Savings to save Oregon's credit rating
According to the state director of debt management, Oregon has one of the three worst state credit ratings in the country -- only ahead of California (land of multi-billion-dollar deficits) and Louisiana (which has been shelling out cash for a little storm called Katrina).
What's the cause for this low rating? The lack of a state savings account, the debt managers told state budget writers on Wednesday. All we have to do is sock away more in a rainy-day fund, and we're on our way to happy days in the eyes of our creditors.
But wait, I thought to myself. When a family gets into financial trouble and its credit rating drops, it's usually because that family is maxing out its credit, paying late or not at all, and losing assets through repossession, foreclosure, legal judgments and/or bankruptcy.
In other words, the family is spending too much.
Sure, a well-stocked savings account would be helpful, but that's not the cause of its credit troubles, only one symptom of the challenges that have contributed to the financial slide.
I realize that it's difficult to compare a family and a state, considering the latter (usually) can't descend into deficit spending. But could it be that the state's credit worthiness is based on a decade of drunken-sailor spending when it had the cash to create a rainy-day fund? Could it be that the credit rating firms are looking for all-around financial responsibility from Oregon, which includes fiscal restraint?
And what do we have instead? The Oregonian's political blog spells it out:
Don't get me wrong -- I think a savings account is important (for a family, a business, or a government) and I hope the state implements a rainy-day fund in this session.
But maybe, if Ted Kulongoski and the Oregon legislature weren't hell-bent on spending every penny of revenue (and then some), maybe they'd have plenty of money for savings. And I bet the credit rating firms would be just as impressed by spending restraint as by a rainy-day fund.
What's the cause for this low rating? The lack of a state savings account, the debt managers told state budget writers on Wednesday. All we have to do is sock away more in a rainy-day fund, and we're on our way to happy days in the eyes of our creditors.
But wait, I thought to myself. When a family gets into financial trouble and its credit rating drops, it's usually because that family is maxing out its credit, paying late or not at all, and losing assets through repossession, foreclosure, legal judgments and/or bankruptcy.
In other words, the family is spending too much.
Sure, a well-stocked savings account would be helpful, but that's not the cause of its credit troubles, only one symptom of the challenges that have contributed to the financial slide.
I realize that it's difficult to compare a family and a state, considering the latter (usually) can't descend into deficit spending. But could it be that the state's credit worthiness is based on a decade of drunken-sailor spending when it had the cash to create a rainy-day fund? Could it be that the credit rating firms are looking for all-around financial responsibility from Oregon, which includes fiscal restraint?
And what do we have instead? The Oregonian's political blog spells it out:
In his budget proposal, Gov. Ted Kulongoski proposed spending all but $145 million of the nearly $15 billion projected to be available for the state to spend in 2007-09, plus raising more taxes and spending them too. He would fatten the state savings account by canceling all $275 million of corporate "kicker" tax rebates and putting the money into savings instead. Doing so would require a two-thirds vote of the House and the Senate, a daunting hurdle.In other words: spending every penny of tax revenue, increasing taxes, and hoping that 20 senators and 40 representatives will go along with killing the corporate kicker to put that money in savings -- because those corporations (especially the out-of-state companies) need to hire our residents and send their taxes to Salem, but otherwise should shut up.
Don't get me wrong -- I think a savings account is important (for a family, a business, or a government) and I hope the state implements a rainy-day fund in this session.
But maybe, if Ted Kulongoski and the Oregon legislature weren't hell-bent on spending every penny of revenue (and then some), maybe they'd have plenty of money for savings. And I bet the credit rating firms would be just as impressed by spending restraint as by a rainy-day fund.
Labels: credit rating, governor, Kulongoski, legislature, Oregon
posted by Ken @ 8:59 AM
6 Comments:
At 1/31/2007 9:22 PM,
Anonymous said…
Disregard first post ,what I meant to say is that Governor TED K Needs to stop the special interest,
which means Governor TED K needs to stop same sex marriage and make marriage between one man and one woman and no on civil union and no on domestic partnership
and give us our kicker back how would you vote.
