The 2008 Oregon elections are completed, and the people have decided who will represent them for the next two to four years. Once again, the 80% of the people who live within 20 miles of the Willamette River have dominated the outcome of the election.

I do sincerely thank all those who voted to re-elect me to a second term in the Oregon Senate. Nearly 98% of those who voted, supported my re-election as your State Senator in our five county District 28.

With the single exception of our Congressman Greg Walden, all of Oregon’s congressional seats are now held by Democrats. All statewide offices including Governor, Secretary of State, Treasurer, Attorney General, Commissioner of Labor and Commissioner of Education are held by Democrats. Virtually all agency directors are Democrats appointed by the Democrat Governor. In Oregon, fourteen of seventeen Supreme Court and Appellate Court Justices, most District Court Judges, and most District Attorneys have been appointed by Democrat governors as well.

The Oregon Senate is dominated by an 18 to 12 Democrat majority. That majority has selected a Democrat, Senator Peter Courtney, to continue to serve in the most powerful office as Senate President. He will assign all committee chairmanships as well as assign all Senate members to committees. The committee chairs serve at the pleasure of the President. He will assign all introduced bills to committees, and he will decide what bills will, or will not, receive hearings.

The Senate Republicans did pick up one seat when Chris Telfer won her election in Deschutes County. However, the House Democrats gained 5 seats including two from previously considered safe Republican districts including one east of the Cascades.

The Oregon House of Representatives is now dominated by a 36 to 24 Democrat majority. That 36 seat majority provides both the House and the Senate with 60% Democrat majorities allowing them to increase and pass new taxes without a single concurring Republican vote.

          In fact, if the Democrat majority votes together, they now have an insurmountable margin that will allow them to pass any law they choose, except for the passage of a constitutional amendment.

The House Democrats have selected Representative Dave Hunt as the new Speaker of the House since former Speaker Jeff Merkley is now our United States Senator. The Speaker has similar powers to the Senate President, except for having the additional powers of controlling all tax and revenue bills, which must originate in the House.

We may expect to see a variety of new taxes introduced, such as some form of a retail sales tax, a real estate transfer tax, and increased document recording taxes. Increased taxes on gas, alcohol, tobacco and either a minimum corporate tax, or a tax on gross corporate sales, may be expected as well. Laws will be introduced to make it easier for counties to expand their sources of revenue—that means make it easier to raise your taxes.

Many current business tax credits and deductions will be reduced or eliminated in proposed bills. Some of the revenue generated from these reductions will be channeled into more tax credit incentives to encourage even more alternative energy generation.

One of the Governor’s legacy items is a government mandated third party government pay health insurance system for all Oregonians. The only apparent way to pay for such an extensive health care system would be an additional state payroll tax deduction. This bank busting plan may gain new traction with the Democrat super majority. At the very least, the Governor will make a huge push for expanding the Oregon Health Plan to include all uninsured children regardless of their parents’ ability to pay.

Expect to witness a plethora of new environmental laws including some of the Governor’s other legacy items such as his Marine Reserves, Headwaters 2 Ocean, and Carbon Cap and Trade initiatives, as well as laws to further expand land use restrictions.

Anticipate a number of new laws to be enacted that will further enhance the control of Oregon by labor unions, especially by public employee labor unions.

Not least, the long standing Republican backstop to prevent enhanced gun control statutes is now no longer a factor. Gun control advocates have been waiting a long time for this opportunity.

Oregon voters have voted for change, and as a direct result, they will undoubtedly experience significant change. Unfortunately, the citizens who live and work in the 80% of Oregon, not dominated by that Willamette Valley majority, will be required to live under laws created by the representatives of that Willamette Valley majority.

The 2009 legislative session will certainly be interesting and challenging. Many of the outcomes will most likely be disheartening for rural and small town Oregon.

401 K  RETIREMENT PLANS

Following our recent elections, the new progressive Democrats have near total control of both our state and federal governments. They have promised change, and tax relief, for middle class Americans.

        Sweeping transformations in 401k retirement plans are one of the changes being contemplated our Democrat leadership in Washington D.C.

        Over half of adult Americans own and manage more than 65 million private 401k retirement plans. Contributions to these private plans by their employee owners are tax deductible. Matching contributions by employers are also tax deductible. The 401k plan structure allows private wealth held within the plans to compound without being restrained by taxation. In fact, the growth of assets held in 401k plans is totally exempt from both income and capital gains taxes.

