Oregon Lawmakers: Get Proactive on the Economy

Who wouldn’t want to live in the Pacific Northwest?

According to the 2010 Census, Oregon has enjoyed a relatively large population growth. There were 12 percent more people in the Beaver State in 2010 than in 2000. This is good compared to the national growth rate of 9.7 percent.

Oregon is attractive. But other than a pleasant climate, a breathtaking coastline, and beautiful mountains, what makes Oregon stand out?

From an economic viewpoint the answer is “not much.” Over the past decade Oregon had a few years of strong growth, but that was driven entirely by computer and electronics manufacturing. While production of computer components and other electronic products surged from ten percent of the state’s economy in 2001 to 30 percent in 2010, the rest of the private sector stood still or declined. And even though recent media headlines noted that Oregon saw the second highest economic growth rate in the country at 4.7 percent in 2011, you would have to read down the page to realize that this was a 42 percent decline from our 8.1 percent growth rate the year before.*

It is a bit frightening to see the numbers from the Bureau of Labor Statistics. Comparing the recession year of 2001 to the recession year of 2010, there is absolutely no private-sector job growth. There are as many people working private jobs in Oregon today as there were a decade ago.

Again, it is nice that electronics manufacturing has become big in Oregon, and 16,000 Intel employees should be proud of their jobs. But it is problematic that this particular branch of manufacturing is the only driver of the state’s economy. Jobs in the electronics industry are among the easiest to move, both nationally and globally.

The problem is that the Beaver State lacks consistent growth-promoting policies. Instead of being economic visionaries, the lawmakers in Salem come across as run-of-the-mill ho-hummers.

Oregon’s ranking with the Tax Foundation has not changed much over the past ten years. Taxes are relatively high – currently 17th highest in the nation. Oregon is not in the tax dungeon like New York or California; but on the other hand, there is no concerted effort in Salem to make Oregon attractive relative to its peers in the West.

Oregon’s tax rates continue to make the state uncompetitive compared with others. The high individual income tax is a good example. Since two thirds of the state’s tax revenues come from the individual income tax, state legislators are more interested in a tax code that maximizes revenue than one that promotes growth. As a result, Oregon has a nine-percent state income tax bracket that covers the vast majority of income tax filers. Even California is more lenient toward individual incomes.

And let’s not forget that Washington and Nevada have no state income tax at all.

In terms of business taxes, Oregon ranks about the same as for individual income taxes: better than California and Idaho, but worse than Washington and Nevada. This is yet more evidence that state lawmakers are taking a passive, go-with-the-flow attitude to economic policy.

Government employment is another area where state legislators could be proactive. While there is no steady, long-term growth in private employment in Oregon, government employment is doing well. In 2001, at the bottom of the Millennium recession, there were 181 state and local government employees per 1,000 private-sector employees. In 2010, at the bottom of the Great Recession, that ratio had risen to 191. This means, in plain English, that while the private sector was essentially standing still, job-wise, over the long term, Oregon’s governments kept adding to their payrolls.

Since the summer of 2010 there have been some reductions in local government employment, but available Bureau of Labor Statistics data shows no break in the trend of swelling state payrolls. In other words, the prevailing spending-as-usual attitude continues in Salem.

Instead of complacency, the state legislature needs to take a proactive approach to the economy. Their duty is not first and foremost to maintain government and the status quo, but to facilitate the growth of prosperity and economic freedom in the state. To do this, they could start with something as simple as capping tax-funded payrolls to what the private sector can afford. If there are no new jobs being created in the private sector, then at the very least there should be no expansion in tax-funded payrolls, either.

Another step is a more competitive tax code. Interstate migration data from the Census Bureau shows that while Oregon has gained population over the past decade, Washington is a much stronger magnet. It is fair to assume that Washington’s lack of income tax is a major reason for this.

There is a lot more to do, of course, but these two measures would be a good way to start.

 

*http://www.oregonlive.com/business/index.ssf/2012/06/oregon_economy_growing_at_nati.html

 

Sven Larson is Senior Fellow in Economics at the Wyoming Liberty Group and a guest contributor for Cascade Policy Institute, Oregon’s free market public policy research center. He holds a Ph.D. in social sciences with major in economics and has taught economics at colleges in three countries. His research on health policy, taxes, and government budgeting and entitlement reform has been published by think tanks including Cascade Policy Institute and the Wyoming Liberty Group.

Divorcing Lady Liberty

Numerous recent news stories have reported on high-net-worth Americans renouncing their U.S. citizenship to protect assets from high tax rates. Last Friday, a Wall Street Journal editorial suggested the U.S. government should not seek to “punish” ex-citizens through high “exit taxes.” Instead, Congress should work “to make the U.S. so appealing and dynamic again” that people will be “sorry [they] ever left.”

