Friday, November 14, 2008

The Law of Unintended Consequences

Property tax limitation referenda have been appealing to Oregonians who have passed them in the past.  Most notable of these were Sizemore's Measure 47 and the subsequent Measure 50 which decoupled property taxes with current market values.  Seemed like a great idea at the time, especially when values boomed, but now that values are crashing, it doesn't seem like such a great thing to those in places like Deschutes County which have seen deep declines in the market value of their property.  

What is interesting about this measure is that it is turning out to be a bit of a nice counter-cyclical revenue mechanism in this time of deep downturn.  So though it was never meant to provide such counter-cyclical, pro-revenue protection from a deep recession, it is. 

Which, of course, still doesn't mean it is good policy.  Mechanisms that tie the hands of government reduce government's ability to provide flexible and creative policy solutions during the ups and downs of the economy.  It all suggests that our referendum system needs to be reformed to preserved good governance in Oregon.

1 comment:

Fred Thompson said...

Measure 47 was placed on the ballot by initiative by Bill Sizemore, and approved by voters in the November 1996 general election. It reduced property taxes to the lesser of the 1994–95 tax or the 1995–96 tax minus 10 percent and limited future increases in assessed property values, except for new construction or additions, to 3 percent per year and established the now defunct double majority provision for tax legislation.

Measure 50 was referred to the voters by the state legislature to clarify 47.

Ballot Measure 5 capped total property tax rate at 1.5%, ending the levy based system of local property taxes in Oregon, required uniform assessment of real property based on market value, transferred the responsibility for school funding from local government to the state and equalized funding among schools.

Measures 5 and 47 were initiatives, 50 a referendum. Most of the adverse consequences of this legislation could could be fixed by repealing it. Many of the problems with the initiative could be fixed if they were made to comply with the constitutional requirement that they deal with only one issue at a time. Unfortunately, the courts have applied this restriction in an entirely ad hoc manner.