palatable to voters.

Still, he is trying. A working group began looking at the problem a year ago and continues to do so. Its biggest challenge is to come up with a plan that voters, who sometimes seem to think that the man behind the tree is the only one who isn’t already paying too much, will approve.

Oregonians have rejected major changes to the state’s taxing structure more times than not, as the governor well knows, and he’s not about to hurry forward with a plan that goes nowhere. His proposals won’t come in this legislative session, and they may not come in the next.

Sooner is better, but it’s worth the wait if the governor can come up with reform that a majority of Oregonians will support.

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