I think Governor TED K Needs to get rid of the special interests groups in oregon,
give us our kicker and save money that direction
go to these polls and vote how you would want your kicker
vote here for your kicker which way you want it to go -
Comprehensive news for Roseburg Oregon. ... Online Poll. What should be done with Oregon's "kicker" tax rebate program? ...
apps.oregonnews.com/nrpcpolls/index.php?pollID=93
8:59 PM
9:06 PM
Anonymous said...
To Governor TED K their is other ways to cut back spending in oregon Like same sex special interest groups
you don't need our kicker to do it through election I have noticed alot on here about the rainy day fund in oregon please stop funding abortions
Read this letter below
To Whom It May Concern:
Please consider dropping your corporate support of the nation’s largest perpetrator of brutalized violence against preborn boys and girls, Planned Parenthood. The ideals of justice, compassion and a regard for scientific fact are completely inconsistent with the lethal barbarism of abortion.
Please!
Sincerely,
Sent to several of the companies mentioned in this previous Vital Signs Blog post. Among the addresses of the companies showing up on the Planned Parenthood sponsor list for the first time are the following:
At 1/31/2007 9:23 PM,
Anonymous said…
by the way I am not from roseburg but this was the only pole for the kicker I could find
what I meant to say is that Governor TED K Needs to stop the special interest,
which means Governor TED K needs to stop same sex marriage and make marriage between one man and one woman and no on civil union and no on domestic partnership
and give us our kicker back how would you vote.
I think Governor TED K Needs to get rid of the special interests groups in oregon,
give us our kicker and save money that direction
go to these polls and vote how you would want your kicker
vote here for your kicker which way you want it to go -
Comprehensive news for Roseburg Oregon. ... Online Poll. What should be done with Oregon's "kicker" tax rebate program? ...
apps.oregonnews.com/nrpcpolls/index.php?pollID=93
8:59 PM
9:06 PM
Anonymous said...
To Governor TED K their is other ways to cut back spending in oregon Like same sex special interest groups
you don't need our kicker to do it through election I have noticed alot on here about the rainy day fund in oregon please stop funding abortions
Read this letter below
To Whom It May Concern:
Please consider dropping your corporate support of the nation’s largest perpetrator of brutalized violence against preborn boys and girls, Planned Parenthood. The ideals of justice, compassion and a regard for scientific fact are completely inconsistent with the lethal barbarism of abortion.
Please!
Sincerely,
Sent to several of the companies mentioned in this previous Vital Signs Blog post. Among the addresses of the companies showing up on the Planned Parenthood sponsor list for the first time are the following:
At 1/31/2007 9:33 PM,
Anonymous said…
Most anniversaries we observe are times when we celebrate family events such as birthdays or weddings. Some are national events like Independence Day, V-E Day or Thanksgiving. Other anniversaries are religious in nature like Christmas, Epiphany, Passover and Easter. However, there are other anniversaries that are certainly NOT a time for celebration -- these commemorations grieve the heart because the events we remember cause us to soberly reflect on terrible tragedies. Of this kind of anniversary are Pearl Harbor Day, the terrorist attacks of 9/11, and the Oklahoma City bombing. For we Americans who recognize the sanctity of all human life, January 22nd, the day when the United States Supreme Court legalized abortion-on-demand, is the saddest anniversary of all.
At 1/31/2007 9:35 PM,
Anonymous said…
he most visible expression of our deep sorrow over the carnage of almost 50 million unborn children that have been destroyed by the abortionists in these last 34 years.
It had been 5 or 6 years since I had attended this annual March, so when the opportunity presented itself to go with dear friends, Denny, Claire, Dick and Matt, I knew it was the time to attend the March again. Also, on these trips, we take advantage of the chance to see the major sights of our nation's capitol as well as enjoying fellowship and prayer with one another.
It was no coincidence that we chose to visit the National Holocaust Museum first. This museum describes in graphic detail, with displays, text, photos and multimedia presentations, the horror of the assault on life by the Nazis under Adolph Hitler. Though many groups of people were attacked and killed by the Nazis, their primary focus was against the Jews as they specifically targeted the entire race for extermination.
