Tax debate welcome.

Byline: The Register-Guard

In an ideal political world, elections would provide the pulpit for innovation and risk-taking, for bold discussions of new concepts and possibilities. Alas, modern elections have become more about self-preservation, about not making mistakes, about not making waves.

Happily, this unfortunate trend has exceptions. Two have surfaced this fall. In their campaigns for seats in the Oregon Senate, Republican Sen. Lenn Hannon of Ashland and Democrat Rep. Kurt Schrader of Canby have each trotted out for public debate separate tax reform plans. Their proposals are both timely and needed to launch a long-overdue statewide debate over Oregon's tax system.

The tax system lies at the heart of most issues facing the state. Measure 5, approved by the voters in 1990, capped local property taxes and shifted most funding of public education to the state, causing Oregon's reliance on the personal income tax to grow. In good economic times, high employment brings a gusher of greater income tax revenue to the state. But in recessionary periods like the current one, overreliance on the income tax creates serious imbalances and state revenue shortfalls.

Hannon and Schrader seek to reduce the state's dependence on the income tax by introducing new - and separate - concepts of taxation.

Of the two, Hannon's is the simplest. He proposes to lower the personal income tax rate to a maximum of 5 percent from the current top rate of 9 percent, drop the maximum local property tax rate (for schools and local governments combined) to $10 per $1,000 of assessed value from its current top rate of $15 per $1,000, and require any increases in either to be approved by voters. Then - here's where it gets interesting - Hannon would establish a 6 percent sales tax with the revenue dedicated to schools.

Schrader proposes eliminating the corporate income tax over a four-year period, cutting the capital gains tax in half (to 4 percent), reducing personal income taxes by 10 percent for the wealthiest taxpayers and 20 percent for the lowest bracket, and allowing low-income taxpayers to claim the full federal earned income tax credit on their state returns. Schrader would then create a business activity tax on capital and labor costs - effectively, a built-in sales tax on businesses - starting at 2.5 percent and increasing to 3.25 percent over four years, with the revenue dedicated to schools.

The common denominator in both plans is some form of consumption or sales tax, a concept that Oregonians have forcefully rejected nine times over the years. Hannon's and Schrader's approaches differ from most past sales tax proposals in that they would dedicate the revenue from such a tax to schools. Only one previous proposal, in 1993, dedicated sales tax proceeds to that purpose.

Voters can find merits or demerits in both legislators' proposals, but that's not the point here. The point is that it's high time that voters, candidates and office-holders begin talking about state tax reform. With the next Legislature facing a shortfall of $1 billion or more, it's imperative that serious attention be directed to how the state funds essential services, including education. The time for that debate is now, and Hannon and Schrader deserve praise for having the political courage to get it started.