Free Markets, Free People


Oregon Voters Raise Their Own Taxes (Update)

If you were to ask them though, the taxes will be collected only from corporations and the rich.  The idea is to stick them with the bill for services the rest of the voters have decided they’d like but can’t afford.  It’s a bit like getting on a train without a ticket, finding a well dressed man, and having the ticket collector point a gun at him and demand ticket money for your trip.

If I were the well dressed man, I’d probably find alternate transportation for my next trip. If I was a “rich” person in Oregon, I might begin scouting out a new place to live. The voters have certainly made it clear they feel they have every right to loot my earnings at will. Why would I want to give them any more chances?

Measure 66 raises the income tax paid by households earning at or above $250,000 a year or individual filers who make $125,000 or more. Measure 67 raises the state’s $10 minimum corporate income tax.

Together they generate an estimated $727 million, which has already been budgeted by the 2009 Legislature for public schools and other state services.

So instead of cutting budgets at the state level to what they can afford, Oregon voters have doubled down and bought into the populist notion that they can do it on back of those demonized rich people and evil corporations.

Corporations, of course, have a number of choices. Among them, if the tax isn’t too high, is pass the cost on to their customers. That would most likely be those who voted “yes” on Measure 67 ironically. If it is a large tax which is not easily passed on to the consumer, the corporation has other choices. It can cut headcount – lay people off – to recoup the cost. Or, if it is really crippling, find a new home for their business in a state which is friendlier toward business than is Oregon. What they most likely won’t do, at least not anytime soon, is hire and expand.  And if I was a corporation looking for a new home, this vote would have me cross Oregon off the list.

The “rich” also have options. Find ways to hide that income. Like increase 401k savings so that taxable income is below that number. Many are probably small businesses which will hide income in the business vs. putting it in the owner’s income. If none of that’s possible they may find a new home for themselves and their business. One of the benefits of being “rich” is it does tend to give one some options as to where to live.

That’s not to say they will or even that all of them object to this new tax, but Oregon voters shouldn’t fool themselves that this sort of taxation is beneficial in the long run to an atmosphere which will attract and keep businesses or people who have the money to help the economy. Oregon might be a nice place to live, but it’s not that nice – especially when alternatives exist.

UPDATE: Megan McArdle points out something about the  tax on business that makes it even worse:

The business tax changes apparently include a gross receipts tax, which is really an awful tax, especially during a downturn. Companies which are actually losing money may still owe taxes, which could hasten their closure, and the evaporation of any jobs they provide.

Any business that took in a dollar last year owe taxes on it. That means, as McArdle points out, marginal businesses who have just managed to hang on (and continue to provide employment) may be forced to lay off or close their doors and liquidate to pay the tax. A particularly “smart” move in a recession.

Additionally, as Tonus points out in the comments – the $727 million will be spent on the static analysis which said such a tax would yield that amount of revenue. But life isn’t static and those effected will immediately begin to do things which will lessen the impact on them and, of course, make that revenue stream smaller than anticipated. That means two things – more deficit spending and, most likely, more taxes on those who approved these to measures in order to make up the revenue shortfall.

~McQ

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15 Responses to Oregon Voters Raise Their Own Taxes (Update)

  • Ed at HotAir often points out the difference between dynamic and static analysis.  For example, if you raise taxes on cigarettes, the amount of revenue generated may be less than you expected, if you assumed that the tax would not decrease sales of cigarettes.  I see that the Oregon Legislature has already budgeted the $727 million that they expect to raise via Measures 66 and 67.

    Well… what happens if there is less spending as a result of these additional taxes?  Or less hiring?  Or more unemployment?  Or if people and companies leave?  What happens when you spend $727 million and collect $675 million because your estimates assumed that raising taxes would have no other effect aside from generating additional revenue?

  • Insanity – doing the same thing over and over again and expecting different results.

    Maryland voters did the same thing with a “millionaire” tax.  The result: an unexpected (/ sarc!) and dramatic decrease in the number of millionaires in Maryland, with resulting unpredicted (/ sarc!) shortfalls in revenue.

