Governor should find way to help farmers

August 26, 2005

Within days, Gov. Ted Kulongoski will veto a bill to give Oregon farmers a tax break for the wages they pay farmworkers. As required, he's posted notice of his intent. Sponsors of the measure are working steadily to persuade him, but the evidence is they won't succeed.

This is a snake-bit piece of legislation. But if Kulongoski vetoes it, he ought to do so with good ideas about how to fix it.

In both parties, in both chambers, there was recognition this year that the economics of farming combined with Oregon's minimum wage give farmers a problem that others, such as the fast-food industry, don't have, at least to the same degree.

The problem is that farmers sell into national and international markets and don't have much in the way of pricing power. So, sharply rising wages squeeze profits and push farmers toward mechanization and crops that are less labor intensive. Oregon's indexed minimum wage guarantees that wages will rise steadily.

The solution, so it was supposed, was to give farmers a credit against their Oregon income taxes for a part of farmworker wages represented by the minimum wage. This is the approach the Oregon Farm Bureau put in a bill.

The "whoops" was how much the bill would cost the treasury. When it passed the Democratic-majority Senate, by a large bipartisan margin, the estimate was $6 million over four years.

That was the amount it would take to compensate farmers for the wages of those earning just the minimum wage of $7.25 an hour and no more. That would apply to something like 10,000 farmworkers. A lot of legislators thought this amount was affordable, even in a time of tight budgets.

By the time the identical bill passed the Republican-majority House, on a party-line vote, the estimate of the cost was up to a staggering $244 million. The official estimate had changed, and the tax credit would now apply to all farmworkers, making whatever wage. That would apply to about 50,000 workers.

There's logic to applying the tax break to all farmworkers. If the tax credit applies only to those who make just the minimum wage, the state would create what a Farm Bureau lobbyist called "a perverse incentive" not to grant raises or to use other less savory practices to keep farmworkers right at the minimum wage.

But the price tag for the broad application of the tax credit is, if accurate, too high, as even many supporters of the bill acknowledge.

Partisan divisions, a lack of time and the Legislature's general dysfunction kept lawmakers from making fixes.

Once the revenue estimate changed and Republicans in the House passed the bill, Kulongoski, a Democrat, said he'd veto it. There the matter lay, and still lies. When legislative leaders of both parties negotiated a budget, they knew what the measure would cost. But they also probably assumed in their calculations that Kulongoski would kill the bill.

What might have been done, or be done in the session two years hence?

For one thing, a tax credit will have to be targeted. Its supporters are going to have to identify those parts of agriculture that need relief the most. That will be difficult politically, but necessary.

Then, the application of a tax credit will have to be scaled back. As wages rise, the tax credit will have to diminish. The trick, which may be impossible, will be to find a balance between what's a "perverse incentive" to keep workers at the minimum wage and what keeps farmworkers on the job and farmers in business.

The estimates will have to be refined. One argument for Kulongoski to sign the bill is that it would answer questions about the accuracy of the revenue estimates. This is just a start of the possibilities.

Finding a modest fix for a real problem will take plenty of negotiating and thought. If Oregon can, with great fanfare, grant Hollywood producers tax credits for filming here, it can find a way to help farmers. If Kulongoski can't find a way to allow the bill to become law, he should start leading the way toward finding a fix.