The 2008 Oregon
elections are completed, and the people have decided who
will represent them for the next two to four years. Once
again, the 80% of the people who live within 20 miles of
the Willamette River have dominated the outcome of the
I do sincerely
thank all those who voted to re-elect me to a second term
in the Oregon Senate. Nearly 98% of those who voted,
supported my re-election as your State Senator in our five
county District 28.
With the single
exception of our Congressman Greg Walden, all of Oregon’s
congressional seats are now held by Democrats. All
statewide offices including Governor, Secretary of State,
Treasurer, Attorney General, Commissioner of Labor and
Commissioner of Education are held by Democrats. Virtually
all agency directors are Democrats appointed by the
Democrat Governor. In Oregon, fourteen of seventeen
Supreme Court and Appellate Court Justices, most District
Court Judges, and most District Attorneys have been
appointed by Democrat governors as well.
The Oregon Senate
is dominated by an 18 to 12 Democrat majority. That
majority has selected a Democrat, Senator Peter Courtney,
to continue to serve in the most powerful office as Senate
President. He will assign all committee chairmanships as
well as assign all Senate members to committees. The
committee chairs serve at the pleasure of the President.
He will assign all introduced bills to committees, and he
will decide what bills will, or will not, receive
Republicans did pick up one seat when Chris Telfer won her
election in Deschutes County. However, the House Democrats
gained 5 seats including two from previously considered
safe Republican districts including one east of the
The Oregon House
of Representatives is now dominated by a 36 to 24 Democrat
majority. That 36 seat majority provides both the House
and the Senate with 60% Democrat majorities allowing them
to increase and pass new taxes without a single concurring
fact, if the Democrat majority votes together, they now
have an insurmountable margin that will allow them to pass
any law they choose, except for the passage of a
Democrats have selected Representative Dave Hunt as the
new Speaker of the House since former Speaker Jeff Merkley
is now our United States Senator. The Speaker has similar
powers to the Senate President, except for having the
additional powers of controlling all tax and revenue
bills, which must originate in the House.
We may expect to
see a variety of new taxes introduced, such as some form
of a retail sales tax, a real estate transfer tax, and
increased document recording taxes. Increased taxes on
gas, alcohol, tobacco and either a minimum corporate tax,
or a tax on gross corporate sales, may be expected as
well. Laws will be introduced to make it easier for
counties to expand their sources of revenue—that means
make it easier to raise your taxes.
business tax credits and deductions will be reduced or
eliminated in proposed bills. Some of the revenue
generated from these reductions will be channeled into
more tax credit incentives to encourage even more
alternative energy generation.
One of the Governor’s legacy
items is a government mandated third party government pay
health insurance system for all Oregonians.
The only apparent
way to pay for such an extensive health care system would
be an additional state payroll tax deduction. This bank
busting plan may gain new traction with the Democrat super
majority. At the
very least, the Governor
will make a huge push for expanding the Oregon Health Plan
to include all uninsured children regardless of their
parents’ ability to pay.
Expect to witness
a plethora of new environmental laws including some of the
Governor’s other legacy items such as his Marine Reserves,
Headwaters 2 Ocean, and Carbon Cap and Trade initiatives,
as well as laws to further expand land use restrictions.
number of new laws to be enacted that will further enhance
the control of Oregon by labor unions, especially by
public employee labor unions.
Not least, the
long standing Republican backstop to prevent enhanced gun
control statutes is now no longer a factor. Gun control
advocates have been waiting a long time for this
voters have voted for change, and as a direct result, they
will undoubtedly experience significant change.
Unfortunately, the citizens who live and work in the 80%
of Oregon, not dominated by that Willamette Valley
majority, will be required to live under laws created by
the representatives of that Willamette Valley majority.
legislative session will certainly be interesting and
challenging. Many of the outcomes will most likely be
disheartening for rural and small town Oregon.
401 K RETIREMENT
recent elections, the new progressive Democrats have near
total control of both our state and federal governments.
They have promised change, and tax relief, for middle
transformations in 401k retirement plans are one of the
changes being contemplated our Democrat leadership in
of adult Americans own and manage more than 65 million
private 401k retirement plans. Contributions to these
private plans by their employee owners are tax deductible.
Matching contributions by employers are also tax
deductible. The 401k plan structure allows private wealth
held within the plans to compound without being restrained
by taxation. In fact, the growth of assets held in 401k
plans is totally exempt from both income and capital gains
A significant penalty for any withdrawals
before attaining retirement age insures that these assets
are saved for retirement. Withdrawals after reaching
retirement age are taxed as ordinary income.
