Oregon Discovers What Static Scoring Is All About

The Rabbi

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Sep 16, 2009
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Editorial in the WSJ on Oregon, one of the lefty states in the nation not currently close to bankruptcy. They passed a tax on rich guys to "close the budget gap" (or whatever the excuse was) and voila, the rich disappear. Probably to Texas.
Review & Outlook: Ducking Higher Taxes - WSJ.com

Oregon raised its income tax on the richest 2% of its residents last year to fix its budget hole, but now the state treasury admits it collected nearly one-third less revenue than the bean counters projected. The sun also rose in the east, and the Cubs didn't win the World Series.

In 2009 the state legislature raised the tax rate to 10.8% on joint-filer income of between $250,000 and $500,000, and to 11% on income above $500,000. Only New York City's rate is higher. Oregon's liberal voters ratified the tax increase on individuals and another on businesses in January of this year, no doubt feeling good about their "shared sacrifice."

Congratulations. Instead of $180 million collected last year from the new tax, the state received $130 million. The Eugene Register-Guard newspaper reports that after the tax was raised "income tax and other revenue collections began plunging so steeply that any gains from the two measures seemed trivial."

One reason revenues are so low is that about one-quarter of the rich tax filers seem to have gone missing. The state expected 38,000 Oregonians to pay the higher tax, but only 28,000 did. Funny how that always happens. These numbers are in line with a Cascade Policy Institute study, based on interstate migration patterns, predicting that the tax surcharge would lead to 80,000 fewer wealthy tax filers in Oregon over the next decade.

The tax wasn't enacted into law until June 2009 but was retroactively applied to January 1, 2009. So for the first half of the year wealthy Oregon residents weren't able to take steps to avoid the tax ambush because they didn't see it coming. This suggests that a bigger revenue loss from tax mitigation strategies will show up on tax return data in 2010 and 2011. The Revenue Office has already downwardly revised tax collection projections for the first three years by one-third.

The biggest loss of revenues came from capital gains receipts. The new 11% top tax rate applies to stock and asset sales, which means that Oregonians now pay virtually the highest capital gains tax in North America. Instead of $3.5 billion of capital gains in 2009, there was only $2 billion to tax—43% less. Successful entrepreneurs like Nike owner Phil Knight don't get rich by being fools with their money. They don't sell tens of millions of dollars of assets when capital gains taxes go up.

The tax defenders in the Salem legislature blame the decline on the state's lousy economy, with unemployment having risen to 10.6%. "This is a temporary thing," argues Phil Barnhart, a Democrat who helped to write the tax increase, adding that he's "pleasantly surprised" that only one-third of the estimated revenue was lost.
More at the source.
 
Robin Hood politics at its finest... and the lefty wingers get surprised by the inevitable outcome

They'll have some rationalization for it.
Because deep down they don't care about higher revenues. The real issue is not revenues but "fairness." IN the walnut-sized minds of libs the idea that a man can earn $10M a year is just inherently unfair and unjust and must be stopped no matter what.
 

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