 

It seems unreal that citizens should find it in their interest to leave the United States of America. Our country and its material success were built by millions of the world’s “huddled masses, yearning to breathe free.” Men, women, and children have come to America for centuries in search of freedom, justice, and an upwardly mobile future that results from both. When the tax code is so punitive that Americans would relinquish willingly the rights and privileges of U.S. citizens, we know we have a problem.

 

Our tax policies should encourage entrepreneurs, investors, and individuals of financial means not only to come here but to stay. Yet, it bears remembering that our identity as Americans and our relationship with our country should have value to us beyond whether they are financially “worthwhile.” Americans have grown used to acquiring whatever we desire, but our American heritage can’t be purchased―and you can’t put a price on freedom. That’s why it’s a sorrow to see Americans choosing to go.

Working to Live―or for Runaway Government Spending?

Tax Freedom Day arrived this year on April 17, coincidentally the same day tax returns were due. Tax Freedom Day is a calendar-based measure of Americans’ cumulative tax bill. It is calculated as the day on which Americans have worked long enough to pay all their taxes. Americans worked 107 days to earn enough money to pay this year’s combined federal, state, and local taxes. These taxes include personal income taxes, payroll taxes, corporate income taxes, and property and sales taxes.

 

However, this is only what Americans actually pay, not what government spends. According to the nonpartisan Tax Foundation, “if the federal government raised taxes enough to close the budget deficit—an additional $1.014 trillion—Tax Freedom Day would come on May 14 instead of April 17. That’s an additional 27 days of government spending paid for by borrowing.”

 

Americans currently pay more in taxes ($4.04 trillion) than they do on food, clothing, and housing combined ($3.89 trillion). The saying goes, you should “work to live, not live to work.” But the more government grows, the more Americans are working less to live and more to pay for runaway government spending. That leaves fewer resources to invest in the real engines of economic growth: private sector businesses that create jobs and produce goods and services for a market fueled by Americans’ hard-earned purchasing power.

This is a "told you so" story about Measures 66 & 67 …

Steve Buckstein

This is a “told you so” story about Measures 66 & 67 …

by Steve Buckstein

In December 2009, Cascade Policy Institute published a research report by Randall Pozdena, Ph.D. and Eric Fruits, Ph.D. forecasting the impacts of tax increase Measures 66 and 67 on Oregon employment.

The study was based on thorough research of peer-reviewed literature and a quantitative analysis of taxes and economic growth across the U.S. and over a long period of time. They concluded that the tax measures would have a significant negative impact on Oregon’s employment picture, as shown in Exhibit 1 on page 7 of their report.

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Astoria Tea Party Hears from Cascade Policy Institute

Steve in Astoria
On Saturday, September 12, Cascade Policy Institute founder and Senior Policy Analyst Steve Buckstein [center photo] spoke to an enthusiastic crowd of about 80 people from the courthouse steps in Astoria. The event was one of hundreds of such “9-12” events around the country, including a massive rally in Washington, D.C.

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John A. Charles, Jr. featured on KATU 2story on TriMet’s gold-platedemployee benefits.

Watch this great KATU-TV exposé of TriMet’s “most generous in the country” benefits package. Featuring Cascade’s President John Charles’ analysis of the agency’s out-of-control spending and Common Sense for Oregon’s Golden Fleece Award for wasting taxpayers’ money.

Two Job-Killer bills threaten to destroy ten to twenty times more jobsthan Oregon’s so-called “stimulus package” has created

Steve Buckstein
For immediate release
Contact Steve Buckstein
(503) 242-0900 steven@cascadepolicy.org

The state recently announced that its $175 million “stimulus package” has created or saved 3,236 jobs.1,2

What the state hasn’t yet told citizens is that Oregon risks losing ten to twenty times or more as many jobs if two “anti-stimulus” tax bills take effect.

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Taxing the “Wealthy” More Will Cost 36,000 Oregon JobsBy Bill Conerly

QuickPoint!Bill Conerly
I estimate that raising the maximum tax rates on personal income, including capital gains, to eleven percent will cost the Oregon economy 36,000 jobs by 2015. The job losses will continue to accumulate beyond that year. This analysis does not incorporate job losses due to higher corporate income taxes.

The estimate is based on a model of state employment growth that incorporates data for all 50 states for 26 years. It exploits tremendous variation in tax practices from one state to another, and within individual states across time. The model was developed for my 2005 analysis of Oregon’s capital gains tax. (See “Generating Jobs and Income Through a Capital Gains Tax Reduction,” Appendix 1, Equation 3, available at http://www.conerlyconsulting.com/pdf/Capital_Gains_Report.pdf.)

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