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. ...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. ...
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. ...
Don't you hate that law of unintended consequences?
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. ...
Also remember, people who have that kind of wealth can very easily pay someone to move it elsewhere.
All of this is an instant replay of what happened in Maryland in 2008 when the legislature in Annapolis instituted a millionaire tax. There roughly one-third of the state's millionaire households vanished from the tax rolls after rates went up.
If Salem officials want to find where the millionaires went, they might start the search in Texas, the state that leads the nation in job creation--and has a top income and capital gains tax rate 11 percentage points lower than Oregon's.
Which also explains why Texas is gaining population and spurring job growth and the liberal states are losing them.