The sheer horrors of this attempt at genocide are overwhelming -- over 6 million Jews slaughtered by the most barbaric means. And yet...what our society has ventured into beginning with Roe v Wade is no less savage and selfish. And our crimes against humanity rage decade after decade to this very day. The only difference is that the targeted group now is innocent, defenseless children in the womb. It is so ironic that, following the end of World War II, we held the Nuremberg Trials and condemned the Nazis for their murder, but less than thirty years later, we in the United States embarked on a campaign of murder that has far surpassed the Nazis in numbers killed and is every bit as gruesome and cruel and evil. How quickly we began to do what we once condemned!
Thus, as we walked the streets of we felt keenly the sadness over both the Nazi crimes and our own. However, we also took courage by the words of the speakers and the resolve of the pro-life people in this huge crowd (many, many who were young and enthusiastic) and we were energized to continue in the battle for life, justice and compassion. Seeing the thousands of people who came to be a part of the march makes us see that we are not alone, but are involved with thousands who pray, fight the battle in front of abortion clinics, volunteer at CPC's, write letters, and get politically involved.
Hearing the many speakers who spoke to us with encouraging words, we remembered that the fight for sanctity of life is still a winnable war. And beyond even that, we are reminded by Holy Scripture that "nothing is impossible with God."
At 2/01/2007 12:09 AM,
Anonymous said…
oh and by the way this is not from the constitutional party either it is from a conservative republican group of people.and not or ra either.
At 2/02/2007 5:49 PM,
Anonymous said…
Although several tax reform proposals are sprouting up in the Capitol, one has risen to the top. It is the House Republican’s “Oregon Investment and Stability Plan (OSIP). For a video explanation click here.
OSIP has five components:
1. Keep Corporate Kicker Money in Oregon.
The Corporate Kicker is the amount of tax dollars that revert back to corporate taxpayers when corporate income tax payments are 2% higher than budgeted. When the economy grows during an economic recovery and corporate tax payments are 2% more than expected, the excess becomes a credit for corporate taxpayers, unless the Legislature says otherwise. Since Oregon’s corporate tax payments are forecast to exceed the Corporate Kicker threshold by $275 million, the Legislature must decide whether to refund that amount or use all or part of it to establish a true Rainy Day Fund, to help prepare for the next recession.
There are some who say keep the money and some who say send it all back. Wisdom dictates the corporate tax kicker credit should remain in Oregon. Thus, the Corporate Kicker issue should be carefully considered. Let’s begin with a quick review of which corporations pay corporate taxes and which do not.
There are two basic types of business corporations—the Subchapter “S” Corporation and the “C” Corporation. “Sub-S” corporations are usually small, closely-held, personal corporations. They are taxed on their shareholders’ personal income tax returns, so the corporate kicker has no affect on Sub-S corporations. Chapter “C” Corporations are “for-profit” corporations that sometimes have hundreds of thousands of shareholders. In Oregon there are more than 34,000 C-Corporations, and only 889 have annual taxable income that exceeds $500,000. Those 889 corporations are some of the largest tax payers in Oregon. Out of the 34,000 Oregon C-Corporations, the top 889 would receive $240 million out of the $275 million of Corporate Kicker refund money. Many of these top 889 C-Corporations send their profits outside of Oregon, and often outside of the USA. To keep Oregon corporate tax dollars in Oregon, OSIP proposes returning the Corporate Kicker to all C-Corporation tax payers, except for the top 889. As a result, OSIP will retain in Oregon $240 million of corporate tax dollars, which can be used to fund the new Rainy Day Fund, discussed below.
2. Realign Minimum Corporate Tax Rates.
Oregon charges corporate income and capital gains taxes with a minimum annual tax . Since 1931 that minimum corporate tax has been $10. OSIP will raise the corporate minimum tax for small, inactive or unprofitable corporations with Oregon sales between $0-50,000 to $25. The minimum tax will increase according to a schedule in relation to higher sales up to a top level of $50,000 for huge corporations with annual Oregon sales exceeding $25 million. OSIP’s proposed “sales-based” annual corporate filing fees will generate an additional $153 million for the 2007-09 biennium.
