Oregon Voters Approve Taxing "The Guy Behind the Tree"

January 27, 2010

The results from Oregon are in. Measure 66, which will raise income taxes on high-earners, passed 53.69% to 46.31%. Measure 67, which raised corporate income taxes, passed 53.03% to 46.97%. About 1.2 million people cast ballots.

This means that two tax increases passed by the legislature last summer will stand.  The success of Proposal 66 means the top income earners in the state will pay a rate of 11% (tied for highest state rate in the nation with Hawaii) on incomes over $250,000 a year.  Proposal 67 added new bracket and top rate for corporations earning over $250,000 a year. (More on Measures 66 and 67; more on the tax increases.)

Long-time U.S. Senator Russell Long famously said that for many people, tax reform means, "Don't tax you, don't tax me. Tax that fellow behind the tree." That's the best way to sum up the results from yesterday's tax referendum in Oregon, as the Tax Lawyer's Blog has. It's not evidence of people willing to "tax themselves." As the Washington Post explained:

Nine times since the 1930s, for example, Oregon voters have rejected sales tax proposals, leaving the state government relying primarily on income taxes at some of the highest rates in the nation and secondarily on lottery proceeds. Twice in the past decade, voters have rejected broad-based income tax increases.

The referendum process in Oregon has thus been used previously to block tax increases that would affect a majority of the population directly. So the legislature came back with taxes directly targeting a smaller minority population. In this case, the top income tax rate will only hit around 2% of income earners in the state.

One question that is yet to be answered is whether more frequent but less distortionary tax increases from the legislature are worse for Oregon than infrequent distortionary taxes targeting a small group of people?

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