February 12, 2002

Dear Oregon Leader:

On behalf of the Small Business Survival Committee (SBSC), we strongly urge that you oppose imposing any tax increases as a means of addressing your state's budget problems.

We understand that Governor John Kitzhaber is considering tax increases on beer and cigarettes.  In addition, a recent opinion article by a handful of Oregon CEOs indicated willingness to boost beer, wine and cigarette taxes.  In reality, of course, such steps would be bad for consumers, small businesses, and the Oregon economy.

In particular, higher taxes mean higher prices for consumers.  Costs rise and business is lost, including for retailers and wholesalers.  Those retailers and wholesalers tend to be overwhelmingly small businesses.

These higher consumer and business costs are felt throughout the economy. After all, individuals and businesses would have used the money that goes to pay higher tobacco, beer or wine taxes for other economic activities.  More revenues sucked out of the private sector by government translate into less consumption, less saving and less investment. Therefore, increased taxes on tobacco, beer and wine products result in restrained economic growth and job creation.

In addition, Oregon already is not positioned well regarding some key areas when it comes to competing with other states.  In our latest "Small Business Survival Index 2001," which ranks the states according to their respective policy environments for small business and entrepreneurship, Oregon ranks a rather poor 36th in the nation. Raising taxes will only further damage Oregon's competitive position.

Finally, it also needs to be noted that the state of Oregon has experienced a breathtaking increase in tax revenues over the past decade.  For example, according to data from the U.S. Census Bureau, per capita state total taxes, adjusted for inflation, ballooned by 43% between 1990 and 2000.  Oregon's budget woes do not spring from a shortage of revenues.  Instead, the state's current fiscal woes should be redressed exclusively on the spending side of the budget.

Again, tax increases, especially during these uncertain economic times, would do real damage to Oregon.  Feel free to contact us at SBSC with any questions, or if you need our assistance.

Sincerely,

Darrell McKigney
President
Small Business Survival Committee
Raymond J. Keating

Chief Economist

Small Business Survival Committee