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Oregon’s income growth is not what it seems

April 4, 2012

Dr. Eric Fruits, Ph.D.
Oregon economist

There seems to be a bit of back slapping here and there about last year’s personal income growth in Oregon. Oregon was ranked 15th in personal income growth among the United States and the District of Columbia. That ranking just barely puts the state in the top third in terms of personal income growth last year. As shown in the table below, Oregon’s personal income growth per person was 4.4 percent while the US as a whole saw growth of 4.3 percent.

On the one hand, it’s easy to laugh at those who get overly excited about one-tenth of one percentage point. On the other hand, as Robert Barro points out, “increases in growth rates by a few tenths of a percentage point matter a lot in the long run and are surely worth the trouble.”

The key qualifier is “in the long run.”

Over the long run, Oregon’s personal income growth per person has lagged the rest of the US by two to four tenths of a percentage point. It’s not enough to notice from year-to-year, but the impacts compound over time.

At the end of World War II, Oregon’s per capita personal income was 8.5 percent higher than the US as a whole.

In the 1950s, Oregon’s personal income growth could not keep pace with the rest of the US and by 1960, the state’s per capital personal income was the same as the US as a whole. The recession of the early 1980s hit Oregon particularly hard, and income growth never seemed to recover. Even during the dot-com boom, Oregon’s personal income did not keep pace with the rest of the US.

Last year—even with the one-tenth of one percentage point advantage—Oregon’s personal income per person was 9.0 percent lower than the US as a whole.

Even the tiniest drags on the economy can compound over time such that a state that begins almost nine percent richer than the rest of the country can end up decades later being nine percent poorer than the rest of the country.

Per Capita Personal Income Growth, Oregon vs. US

(Average Annual Growth Rate)

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Discuss this article

Bob Clark April 4, 2012

I looked at per capita income for Multnomah County over the past ten years, and found per capita income is growing at a mediocre rate of 2.2% or so. I haven’t checked but I bet this may be a percentage point or more lower than for the 1990s. If you look at local and state government spending for the last ten years, you get the general impression state and local governments continue to budget, tax and regulate as though the economy is still as robust as in the 1990s. Maybe the reality of the economic malaise of the past 11 years is finally starting to set in for state and local government. Unfortunately, public employee unions can’t let go of the 1990 glory years, and think the solution to Oregon’s woes is for them simply to squeeze the private sector harder for more income and wealth confiscation.

We need a regime change in Salem; and Kitzhaber III is mostly only more of the same.

Brian Owendoff April 4, 2012

With the passage of Measure 66, Oregon has the dubious distinction of having the highest capital gains tax and second highest income taxes in the nation. This policy discourages investors and high wage earners from locating here.

According to Kiplinger, because of the high tax rates imposed by Measures 66 and 67 (for its effect on passive income Oregon is the fourth most unfriendly state for retirees. For those retirees with taxable income of $250,000 or more, Oregon shares with Hawaii the dubious honor of imposing the highest income tax rate in America. Taken together, these policies have earned Oregon a place on its “do not live here in your second act” list.

There are two union backed bills to increase Oregon income tax to 13.6%! I know five high net worth people that own sizeable businesses that employee 1000s of Oregonians that said they will relocate if this passes. Taxing those that create the most jobs is not a receipt for growth for our state.

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