Thursday, December 17, 2009

Mississippi, Here We Come

Posted By on Thu, Dec 17, 2009 at 10:04 PM

An Oregon State University economist has come out with a report pretty much demolishing the conservative propaganda that Oregon is Tax Hell and two measures on the January ballot will make it much worse.

William Jaeger compared tax rates in Oregon with those of other states over a period of 17 years and found that, as a percentage of personal income, the nationwide average state tax rate has remained a fairly steady 6.4% while Oregon’s has averaged 6% -- and it’s been trending down, not up.

Jaeger’s data show that Oregon currently ranks 44th out of the 50 states in terms of state taxes as a percentage of total personal income, at 5%. The nationwide average is now 6%.

The increase in corporate taxes under Measure 67 and in the marginal personal tax rate under Measure 66, which would apply only to the most affluent 3% of the state’s taxpayers (individuals with incomes above $125,000 or couples with incomes above $250,000), “would only partly narrow, not eliminate, the gap between Oregon’s taxes and the national average,” according to Jaeger.

Even with the passage of both measures, he goes on, “high-income earners [in Oregon] would still pay lower average tax rates than lower-income earners. The effect of these changes on Oregon’s business taxes overall would still leave Oregon ranked 46th out of 50 states in business taxes as a share of gross state product.”

As Oregon’s tax rate has fallen compared to the national average, Jaeger’s data show, its standing among the states in terms of the quality of public services has dropped too.

“At Oregon’s public universities, funding in real dollars per student has gone down by more than half in 20 years, and faculty salaries are 10–17 percent below national averages — meaning that it’s harder to attract good teachers and researchers,” Jaeger writes. “At the same time, average education levels in our state have gone down too: only 28.8% of younger Oregonians have college degrees compared to 33.4% of older Oregonians. These trends in Oregon’s public services and average education levels raise concern about how Oregon will be able to compete nationally and internationally.”

Jaeger’s study “cites a survey of dozens of scholarly, peer-reviewed economic studies and concludes that increases in taxes, when used to expand the quality of public services, can promote economic development and growth in employment,” said an OSU press release.

Jaeger quoted Nobel Prize-winning economist Joseph Stiglitz of Columbia University and Peter Orzag, former director of the Congressional Budget Office, as saying: “Tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run.”

“Stiglitz and others conclude that cutting social services further harms those already hurt by the recession, while a tax increase on high-income groups affects only those who are doing well during a recession,” Jaeger said.

On the other hand, if our goal is to make Oregon the Mississippi of the West we can follow the conservatives’ advice and continue down the path of cutting taxes and services.

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