DJC Op-Ed: Taxes and spending: Oregon’s total cost of citizenship

Mike Salsgiver

By: Mike Salsgiver
Executive Director, AGC Oregon-Columbia Chapter

This article was published by the DJC on March 17 in Buildings Bridges and Roads, and can be viewed here (subscription required).

Oregon voters, get ready to sharpen your pencils. There are almost countless funding requests coming your way in the 2020 election season.

In Portland alone, residents will face a wide range of measures both on primary ballots in May, and on general election ballots in November. Many of the measures will ask voters whether to approve tax increases.

Statewide, businesses are experiencing a steady increase in tax liabilities. After the passage of the Corporate Activity Tax (in spite of voters rejecting a similar, higher tax by a 2-to-1 margin in 2016) and Paid Family and Medical Leave Program in 2019, government’s demand for more money from the pockets of everyday Oregonians and from Oregon businesses continues to stack up. It seems almost not a day goes by without another governmental request for new funds.

One tax measure in particular aims to address the homelessness crisis through a new income tax. Who would this target? Those with more than $125,000 in taxable income and couples making more than $250,000 would be taxed 1 percent of that income. By almost any measure, the burden is settling more and more on middle-income to upper-middle-income wage earners.

Here is a list of tax policy measures being considered for voters in Multnomah, Clackamas, and Washington counties:

  • $250 million Metro business income and personal income tax increase
  • $16 million city of Portland 10-cent-per-gallon gas tax renewal
  • 3.9 percent personal income tax increase to fund universal preschool
  • Multnomah County business income tax increase
  • $3 billion Metro transportation tax package
  • $1.4 billion Portland Public Schools bond
  • $405 million Multnomah County library bond

When I survey the tax and spending landscape in today’s Oregon and try to make sense of it, my mind flashes back to a challenge facing my former employer, Intel, about 20 years ago.

In the late 1990s, Intel began to see a substantial flattening in the sale of personal computers. In those days, the microprocessors (i.e., Pentium chips) that were the brains of the computers were premium products. Computers, unless you were a computer hobbyist, were cumbersome and complex – and very expensive. The sales of personal and business computers with Intel’s chips in them were sinking at an alarming rate.

In its usual way, a team of interdepartmental experts went to work to gather data, evaluate it, and seek to understand the threat to computer sales. What that team found led to a term that has stayed with me ever since: the total cost of ownership.

Intel found that, even in the high-flying 1990s, there was a limit to what the vast majority of consumers were willing to pay to have a computer (or two) in their homes and offices. In short, average consumers and business owners were voting with their wallets, and computer sales were sinking. Because the company discovered this, they went to work to nearly completely reinvent the personal computer industry. Computers became faster, better and cheaper.

What happened because Intel discovered there was a limit to the total cost of ownership?

The personal and business computer industry diversified. We saw the birth of laptops, tablets, and smartphones. Because they were modular in their construction, the upgrade of a particular component – say, for example, a hard drive – didn’t mean the entire computer had to be scrapped. The company squeezed costs out of what it took to assemble a computer. The price of a computer dropped by as much as 90 percent, mostly because Pentium chips (and their later offspring) moved from being a premium component to a commodity. At the same time, however, their processing power grew almost exponentially. And overall, computers now last much, much longer.

What, you might ask, does this little trip down computer memory lane have to do with government taxing and spending?

I have long believed that the public equivalent to Intel’s “total cost of ownership” study is what I call the “total cost of citizenship.” In other words, at some point, taxpayers will have reached their financial limit in terms of what they are willing and able to pay to fund government programs and services, and they will stop supporting more taxes and push for reduced spending.

I believe it is likely that funding requests of all kinds – for schools, health care, addressing homelessness, infrastructure improvements – will begin to be rejected with little thought by the voter of their importance. Voters will focus on a proposal’s cost, and they will simply say, “No more.” In the face of a growing perception that government is “broken,” it will be easier for these voters to send a very clear message to the people they elect to fix the system before they send more dollars out the door.

One of the easy throwaway lines people often use when discussing government tax and spend issues is: “Government should run more like business.” In the end, government is not a private business. Its mission is vastly different.

And yet, to some degree, it would be a desirable thing to see government take some pointers from business. It would be to the broader public’s advantage if governments focused on a few core objectives and marshaled public resources toward addressing them in the least-cost, timely, and most efficient way possible. The increased use of business-like principles when administering government programs and services would be to everyone’s benefit – including government’s.

In being more self-aware and in tune with the financial concerns and limits of voters, government would operate much better and more affordably. And we might see the “total cost of citizenship” move from being a problem to an opportunity to achieve better-run, more supportable government programs into the foreseeable future.

Mike Salsgiver is the executive director of Associated General Contractors’ Oregon-Columbia chapter. Contact him at 503-685-8305 or mikes@agc-oregon.org.

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