Needed: A Sunset on Tax Expenditures Sunset

While the 2007 Legislative Session appears enlightened when compared with the '05 session, two shibboleths are alive and well - no new taxes and no new regulations. Curiously, these prohibitions have not affected "tax expenditures" (tax credits, exemptions, subsidies, etc.) in the slightest. Whether that is due to a desire to shrink government or whether it reflects a legislator's desire to reward a good cause, the Legislature has on deck well over 150 proposals for new tax expenditures. These proposals stretch from agricultural equipment exemptions to employers wage increase credits, from affordable housing credits to volunteer public safety service credits. Who knows what will pass. Four of these proposed measures would, in one way of another, extend the life of Pollution Tax Credits.

The League had hoped that the long-used Pollution Tax Credit program, instituted in the '70s to assist industry to adjust to the new federal Clean Water Act requirements, would discretely expire along with its 2008 Sunset date. We had hoped that this sunset would signal for a long over-due look at the whole field of "tax expenditures." In 2005, if you remember, Oregon faced a significant shortfall in revenue and could well have used the $26.6 billion which was targeted to be "spent" through special provisions of the tax code. That figure, in fact, exceeded the $23.76 billion of revenue to be collected through state and local sources.

This 2007 Session, the League's Natural Resources crew has been spending much of its energy in Ways and Means, following state agency budgets - Water Resources, Department of State Lands, Department of Land Conservation for example. We know that the regulations that maintain the health of Oregon's environment and the health of it citizens depend on adequate budgets for monitoring and enforcement, the keys to fair and effective regulation. We also know that regulation requires adequate budgets to be effective.

Having passed the "Rainy Day Fund," it is critical that the Legislature take an over-all look at "tax expenditures" and decide which are good public policy, which are necessary, and which are merely "rewards."

Four bills were heard in House Revenue on Tuesday, March 27^th.

HB 3108 would require a program and performance audit of tax expenditures by the Secretary of State; HJR 26, a constitutional amendment that would require a review of all tax expenditures by the legislature every 10 years; HB 2963 that would sunset tax expenditures not required under federal law or the Oregon Constitution and establish an Oregon Tax Expenditure Commission. The fourth, HB 3260, would extend the sunset dates for all tax expenditures scheduled to sunset in the 2007-2009 biennium. This measure would extend the Pollution Tax Credits that the League has opposed for of all the benefiting interest groups, many sessions.

There is no lack of interest in tax expenditures. Each credit, exemption, and subsidy has its own lobby. Some expenditures the League might support; some we might oppose. Question your Representative and Senator as to what kind of review, by whom, and when a review of this huge source of public revenue is appropriated.

Liz Frenkel, Natural Resources Coordinator