Middle class Americans hold more than $3 trillion in
private equity in these retirement plans. That represents
more private assets held by middle class Americans than in
any other entity except for their home ownership.
New progressive Democrats are making proposals
that would change all that. Congressman George Miller who
chairs the House Education and Labor Committee has labeled
the 401k plans a big failure and he is holding hearings to
consider changes. Congressman Jim McDermott who chairs the
relevant House Ways and Means subcommittee is
The first change contemplated is elimination of the $80
billion middle class income tax deduction for
contributions to 401k plans.
Another change would be to eliminate the tax
free growth of assets while held by the plans. They
contemplate levying income tax on stock dividends, and
levying capital gains taxes on asset growth. Of course,
they would retain the requirement to pay income tax on
If these changes were to be made in the 401k plans, the
plans certainly would be a failure, because all benefits
of the savings plan would be abolished.
Alternatively, the committee heard testimony suggesting
nationalization of all 401k plans, just like Argentina’s
Peronist government has already done. This plan, which
Congressman Miller considers intriguing, would confiscate
the assets in all 401k plans and give all workers an
annual $600 inflation adjusted tax credit for retirement.
It would also require each employee to “invest” 5% of
their annual compensation into a government owned
retirement account to be managed by the social security
This scheme would
be a direct taking of private property on a scale similar
to the confiscation of all private residences.
I want to be very
clear that these laws have not
been passed, but they are
receiving hearings by the New Progressive Democrats in
administration was elected on the promise to be the
champion of the middle class by reducing the taxes for 95%
of Americans. How either the repeal of the middle classes
second largest tax deduction, or the confiscation of their
second largest pool of wealth, would benefit the American
middle class is difficult to understand.
Perhaps we all
need to take a course in understanding the new progressive
COMPREHENSIVE REVENUE REFORM
The 2007 Legislature passed House Bill 2530 that
established the Task Force on Comprehensive Revenue
Restructuring. The Task Force was directed to develop a
blueprint for comprehensive revenue restructuring for
local and state governments. Their purpose is to propose
tax restructuring that leads to a more stable flow of
money to governments, that promotes tax money sharing
agreements among different levels of government, and that
stimulates economic growth.
Oregon has had many previous tax reform and restructuring
efforts and studies. The current Task Force has suggested
five different long term tax restructuring plans. Each of
those tax schemes includes establishing either a retail
sales tax ranging between 2.7 and 8.5%, or either a gross
sales tax or investment tax on Oregon businesses. Each of
those studies has resulted in another vote on an Oregon
sales tax. Each of those votes by the people has resulted
in yet another resounding defeat, often by a 4 to 1 or
even 5 to 1 margin. Following the November election, the
Democrat majority no longer needs the vote of the people
to pass a sales tax.
Like the Task Forces before them, this committee
generally fails to recognize that rather than having a
revenue problem, Oregon has a spending addiction. 93% of
Oregon taxes are created by the individual and corporate
income taxes. During the past twenty years that income tax
revenue has increased by nearly 90%, at an average
increase of more than 4% each year. The range of variation
has been wide, from an increase of 35% in 1989 to a
decrease of 20% in 2002. But the fact of the matter is
that income tax revenue has only decreased in two out of
the last twenty years, while increasing in 18 of the last
The Legislature has made two small efforts toward savings.
In 2002 the Legislature created the Education Stability
fund that receives 18% of the lottery fund income. In 2007
the Legislature increased the amount that the Education
Stability Fund could legally hold.
The 2007 Legislature also established a Rainy Day savings
fund, but did not set aside any money to put into the
fund. Instead, the legislative majority voted to take $319
million in kicker refunds from Oregon Corporations to make
the first contribution to the fund. Incredibly, ongoing
contributions to the Rainy Day Fund were designed to come
from each budget ending balance. Can you imagine the
success of a family savings account where you only save
what you failed to spend at the end of the year? Not
surprisingly, there will not be any money in the ending
balance next year to contribute to the Rainy Day Fund.
IS THE PROBLEM?
