Wyden's sensible idea.

Byline: The Register-Guard

Here's a wild idea: Instead of selling 300,000 acres of national forests to partially satisfy the federal government's century-old obligation to rural counties and schools, why not fund the entire program by closing a loophole that allows government contractors to avoid tax obligations?

Sure, there are some obstacles that would have to be overcome before Congress would accept such a common-sense proposal.

Republican leaders in Congress might object that repealing a tax loophole, even one that should never have been approved in the first place, is a tax increase - or that the proceeds should be used to reduce the federal deficit. Then there's long-simmering resentment from some lawmakers in states that receive little or no funding from the county-payments program, and who don't understand either its historic underpinnings or the havoc that reducing or eliminating it would create in Oregon and the other Western states that are its primary beneficiaries.

This innovative idea isn't hypothetical. It was proposed last week by Sens. Ron Wyden, D-Ore., and Max Baucus, R-Mont. They introduced legislation that would raise $2.6 billion over the next decade to fully fund the program by closing a tax loophole in federal contracts.

Here's how it would work: Under current law, the federal government does not withhold taxes owed by federal contractors, and their non-compliance with federal tax law is notoriously routine. Wyden and Baucus want to close the revenue gap caused by non-compliance by withholding 3 percent of federal payments for goods and services delivered by private contractors. The money would be applied to taxes owed by those contractors. If a contractor's tax obligation is less than 3 percent, the business would be reimbursed for the difference.

At first glance, the idea has considerable appeal. Administration officials have argued that the county-payments program must be scaled back and funded through federal land sales because of the need to reduce the growing federal deficit. The Wyden-Baucus proposal would fully fund the program by recovering taxes that wouldn't otherwise be collected, neutralizing the argument that it is a drain on the federal budget.

The Wyden-Baucus proposal also would eliminate the need for the administration's plan to partially fund the county-payments program by auctioning off up to 300,000 acres of federal forest in 41 states. This proposed sale of public lands, the largest in decades, has generated opposition across the country. That's understandable, given the administration's record of rolling back protections for national forests and the glaringly dysfunctional budget strategy of selling off assets to pay normal operating expenses.

Finally, the Wyden-Baucus proposal would enable Congress to fulfill a commitment it made after the creation of the national forest system shortly after the turn of the last century. Recognizing that rural counties and schools could no longer collect property taxes from the newly designated national forests, Congress agreed that they should receive a percentage of future federal timber sales. When harvests declined as a result of years of court rulings in favor of endangered species, Congress agreed to fund the program from general revenues.

It will be revealing to see how the Bush administration reacts to this sensible proposal. The choice seems clear: Either it will embrace a plan that enables the government to satisfy its long-standing obligation to rural counties and schools - or it will move forward with a strategy designed to ensure the eventual demise of that historic compact.