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Governor Julius L. Meier's Administration

Governor's Special Message, 1933

Source: STATE OF OREGON Special Message Of JULIUS L. MEIER, GOVERNOR To the THIRTY-SEVENTH LEGISLATIVE ASSEMBLY

January 3,1933

Members of the State Senate and the House of Representatives:

Section 2 of article IX of the state constitution reads:

“The legislative assembly shall provide for raising revenue sufficient to defray the expenses of the state for each fiscal year, and also a sufficient sum to pay the interest on the state debt, if there be any.”

Section 6 of the same article reads:

“Whenever the expenses of any fiscal year shall exceed the income, the legislative assembly shall provide for levying a tax for the ensuing final year, sufficient with other sources of income, to pay the deficiency, as well as the estimated expense of the ensuing fiscal year.”

I have convened you in extraordinary session in accordance with these constitutional provisions which confer on the legislature the exclusive power of raising revenue:

First, to afford you an opportunity of providing revenue to replace the tax on real property for state purposes, action on which must be taken at this special session if relief is to be forthcoming for the present year.

Second, to afford you an opportunity of providing immediate relief for Oregon’s unfortunate victims of the world-wide economic depression—the unemployed and destitute.

Let us proceed to the consideration of these subjects in the order named.

To begin with, it may be well to point out that the abolition of the property tax for state purposes has been an issue before the legislature and electorate for a decade.

This issue was precipitated in the 1923 legislative session when Governor Pierce recommended in his inaugural message the enactment of a graduated income tax, the revenue to be derived therefrom to be used as far as possible to replace the tax on real property.

The legislature enacted the measure and the electorate approved it at a special election held in the same year.

Thereupon, Governor Pierce caused the property tax levy within the six per cent tax constitutional amendment to be reduced in December 1923 from $3,350,329 to $1,877,090, estimating that the difference would be absorbed by revenue to be obtained from the income tax.

Within a year, however, the income tax law was repealed by the electorate, leaving the state with income tax delinquencies approximating $1,000,000.

Regardless of the repeal of the law, Governor Pierce again in December, 1924, reduced the property tax levy to $1,923,048. This second reduction resulted in the loss of the original tax base of $,3,350,329 under the six per cent amendment, and the inability of the state to restore the former base resulted in the creation of a deficiency in our state treasury.

This deficiency was the beginning of the state deficit concerning which there is now so much discussion.

I wish to remark here that this recital should not be construed as a criticism of Governor Pierce’s commendable effort to eliminate the property tax for state purposes.

Despite the depleted condition of the treasury, succeeding legislatures continued to appropriate funds in excess of the revenue available under the impaired tax base, thereby steadily increasing the deficit.

Calling attention to this alarming situation and the necessity of retiring the increasing deficit in order to preserve the credit of the state, the late Governor Patterson in his message to the 1929 legislature, in part, said:

“You are aware that at the last session of the legislature appropriations were made aggregating approximately $4,000,000 in excess of the available state revenues for the biennium.

“Of these appropriations I vetoed bills providing for $1,300,000 leaving a deficit of more than $2,000,000, which I hoped might be taken care of by the income tax measure passed by the legislature and referred to the electorate.

“The income tax measure was defeated and as a result the revenues of the general fund will be insufficient by approximately $2,000,000 to meet the obligations thereon for the biennium ending December 31, 1928.”

When I assumed the governorship in 1931, the deficiency in the treasury had increased to approximately $3,000,000.

With a view of keeping this inherited deficit to the lowest possible level and with the further view of so reducing state expenditures that the property tax for state purposes might be eventually abolished in its entirety, I inaugurated a rigid retrenchment program in state affairs beginning with the 1931 legislative session.

On my recommendation that legislature repealed the millage tax on real property for market roads, amounting to $2,250,0000 biennially.

On the adjournment of the session I vetoed appropriations totaling $626,925.

Included in these vetoed appropriations was $500,000 of the $1,181,173 appropriated for the state’s higher institutions of learning.

Simultaneously with the veto of this half million dollars I also vetoed the emergency clause of this appropriation bill, thereby paving the way for the successful invokement of the referendum against the balance, amounting to $681,173.

After the adjournment of the session I also instituted drastic economy measures in state affairs resulting in savings of approximately $1,000,000 out of appropriations authorized for the biennium.

At my request there was also eliminated from the 1932 and 1933 tax levies the millage property tax for the World War Veterans’ Commission amounting to more than $1,000,000.

Had not these economies been effected, the state deficit would have been substantially increased.

To give still further relief to the distressed taxpayers the State Tax Commission omitted from the 1932 levy for state purposes the entire tax on property amounting to $4,500,000.

The commission then estimated that with the economies and curtailments introduced in state affairs during my administration sufficient revenue would be available from the excise and intangibles taxes and from the income tax and other receipts to defray the cost of the state government and the institutions of higher learning.

