Measure 66 Tax Reductions Must Occur
— No Justification for Keeping Tax Rates at Highest Levels
By Oregon prosperity Project,
As we talked about last week, Oregon’s tax revenues continue to decline due to lackluster job creation and declining business incomes. In short, our economy is not producing enough taxpayers.
In response, Oregon’s government unions want to cancel tax rate reductions that were written into Measure 66, which was approved by Oregon voters last year. Under Measure 66, Oregon’s top tax rates are scheduled to ratchet down slightly on January 1st – but they’ll still be higher than pre-Measure 66 tax rates.
Said one government union lobbyist to the Salem Statesman Journal last week, “It’s surprising to me that at this time when there’s a real crisis…that no one is talking about the big tax cut to millionaires that’s coming up January 1.”
The article went on to report that union lobbyists are “dismayed” that Oregon legislators appear not to be considering “gaining more money by raising taxes on wealthy Oregonians.”
We believe legislators are absolutely correct not to consider this option at all.
On this issue, a little perspective goes a long way…
Under Measure 66, income tax rates increased by 20 percent for “wealthy” Oregonians – those making $125,000 per year (or $250,000 for joint tax filers).
The tax rate for these “wealthy” Oregonians increased from 9% to 10.8% – the highest tax rate in the country for these income earners.
Under Measure 66, these highest-in-the-nation tax rates would apply for three years (2009, 2010, and 2011) before “dropping” permanently to 9.9% in 2012 – still the highest tax rate in the nation for this income level.
Pre- Measure 66 Tax Rates ($125,000 income)
Measure 66 Tax Rates: 2009-2011 ($125,000 income)
Measure 66 Tax Rates: 2012 and Beyond ($125,000 income)
Iowa 8.98 %
The new “reduced” 9.9% tax rate in Measure 66 is still ten percent higher than it was before Measure 66 passed.
But the government unions are now crying foul. They want to repeal next year’s planned rate reductions that voters approved with Measure 66.
The planned tax rate reductions in Measure 66 MUST occur for a number of critical reasons:
Oregon needs job creation. Oregon depends on job creation and personal income more than any other state to fund public services. We’ve had three years of the highest tax rates in the nation on business owners. We’ve also had three years of continuously declining tax revenues due to disappointing economic, business and job growth. The connection seems pretty clear to us.
High taxes certainly haven’t sparked Oregon’s economy. We believe the lower tax rate will give us a better opportunity for much needed job growth.
The Measure 66 tax hikes are clearly not producing the revenue that was predicted. In short, Measure 66 has proven ineffective and clumsy at raising the revenue it was supposed to. In 2009, it produced only $131 million of the $180 million that was predicted (73%). In 2010, it was even worse – 67%. And Ballot Measure 66 tax collections for 2011 are at less than 60% of original projections.
Clearly something is happening here. There are fewer “wealthy” taxpayers in Oregon, either because they have left our state or they are no longer “wealthy.” Either way, continuing to pummel these taxpayers with a hefty 10.8% tax rate is fast becoming counterproductive.
Keeping faith with Oregon voters. The government unions authored Measure 66. They spent millions to persuade Oregon voters to pass it. Now they don’t like what their own measure does and want to change it. But changing it after-the-fact is tantamount to a bait-and switch with Oregon voters.
Oregon can’t afford more divisive arguments. Oregon cannot afford to be in a perpetual argument about “making the wealthy pay their share.” As we documented just a few weeks ago, the top 20 percent of Oregon taxpayers pays 63 percent of all the taxes. The top 3 percent of Oregon taxpayers (the Oregonians affected by Measure 66) already paid 32 percent of all the taxes even before Measure 66. This is more than fair.
We absolutely do not support the effort we see by the government unions to label hardworking Oregonians who own businesses, create jobs and may earn $125,000 or more per year as “millionaires” and “ultra-wealthy.” By definition this is not true.
It’s time to move on and come together on what really matters – job creation and a higher level of prosperity for all Oregonians.
Allowing the Measure 66 tax rates to come down, as they are scheduled to do, gives Oregonians the best opportunity to do that.