Tax Reform

Oregon State of the State: Governor Brown Demands Spending on Pet Projects, Neglects Needed Reforms

In her recent State of the State Address, Governor Kate Brown kicked off Oregon’s short 35-day legislative session with a litany of policy proposals, all in her plan to expand economic opportunity by funneling more money into technical education and workforce development.

Governor Brown recognized “Oregon is a leader in economic recovery, and unemployment is hitting record lows,” but lamented “for too many…the American Dream has become the Impossible Dream.” She complained that economic growth should lift everyone, but many “hardworking families are still underwater” with low-paying jobs. Furthermore, due to a lack of local skilled labor, businesses are forced to look out of state to fill some 66,000 job openings, according to the governor.

Economic data suggest the governor’s dismal rhetoric may not entirely reflect reality. Oregon’s non-farm employment has risen impressively to a level nine percent higher than prior to the Great Recession. Average hourly earnings have risen 16 percent over the past six years in Oregon—more than twice the 7.1 percent cumulative inflation. Real personal income in Oregon has been growing at a rate faster than many other states since 2013, and the ALEC-Laffer State Economic Competitiveness Index ranks Oregon’s 10-year cumulative GDP growth at ninth nationally.

Governor Brown lauded the five percentage point rise in the high school graduation rate throughout her three year tenure. Once one of the worst graduation rates in the nation, she set a goal of 90 percent by 2025. The governor cited the 86 percent graduation rate of those enrolled in vocational training or other technical courses as an impetus to enact Future Ready Oregon. She also pointed to Salem’s Career and Technical Education Center’s 98 percent graduation rate.

According to the governor, employment opportunities in most of the businesses driving economic growth often do not require a college degree, even though technical in nature. Examples given include manufacturing, clean energy, IT, healthcare and bioscience. As such, she targets funding to high school degrees and equivalent certificates. Her five-step program aims to incentivize rural construction and infrastructure investment, expand the number of registered apprenticeships, create loan programs for skilled construction workers to start their own businesses, provide more affordable housing and realign training with the current entry-level job requirements.

Although the educational opportunity components of the plan bear promise, the micro-managing of economic development may prove distortionary and counter-productive. Oregon’s education policy ranks 44th in the country, according to the ALEC Report Card on American Education. A dearth of charter schools, lack of private school choice programs, and lackluster teacher quality are all factors. Unfortunately, “Future Ready Oregon” leaves these concerns largely untouched.  Reforming Oregon’s tax and regulatory environment is a far better way to foster business development, job growth and economic prosperity. Oregon’s top personal and corporate income tax rates sit at third and fourth highest nationally – and are especially detrimental to the higher-paying jobs Governor Brown seeks to increase.

The governor neglected to mention the struggling Oregon Health Authority. She did acknowledge the need to “make the PERS system more sustainable and keep the debt we owe from hobbling public education.” According to Unaccountable and Unaffordable 2017, per capita, unfunded public pension plan liabilities are ninth highest in the nation at more than $26,700.  This looming debt crisis threatens taxpayers and public workers.

Although Oregon does rank seventh place in economic performance,  The strong growth following the Great Recession should not be taken for granted.  A “future ready Oregon” requires more than just a slew of programs.

In Depth: Tax Reform

Mainstream economists, small business owners and taxpayers across the country understand that growth-oriented reforms mean increased opportunity for all. As demonstrated by the annual Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, sound tax and fiscal policies are critical to economic health, allowing businesses and households to flourish. A…

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