           A significant penalty for any withdrawals before attaining retirement age insures that these assets are saved for retirement. Withdrawals after reaching retirement age are taxed as ordinary income.

           Middle class Americans hold more than $3 trillion in private equity in these retirement plans. That represents more private assets held by middle class Americans than in any other entity except for their home ownership.

            New progressive Democrats are making proposals that would change all that. Congressman George Miller who chairs the House Education and Labor Committee has labeled the 401k plans a big failure and he is holding hearings to consider changes. Congressman Jim McDermott who chairs the relevant House Ways and Means subcommittee is participating.

 The first change contemplated is elimination of the $80 billion middle class income tax deduction for contributions to 401k plans.

           Another change would be to eliminate the tax free growth of assets while held by the plans. They contemplate levying income tax on stock dividends, and levying capital gains taxes on asset growth. Of course, they would retain the requirement to pay income tax on withdrawals.

 If these changes were to be made in the 401k plans, the plans certainly would be a failure, because all benefits of the savings plan would be abolished.

 Alternatively, the committee heard testimony suggesting nationalization of all 401k plans, just like Argentina’s Peronist government has already done. This plan, which Congressman Miller considers intriguing, would confiscate the assets in all 401k plans and give all workers an annual $600 inflation adjusted tax credit for retirement. It would also require each employee to “invest” 5% of their annual compensation into a government owned retirement account to be managed by the social security administration.

This scheme would be a direct taking of private property on a scale similar to the confiscation of all private residences.

I want to be very clear that these laws have not been passed, but they are receiving hearings by the New Progressive Democrats in Washington D.C.

The new administration was elected on the promise to be the champion of the middle class by reducing the taxes for 95% of Americans. How either the repeal of the middle classes second largest tax deduction, or the confiscation of their second largest pool of wealth, would benefit the American middle class is difficult to understand.

Perhaps we all need to take a course in understanding the new progressive Democrat’s newspeak.

REPORT ON COMPREHENSIVE REVENUE REFORM

 The 2007 Legislature passed House Bill 2530 that established the Task Force on Comprehensive Revenue Restructuring.  The Task Force was directed to develop a blueprint for comprehensive revenue restructuring for local and state governments. Their purpose is to propose tax restructuring that leads to a more stable flow of money to governments, that promotes tax money sharing agreements among different levels of government, and that stimulates economic growth.

PREVIOUS LEGISLATIVE EFFORTS

 Oregon has had many previous tax reform and restructuring efforts and studies. The current Task Force has suggested five different long term tax restructuring plans. Each of those tax schemes includes establishing either a retail sales tax ranging between 2.7 and 8.5%, or either a gross sales tax or investment tax on Oregon businesses. Each of those studies has resulted in another vote on an Oregon sales tax. Each of those votes by the people has resulted in yet another resounding defeat, often by a 4 to 1 or even 5 to 1 margin. Following the November election, the Democrat majority no longer needs the vote of the people to pass a sales tax.

 Like the Task Forces before them, this committee generally fails to recognize that rather than having a revenue problem, Oregon has a spending addiction. 93% of Oregon taxes are created by the individual and corporate income taxes. During the past twenty years that income tax revenue has increased by nearly 90%, at an average increase of more than 4% each year. The range of variation has been wide, from an increase of 35% in 1989 to a decrease of 20% in 2002. But the fact of the matter is that income tax revenue has only decreased in two out of the last twenty years, while increasing in 18 of the last twenty years.

 The Legislature has made two small efforts toward savings.

 In 2002 the Legislature created the Education Stability fund that receives 18% of the lottery fund income. In 2007 the Legislature increased the amount that the Education Stability Fund could legally hold.

 The 2007 Legislature also established a Rainy Day savings fund, but did not set aside any money to put into the fund. Instead, the legislative majority voted to take $319 million in kicker refunds from Oregon Corporations to make the first contribution to the fund. Incredibly, ongoing contributions to the Rainy Day Fund were designed to come from each budget ending balance. Can you imagine the success of a family savings account where you only save what you failed to spend at the end of the year? Not surprisingly, there will not be any money in the ending balance next year to contribute to the Rainy Day Fund.

 WHAT IS THE PROBLEM?

 We are told that, because of our dependence on the income tax during the 2002 recession, the reduction in Oregon’s tax revenue was the second worst in the nation. The 3^rd and 4^th worst reductions were in California and Massachusetts. Both of those states do have a high income tax. What you are not being told is that both states also have among the highest sales taxes in the nation.

