Oregon Voters Approve First Hike In General Taxes Since the 1930s

SAN FRANCISCO — Oregon voters approved $727 million of tax hikes Tuesday, keeping the state’s budget balanced amid a sharp economic contraction.

Measure 66, which increases taxes on households that earn more than $250,000 a year, was passing with the support of 54% of voters, according unofficial results listed on the Oregon secretary of state’s Web site. Measure 67, which raises business taxes, was leading with 53.3% yes votes.

Oregon conducts elections by mail, and ballots from 60.4% of eligible voters had been counted at noon West Coast time yesterday.

“Voters today reinforced Oregon’s national reputation for fiscal discipline, which will favorably impact our future credit ratings and our ability to finance job-creating projects,” Treasurer Ben Westlund said in a statement. “There’s a reason why it’s called fiscal discipline: It’s hard …. But it’s important to ensure that sustainable revenue will pay for education, public safety and other vital programs.”

The vote was the first general tax increase approved by Oregon voters since the 1930s.

The state Legislature and Gov. Ted Kulongoski approved the tax increases last year to help balance a budget that faced a $3.8 billion deficit over the 2009-11 biennium.

But business groups collected signatures to put the tax hikes before voters, arguing that Democratic lawmakers had used a temporary downturn in revenue to push through largely permanent tax hikes that would slow job creation in a state that’s been hard hit by job losses over the past two years.

In addition to tax hikes, the state cut more than $2 billion in spending, used federal stimulus dollars, and tapped its reserves to close the budget gap, while lawmakers warned that deep cuts in public services, including education, would be necessary without a tax increase.

The balancing act helped Oregon maintain its double-A credit ratings. In October, Standard & Poor’s and Fitch Ratings affirmed their AA ratings on the state’s general obligation bonds, while Moody’s Investors Service affirmed its equivalent Aa2 rating.

Standard & Poor’s in October said the vote on the tax hike was one of the two biggest threats to the state’s balanced budget. The other was joblessness.

Oregon’s unemployment rate peaked at 12.2% in May 2009, when it was the second highest in the nation. The state had the nation’s ninth-highest jobless rate at 11% in December.

Measure 66 raises taxes on household income of $250,000 or more and on individual incomes of $125,000 or more. It also reduces income taxes on unemployment benefits in 2009.

The measure would raise the corporate profits tax and the minimum tax. It increases the tax rate on corporate income above $250,000 by 1.3 percentage points. It also creates formulas that would charge a corporate minimum tax based on revenues. The tax ranges from $150 for companies with less than $500,000 in sales to as much as $100,000 for companies with $100 million in sales.

Anti-tax campaigners said the measure would drive away businesses because even unprofitable firms must pay the tax.

Supporters of the tax said 95% of businesses would pay the minimum tax of $150. They said the minimum tax had been just $10 since the 1930s.

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