What's to Blame for Oregon's Budget Woes?
As Tennesseans look back at the almost-over Sundquist administration and remember how the administration blamed Tennessee state government’s budget gap on the state's lack of an income tax (rather than on over-spending), it's instructive to look at the situation in Oregon. Why? Because Oregon doesn't have a sales tax. It has only an income tax. It is the flipside of Tennessee. Thus, you would think that it would have no revenue problems at all. We were told, after all, that the sales tax was the problem and the income tax was the cure.

So, Oregon has no budget problem, right? Wrong, says the Portland Oregonian newspaper.

Rising unemployment, business failures and plunging stock prices have driven down the state's income tax collections. The amount has fallen far short of paying for the roads, school support, prisons and other government services in the 2001-03 budget. As the shortfall worsened, lawmakers held a record five special sessions to fill what became a $2 billion hole in the $12.3 billion budget. Cutting spending is one of the main ways they've kept the budget in balance, as the law requires. That has kept officials busy for most of the year deciding how to strip more than $900 million by the time the budget period ends June 30, 2003.

It seems the income tax is to blame for Oregon's budget problems. It is not alone. In fact, many states that have income taxes have worse budget problems than Tennessee did in the past three years, and far worse than the minor revenue shortfall Tennessee is now facing. As I've said before, Tennessee dodged a bullet by not adopting an income tax.