 The problem is not that Oregon has failed to tax its citizens enough. The problem is that the legislature simply refuses to save money in the good years in order to maintain services in the bad years. The fact of the matter is that the 2007 Legislature had two and one half billion dollars more money to spend than any Legislature in history, and virtually spent it all. In fact, the Democrat leadership insisted on funding new and expanded programs that even exceeded that incredible increase in available revenue. Those programs required fee increases totaling half a billion dollars during the next budget cycle, even before our economy tanked. That projected budget may now be more than a billion dollars. The sad fact is that this fiscal irresponsible performance has been true of virtually every legislative assembly in recent memory.

 HOW TO INFLUENCE OUTCOMES

 The Legislature that convenes next January will have a 60% Democrat majority in both chambers that will allow them to levy new taxes and increase existing taxes, including a retail sales tax, on a party line vote without needing a single Republican.

 The Task Force’s 36 page report is available on line and is well worth reading. It does make many thoughtful and valid points regarding Oregon’s state and local taxing authority.

 The Task force will hold 6 public meetings seeking your input into the report that they will provide to the Legislature in January. The first of those meetings is in Medford Nov. 13^th at 5 p.m. at the Jackson County Library. The third is in Redmond Nov. 20^th at 5 p.m. at the Deschutes County Fairgrounds. These will be your nearest opportunities to make your thoughts known on how our state taxes should be restructured. Please take the time to become informed and then attend one of these meetings.

 The only reason that Oregon has insufficient funds is because it has spent too much for too long. Current economic conditions demonstrate very clearly that this spending spree is simply not sustainable.

 FOREST MANAGEMENT

           Our office recently sent this letter to Governor Kulingoski in the hope that we might help to influence his decision regarding the use of BLM  O&C lands.

November 5, 2008

The Honorable Governor Ted Kulongoski
160 State Capitol
900 Court Street
Salem, Oregon 97301-4047

Dear Governor Kulongoski,

The purpose of this letter is to offer my perspective on the Bureau of Land Management Western Oregon Plan Revision (WOPR) as an elected official representing several rural counties with O&C lands. Any decision regarding the use of these lands will have a significant impact on the preponderance of citizens that I represent. This decision will have direct impacts on the future economic health of our rural and small town businesses and local governments.

About sixty eight percent of our entire Senate District 28 is owned by the federal government. A significant additional portion is owned by state and local governments. Another significant additional amount is strictly limited for development by wildlife habitat overlays. The exclusion of this preponderance of our land base from any meaningful property tax base creates an untenable cash flow problem for local governments.

As you know, Congress recently decided to partially keep their previous promise by passing a four year extension of the Secure Rural Schools and Communities Self Determination Act. Congress also made it abundantly clear that this is just a temporary bridge to securing a long-term funding solution.  The O&C lands managed by the BLM were once private land that provided significant revenues to local governments.  Because timber sale revenues from these 2.1 million acres are shared with local government, they can continue to provide critical contributions to the financial health of rural Oregon communities. 

Some of the O&C lands are among the most productive timber lands in our state. The Oregon and California Lands Act of 1937 mandates a sustainable yield of forest products.  The Act declares these lands, “shall be managed for permanent forest production, and the timber thereon shall be sold, cut, and removed in conformity with the principals of sustained yield for the purpose of providing a permanent source of timber supply, protecting watersheds, regulating stream flow, contributing to the economic stability of local communities and industries and providing recreational facilities.”

WOPR calls for an annual sustainable harvest of 502 million board feet of timber. We possess the necessary science-based management to easily produce this sustained yield, or even a great deal more, from these O&C lands. That sustainable harvest level will provide opportunities for local businesses to create family wage jobs, as well as generating significant tax revenue for county governments while sustaining our ecosystems and carbon sequestering forests. 

The WOPR proposal is based on sound science based management principles. It appropriately balances our needs to preserve and protect threatened and endangered species, watersheds, and forest health. It appropriately addresses the current critical economic needs of our rural communities and small urban areas.

 Governor Kulongoski,  I respectfully request your full support for the WOPR as presented by the BLM.  The successful sustainable yield management of these productive forest lands is critical for the economic, social, and environmental health of our constituents.         

Thank you for considering the needs of your rural small town constituency.

Best regards,

Senator Doug Whitsett

District 28

CC: Klamath County Board of Commissioners

        Jackson County Board of Commissioners