Voters in Oregon support higher taxes

This week, voters in Oregon showed that they understand that budget deficits are unsolvable through tax and spending cuts.  About 54% of voters supported raising the income tax on individuals earning more than $125,000 per year as well as an increase in the minimum corporate tax and new taxation on corporations’ gross revenue.  Facing a $4 billion budget hole, voters decided that taxing the rich is better than losing teachers and firemen.

It’s hard to tell how much to read into this event.  On one hand, Oregon is a steadfast liberal state; on the other, it has a very conservative interior and has long voted against taxes and tax increases.  In addition, the two measures should only raise $700 million, much less than what is necessary to reach a balanced budget.  This leads Bruce Barlett to argue, correctly I feel, that:

I have foreseen this development for some years and feared that once our budgetary problems forced action that sharply higher tax rates on the rich, corporations and capital in general would be the inevitable consequence. That is why I have championed the value-added tax as a way of raising the revenue that will be raised one way or another, but in a way that exempts capital because it is a tax on consumption. In short, it is the most conservative way of raising revenue that we know of.

As Bartlett also points out, conservatives have predictably come out against this tax increase.  (Here is Megan McArdle.  Here is a group calling itself Oregonians Against Job Killing Taxes.)

What sticks out to me is that this doesn’t raise nearly enough revenue to close the shortfall, so Oregon is still looking at cuts in services.  As I’ve said before, I’m just as much against low taxes for the wealthy as the next liberal, but our country is not going to regain fiscal solvency through our narrow tax base.    It’s pretty clear to most people who study the issue (but not the Heritage Foundation) that we’ll need to widen our tax base, end tax favors, and simplify our tax code.  Hopefully, like so much else it leads the country on, Oregon has started to pave a trail that others will soon follow.