But, due to the economic depression, there was a shrinkage beyond all expectations in revenue from these sources, a shrinkage of approximately $2,000,000, and a further heavy shrinkage will be unavoidable during the present year.

When it appeared likely last summer that the shrinkage in revenue would be so great that the property tax would have to be restored, unless additional income could be mad available, our State Tax Commission jointed hands with the Oregon Taxpayers Equalization and Conservation League in the initiation of a measure revising our present income tax so as to provide more revenue.

This measure, and two other measures to control local tax levies and bond issues, were rejected by the people at the recent general election.

In an effort to compensate for diminishing revenue, nothing has been left undone, in my opinion, to effect reduction in state expenditures.

In the state budget submitted to you the approved appropriations are $8,005,213 less than the appropriations recommended to the last legislature by my predecessor, and $5,888,011 less than the authorized appropriations for the last biennium.

If this budget is adopted by the legislature and no greater levy is made than is now mandatory under our constitution, the state deficit can be reduced by the end of the biennium to approximately $1,000,000.

Included in the levy for state purposes for the present year is a tax on property amounting to $2,975,000, which is approximately $1,525,000 less than the property tax levy for the year 1931.

The remainder of the levy, amounting to $1,500,000, represents revenue which it is estimated will be derived from the excise, intangibles and income taxes.

In view of the tremendous shrinkage in revenue and the existing deficit, the State Tax Commission had no alternative, under the constitution, but to restore a part of the property tax levy for 1933. Unless additional revenue is provided from some other source the commission will have no alternative but to continue the levy on real property in 1934.

Whether this restored property tax shall remain and be continued hereafter is the question you have been convened to determine.

The time has come, in my judgment, when your honorable body should devise ways and means for abolishing this tax in its entirety forever.

Since the foundation of our commonwealth, real property has borne the lion’s share of our tax burden not only for state purposes but for local purposes—counties, municipalities, and other political subdivisions.

In view of the economic depression, real property, in my opinion, cannot longer carry this load without confiscation and bankruptcy—confiscation for property and bankruptcy for our counties, municipalities, and other political subdivisions.

As Governor, I have done everything within my power to solve the financial problem with which we are confronted; in fact, in instances, have gone beyond the strict letter of my legal prerogatives.

Let me say here that a solution of your problem does not lie, as some of you may feel, in further retrenchment. If you were to abolish the whole administrative end of the state government and close the doors of all its departments a property tax levy would still be mandatory under our state constitution so long as the present state deficit remains, unless, of course, other sources of revenue are made available to supplant a property tax.

What this source of revenue shall be is for you, the duly elected representatives of the people and the sole authorized revenue-raising agency of the state, to determine.

Naturally, in matters pertaining to taxation, the counsel and advice of our State Tax Commission is invaluable.

Accordingly, I have had the commission make a comprehensive survey of every available source of revenue, including gift, inheritance, tobacco, income, and sales taxes, and the data assembled are now ready for your consideration.

I have been advised by the commission which has carefully considered the whole problem that, in its opinion, a general sales tax, patterned after the sales tax adopted by Mississippi in 1932 to solve its financial and tax difficulties, offers the only means of providing sufficient revenue to permit the cancellation of the state levy on property.

My study of the subject has also led me to the conclusion that a general sales tax is unavoidable, and I urge you to give it your earnest and serious consideration. However, I am not unalterably committed to any specific remedy, but am willing to give my support to any constructive and practical tax plan this legislature may formulate to replace and abolish from our state tax system the present antiquated, burdensome and inequitable tax on real property.

As already indicated, the second subject you have been convened to consider is relief for the unemployed and destitute.

A part of the revenue raised by any measure enacted at this session should be allocated to unemployment relief. According to data assembled by the State Unemployment Relief Committee there are now approximately 57,078 unemployed in the state, many of these heads of families in destitute circumstances.

The state has received a total of $238,538 in loans from the Reconstruction Finance Corporation for relief, and an application for $725,000 for Multnomah county has been submitted, but no further relief funds will be forthcoming from the federal government until the state of Oregon has exhausted its resources.

The problem of affording relief to those unfortunate men, women and children is as much a duty of the state as of the federal government.

Although we may not be able to provide employment, we should at least make provision for relief so that there will be no avoidable want or suffering in our state.

In my opinion, not less than $500,000 should be made available for relief purposes during your special session.

In conclusion, let me earnestly appeal to those who may have come here with political prejudices to rise above them.

In this hour of our people’s distress and need we should lay aside all petty grievances, personal animosities and blind partisanship.

Let us in these deliberations devote ourselves unselfishly and wholeheartedly to the best interests of Oregon and her people. In the words of Woodrow Wilson, “Let politics stand adjourned,” during our deliberations on the grave problems before us.

I thank you.

JULIUS L. MEIER,

Governor

Oregon Secretary of State • 136 State Capitol • Salem, OR 97310-0722

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