We are told that, because of our dependence on the income
tax during the 2002 recession, the reduction in Oregon’s
tax revenue was the second worst in the nation. The 3rd
and 4th worst reductions were in California and
Massachusetts. Both of those states do have a high income
tax. What you are not being told is that both states also
have among the highest sales taxes in the nation.
problem is not that Oregon has failed to tax its citizens
enough. The problem is that the legislature simply refuses
to save money in the good years in order to maintain
services in the bad years. The fact of the matter is that
the 2007 Legislature had two and one half billion dollars
more money to spend than any Legislature in history, and
virtually spent it all. In fact, the Democrat leadership
insisted on funding new and expanded programs that even
exceeded that incredible increase in available revenue.
Those programs required fee increases totaling half a
billion dollars during the next budget cycle, even before
our economy tanked. That projected budget may now be more
than a billion dollars. The sad fact is that this fiscal
irresponsible performance has been true of virtually every
legislative assembly in recent memory.
TO INFLUENCE OUTCOMES
The Legislature that convenes next January will have a
60% Democrat majority in both chambers that will allow
them to levy new taxes and increase existing taxes,
including a retail sales tax, on a party line vote without
needing a single Republican.
The Task Force’s 36 page report is available on line and
is well worth reading. It does make many thoughtful and
valid points regarding Oregon’s state and local taxing
The Task force will hold 6 public meetings seeking your
input into the report that they will provide to the
Legislature in January. The first of those meetings is in
Medford Nov. 13th at 5 p.m. at the Jackson
County Library. The third is in Redmond Nov. 20th
at 5 p.m. at the Deschutes County Fairgrounds. These will
be your nearest opportunities to make your thoughts known
on how our state taxes should be restructured. Please take
the time to become informed and then attend one of these
The only reason that Oregon has insufficient funds is
because it has spent too much for too long. Current
economic conditions demonstrate very clearly that this
spending spree is simply not sustainable.
Our office recently sent this letter to Governor
Kulingoski in the hope that we might help to influence his
decision regarding the use of BLM O&C lands.
November 5, 2008
The Honorable Governor Ted
160 State Capitol
900 Court Street
Salem, Oregon 97301-4047
Dear Governor Kulongoski,
The purpose of this letter is
to offer my perspective on the Bureau of Land Management
Western Oregon Plan Revision (WOPR) as an elected official
representing several rural counties with O&C lands. Any
decision regarding the use of these lands will have a
significant impact on the preponderance of citizens that I
represent. This decision will have direct impacts on the
future economic health of our rural and small town
businesses and local governments.
About sixty eight percent of
our entire Senate District 28 is owned by the federal
government. A significant additional portion is owned by
state and local governments. Another significant
additional amount is strictly limited for development by
wildlife habitat overlays. The exclusion of this
preponderance of our land base from any meaningful
property tax base creates an untenable cash flow problem
for local governments.
As you know, Congress
recently decided to partially keep their previous promise
by passing a four year extension of the Secure Rural
Schools and Communities Self Determination Act. Congress
also made it abundantly clear that this is just a
temporary bridge to securing a long-term funding
solution. The O&C lands managed by the BLM were once
private land that provided significant revenues to local
governments. Because timber sale revenues from these 2.1
million acres are shared with local government, they can
continue to provide critical contributions to the
financial health of rural Oregon communities.
Some of the O&C lands are
among the most productive timber lands in our state. The
Oregon and California Lands Act of 1937 mandates a
sustainable yield of forest products. The Act declares
these lands, “shall be managed for permanent forest
production, and the timber thereon shall be sold, cut, and
removed in conformity with the principals of sustained
yield for the purpose of providing a permanent source of
timber supply, protecting watersheds, regulating stream
flow, contributing to the economic stability of local
communities and industries and providing recreational
WOPR calls for an annual
sustainable harvest of 502 million board feet of timber.
We possess the necessary science-based management to
easily produce this sustained yield, or even a great deal
more, from these O&C lands. That sustainable harvest level
will provide opportunities for local businesses to create
family wage jobs, as well as generating significant tax
revenue for county governments while sustaining our
ecosystems and carbon sequestering forests.
The WOPR proposal is based on
sound science based management principles. It
appropriately balances our needs to preserve and protect
threatened and endangered species, watersheds, and forest
health. It appropriately addresses the current critical
economic needs of our rural communities and small urban
Governor Kulongoski, I
respectfully request your full support for the WOPR as
presented by the BLM. The successful sustainable yield
management of these productive forest lands is critical
for the economic, social, and environmental health of our
Thank you for considering the
needs of your rural small town constituency.
Senator Doug Whitsett
CC: Klamath County Board of
Jackson County Board
Please remember, if we do not
stand up for rural and small town Oregon, no one will.