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Revenue Solutions

Looking for fair ways to close the budget gap

As Eugene looks for ways to avoid serious service cuts, the Revenue Committee struggles to identify timely, equitable and politically acceptable taxes to generate the necessary revenue. We have ample representation from the business community, but we lack vocal representation from disadvantaged segments of our community. This opens us to the risk that our recommendations will fall heavily on those least able to afford it. While business is the ox that pulls the cart of government, it is working families that keep that ox fed. Moving forward requires that we navigate a thicket of legal limits to give the City Council recommendations that put the interest of the community first.

“Why do we need new revenue at all? The overall budget is fine!” In fact, a bewildering array of legal limits often prevents the movement of money from one fund to another to address genuine needs. Others restrict the city’s ability to raise revenue fairly. For instance, federal law prohibits us from using funds from the airport on general fund activities, while state law prohibits us from using parks bonds funds for anything other than parks acquisition. We may differ in our views of preserving Civic Stadium at partial city expense, but the funds proposed for that project can’t be used to preserve city services. The city has done a terrific job at squeezing any expenses that can fit into special funds into those funds to avoid depleting precious general funds. Unfortunately, we have reached the limits of what we can do.

On the revenue side, special interests have successfully lobbied to prevent local taxation of some of the most logical sources of revenue. Localities in Oregon may not tax tobacco products or any form of alcoholic beverage, despite the fact that Oregon ranks 28th in tobacco taxes and 44th in beer taxes nationwide. I like a beer as much as the next guy, but I also accept that increasing taxes on tobacco and alcohol has significant positive public health implications, in addition to raising significant revenue. Further, state law stringently limits property tax levies, which are also not paid by large segments of the local economy and must be renewed with a public vote every five years. Taxes on gasoline and automobiles must generally be used to fund roads and services directly related to transportation. These laws prevent us from using some of the fairest ways to generate revenue.

Several permissible progressive revenue options have already met their fate. A proposal to impose a 0.9 percent marginal income tax on individuals making over $125,000 per year and couples making over $250,000 died on the “nay” votes of members who would have to pay such a tax. Proposals for a gross receipts tax, a corporate income tax and a tax on businesses that handle hazardous materials to fund the Hazmat Team also died quickly, opposed by business interests. An amusement tax on ticket sales may yet have a small role to play, despite the UO’s refusal to participate in such an arrangement. Similarly, other government entities will likely support a utility tax, which they would not pay, but oppose an increase in EWEB’s contribution in lieu of taxes to the city, which they would. 

 Of course, we all support taxes we will never pay! Property tax measures remain popular with representatives of other government agencies, which don’t pay property taxes. Taxes not usually paid by city residents, such as hotel and rental car taxes, are always popular. We certainly should look to tax non-residents who use our services without paying taxes, but any tax that could raise substantial revenue must have a broad base. We cannot balance the budget solely on the backs of commuters and tourists. 

Some reasonable options remain on the table. A 1 to 2 percent restaurant tax would completely solve the city’s budget gap, tax a voluntary activity and have a minimal economic impact on the restaurants. An earlier study showed that this falls more heavily on higher income people and visitors than the poor. A tax on e-cigarettes would prevent these purveyors of nicotine from benefiting from a loophole in the state tobacco tax and discourage kids from getting hooked. A small per-space tax on parking spaces would incentivize appropriately dense development, use of mass transit and be paid more by big box stores than small businesses. 

In sum, we must move beyond self-interest to arrive at a fair revenue solution to preserve city services. The proposals we forward should find equilibrium between a healthy business climate and the need to tax the population justly. I hope that we can reach this balance and provide the council equitable new revenue options to address the budget gap.