3. Reduce Personal and Corporate Capital Gains Taxes.
Capital Gains Taxation is a brutal weapon against the middle class. We work our whole lives, struggling to pay our debts and save for retirement. We invest in retirement plans, and use after-tax-dollars to invest in mutual funds or a few carefully selected growth stocks. If we are fortunate our investments appreciate over time. Then judgment day comes when we sell those investments and see the tax bill—the Capital Gains tax bill on all appreciation that occurred over the time we held the investments.
The government does not give us a deduction to compensate for the 3 to 4% average inflation rate that eats away at the buying power of our investments. Currently, in Oregon the personal Capital Gains rate is a cruel 9%, the same rate charged on wage and salary income. The Corporate Capital Gains rate is 6.6%.
OSIP will help our retired seniors and middle class Oregonians by lowering the personal Capital Gains rate to 7% and the corporate rate to 5%. The money saved by the lowered Capital Gains rates will benefit Oregon’s economy where the extra money helps pay for Oregon products, jobs and services. The total cost of lowering the Oregon personal and corporate Capital Gains rates would be $214 million.
4. Protect Small Family Farms & Businesses from Forced Death Tax Liquidations.
For several years in the 1980’s I dedicated my law practice was devoted to estate and business tax planning. As a small town country lawyer I represented farmers and small business owners who were concerned about the high costs of inheritance and estates taxes when they died. Their concerns were justified. Every estate planning attorney can tell tales of bereaved families who were forced to sell the family farm or business to pay state “inheritance” or federal “estate” taxes. There is something inherently wrong with spending a lifetime working on the family farm or building a family business, only to have it shut down and sold to pay “death taxes.”
I remember being contacted by a group of art instructors from a successful art college in Ashland, Oregon. They told me how the owner of the art school had died, and the college had been summarily shut down leaving both art students and faculty members sitting on the curb. There were several reasons why this happened and none of them were good. With proper planning and good tax reform legislation, this kind of tragedy can be avoided. OSIP will help by increasing the “inheritance” or “death tax” threshold from $1 million to $2 million. The $2 million figure will bring Oregon in line with the federal estate tax exclusion amount, which is also $2 million. The loss of revenue to Oregon over the next biennium from increasing the inheritance tax threshold is expected to be $43 million.
5. Create a true Rainy Day Fund.
Most candidates made a promise during last year’s campaigns to create a true Rainy Day Fund. Now it is time for the Governor and Legislators to make good on that promise. OSIP makes good on the promise to create a true Rainy Day Fund. By taking only one percent ($126 million) from the forecasted 2007-09 Revenue ($12,602 million), and adding it to the $240 million retained from the 889 highest tax paying “C” corporations, $366 million can be placed in a new Rainy Day Fund that can only be touched with a “super majority” 3/5 vote of both the House and the Senate. Even with a 3/5 vote the Rainy Day Fund cannot be tapped unless there exists the same economic downturns required to tap the Educational Stability Fund--Oregon’s other rainy day fund. Thus, between the ESF and the new Rainy Day Fund, more than $817 million can be set aside in 2007-09, to prepare for the next economic recession.
In summary, by analyzing the attached chart we see the Total Additional Revenue generated in the 2007-09 biennium from the “Suspended 2007 Corporate Kicker” and the “Increased Minimum Tax (or more correctly Increased Corporation Registration Fee), on “C-corporations,” is $392.6 million.
On the Reduction side of the ledger, we reduce 2007-09 revenues by the following: $366 million to fund the new Rainy Day Fund; $43 million in reduced death taxes; and, $214 million in reduced personal and corporate capital gains taxes, for a total reduction from the budget of $622.6 million.
Thus, the net cost from the $14.9 billion 2007-09 biennial budget is only $230 million—a small deduction from the 20% increase in forecasted state revenues. Clearly, the many benefits for Oregon citizens from the Tax Overhaul Plan make the Oregon Stability & Investment Plan a top priority for this Legislative Session. A summary of this plan is available online.
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