Decision Day in Oregon for Highest State Income Tax

January 26, 2010

Today is Election Day in Oregon, and as it’s a mail ballot state, the last day for voters to return ballots to elections officials. On the ballot are Measures 66 and 67, referenda on measures that will raise the state’s income and corporate taxes.

The New York Times frames the election in a post-Massachusetts context, suggesting that it may confirm or deny a no-new-taxes trend. But they quickly and accurately correct themselves:

While tax increases are probably coming in plenty of other states, most by executive or legislative action, Oregon will be the first this year to ask voters to raise taxes on themselves — or at least on some of themselves.

“What’s the saying? ‘Don’t tax me. Don’t tax thee. Tax the man behind the tree?’ ” said Tim Hibbitts, a longtime independent pollster in Oregon. “The measures were designed and have been sold with the idea that somebody else is going to pay, people who are high-income earners and businesses.”

Mr. Hibbitts added, “They were crafted pretty cleverly politically.”

Very clever: the polls suggest that 66 and 67 are ahead.

Such tax increases are bad policy. Taxes on high-income individuals and corporations are notoriously volatile, and states should be moving toward more stable revenue sources to get out of the boom-bust budgeting cycle. And entrepreneurs and businesses are already taking notice of Oregon becoming tied with Hawaii for the highest state income tax in the country.

California has for years dumped its tax burden on those groups, falsely convincing the state’s residents that government services are a free lunch because someone else pays for them. But high-income individuals can flee or shift their income (and have in New Jersey and Maryland), and corporations pass higher taxes to workers in the form of lower wages or reduced hiring, shareholders in the form of reduced profits, or consumers in the form of higher prices. There’s no free lunch.

Read our review of Measures 66 and 67 here.


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