I dislike M-97. Sufficiency aside, it violates all of the
criteria that for 40 years I have taught my students should be employed to
evaluate tax proposals: Neutrality, Efficiency, Horizontal and Vertical equity,
Transparency, and Certainty. Most tax proposals envision some tradeoffs between
these criteria. M-97 abuses them all.
Nevertheless, Yes on
97 looks to be more right than not on three points. M-97 would be good for
small businesses (and big LLCs and S-corps), most of the new money will be
spent on education and health, and, going back to at least 2003, the state has
failed to prioritize education funding. Even where it has increased education
funding it has too often directed monies to special interest projects or
categorical programs, more frequently it has simply imposed mandates on
schools. These have often bled resources away from district priorities, but
have not measurably promoted student learning or welfare. What it has not done
is stabilize school funding or support it at a satisfactory level.
I think M-97 is a wretched mess, although I acknowledge it
could work out fine. Nobody knows; the simple fact is that state taxes per se usually don’t matter very much to
the health of state economies. My fellow economists, who have thought about the
effects of M-97, and I believe that the best real-world analogy to how it would
work is an ad valorem tariff.
Depending on market structure and the economic power of the businesses subject
to tariffs, they can be partly, fully, or more than fully passed through to
final (domestic) consumers. If they are high enough, they can cause foreign
competitors to exit domestic markets. On occasion, foreign businesses are
forced to eat the full tariff themselves, which is what yes on 97 says will happen, pretty much across the board. Of
course, M-97 would be good for non-C-corps, including small businesses, for
precisely the same reason that tariffs are good for some domestic producers:
they let them increase their prices without losing market share.
Finally. I have talked to folks who agree that M-97 is a train
wreck waiting to happen, but plan to vote for it nevertheless. Their logic goes
something like this: its threat will push the legislature to put together a
higher yielding (and perhaps sounder) tax system than the one we have now. I
see their logic, but I don't see a path from this ugly thing to a sound tax
system (historically, gross receipts taxes have simply devolved into retail
sales taxes). It's rather like M-47, which was a mess; in M-50 the legislature
made it into something OK, but by no means ideal, or even close. I also recall
that Willamette Week, in supporting
Measure 5 in 1990, argued that it would force the legislature to confront the
need for fundamental tax and school finance reform. Evidently, Willamette Week learned better. It
opposes M-97.