    Maryland couldn’t balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O’Malley, a dedicated class warrior, declared that these richest 0.3% of filers were “willing and able to pay their fair share.” The Baltimore Sun predicted the rich would “grin and bear it.”
    One year later, nobody’s grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller’s office concedes is a “substantial decline.” On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year — even at higher rates.

  • As they keep driving people out, that $250K amount is gonna come down and down….

    Soon we’ll be treated to the fiction that someone making $75-100K per is a rich “fat cat” who isn’t paying their “fair share”

    • Yeah, anyone not on welfare is a thief who only got that way because they stole it.
       

  • McQ, I just want to praise you, that was one of the most well written and succinct statements on the inadvisability of soak the rich schemes I have ever read.

  • If none of that’s not possible they find a new home for themselves and their business. One of the benefits of being “rich” is it does tend to give one some options as to where to live.

    Interestingly, this is why so many corporations are registered in Delaware; no state income tax if your business operates mostly out of state. So, our hypothetical businessman simply files the necessary incorporation paperwork in Dover instead of Portland and he is out of reach of the taxman. No relocation necessary. Yes, these measures were not well thought through.
    Few, if any, corporations will be hit by these measures but plenty of electricians, plumbers, liquor store owners, doctors and lawyers will.

  • This is so ridiculous to ponder, but it typifies the old problem with “democracy”,…  2 wolves and a lamb deciding what’s for dinner.  Is there a breakdown in the voting demographics that would argue that the majority has once again found an outnumbered victim to exploit?  When will they learn that the vicitm will pay back this by leaving the scene of this crime, and sooner or later there will be nobody left to parasitize.  Oregonians will be headed for Colorado to live in Galt’s Gulch.

  • Go look at the <i>Oregonian’s</i> comments re: the vote.  It’s chock full of lefties celebrating the “win”: “Yahoo! They passed! Now you evil rich folk just have to bend over and take it!” is the general tenor.  The worst is those “educated” folks who try to explain how this is the will of the people, so shut up!  I just <i>know /i> that, had the vote gone the other way, they’d be saying the exact same thing. </sarc>
    They really have no idea what they’ve done.  I look for property values here in ID to increase soon.

  • Glad I live in Texas.  The last time some politicians decided to have a chat about starting a  state income tax there were shots fired through the state capital’s windows.
    6 years later we still dont have state income taxes.

    • /sarc
      Are you people seriously suggesting, counter to the statements by a well know political science economist professor, that companies actually turn around and pass their costs on to their customers?   Next you’ll be saying markets adjust themselves again!
      /offsarc

  • Expect flocks of golden geese flying out of Oregon.
     

  • Oregon voters as a conglomerate may have voted for it… but I didn’t.

    CR: I believe it taxes business <I>operations</i> in Oregon. Any business making income in Oregon will have to pay, or stop doing business in the state. Simply being incorporated in Delaware won’t change that.
    On the topic of it being a tax on gross sales, that’s true – but any business that’s not profitable that year will pay the minimum, which for the $1-$2M bracket, for example, is $1,000.
    If the business is that marginal, that out of $1M in sales a $1000 tax, as opposed to the old minimum of $160, is fatal, then it was doomed anyway.
    That’s not really excusing the stupidity of such a tax scheme, and the populist impulses behind it (or the static model of income that they’re spending in advance), but in terms of real tax rates that’s something like .1%, which is not earth-shattering.

    •  

      I believe it taxes business <I>operations</i> in Oregon. Any business making income in Oregon will have to pay, or stop doing business in the state. Simply being incorporated in Delaware won’t change that.


      Fair enough. Still, if the company has majority operations outside OR and functions as a DE corporation it is only a matter of paperwork to keep the $ value of business actually done in OR to a bare minimum. So, yes, you cannot avoid the taxman completely but you can reduce the bite substantially. QED

  • Thoughts from a native Oregonian ex-pat: Californians who’ve moved to Oregon over the last 3 decades because they screwed up their own state have been screwing up another one.

    A pox on all their houses, except those ones lived in by Oregonians who have to rent from California ex-pats because the bastards have inflated housing prices beyond the means of Oregonians to own their own homes.

    Locusts.

    Please, grant us open season.

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