Oregon’s Economic Outlook Continues to Slip

ALEC published its 2011 report, Rich States, Poor States: ALEC-Laffer State Economic Competitive Index, in late June.

How does Oregon rank?* Oregon now ranks number 30 out of 50 states in its actual economic performance over the last ten years. Even worse, looking forward, Oregon has slipped from number 35 in 2008 to number 43 in 2011. Our economic outlook is now worse than 42 other states, again, based on policy variables that the state legislature could change.

In May, Rich States, Poor States authors Arthur Laffer and Stephen Moore published an article in The Wall Street Journal in which they identified the two policies that “have consistently stood out as the most important in predicting where jobs will be created and incomes will rise. First, states with no income tax generally outperform high income tax states. Second, states that have right-to-work laws grow faster than states with forced unionism.”

How does Oregon rate on those two most important variables? The authors spent almost a full page of this year’s report discussing how damaging Oregon’s 2010 retroactive income tax increases on wealthy individuals and corporations are to the state’s economic outlook. They mentioned Cascade’s analysis of those two measures, 66 and 67, which were approved by voters in January 2010. They noted that “Oregon is tied with Hawaii now with the highest state income tax rate in the nation,” a fact likely to deter entrepreneurs and other high-income individuals from coming to Oregon and to cause some who are here already to leave. Initial results confirm what we feared: These tax measures generated far less revenue than voters were led to believe, and the state had some 8,000 fewer high-income tax-filers in the first year of these measures than the state predicted.

Oregon also ranks poorly on the right-to-work variable. Over time, economic growth in states with strong union protections has significantly lagged growth in states with more worker freedom. Twenty-two states have right-to-work laws which prohibit agreements between labor unions and employers that make membership or payment of union dues or fees a condition of employment, either before or after hiring. Twenty-eight states, including Oregon, require that all employees of unionized employers must become union members or pay dues to the union within a specified period of time or lose their jobs.

So, Oregon fails both important economic outlook tests: We have the highest income tax rate in the nation, and we require workers in unionized companies and government entities to join those unions and/or pay union dues. We also fare badly on other variables, including the fact that we continue to tax estates, and we have the second highest minimum wage in the country.

Again, the 15 policy variables taken into account to determine our economic outlook are all within state lawmakers’ control. Of course, there are national and international policies and conditions that are outside our control. But that is the case for every state. Oregon lawmakers must take responsibility for the factors they can control. Unfortunately, they haven’t, and our economic outlook continues to decline relative to other states.

Talking about creating jobs is great, but actually reducing taxes and protecting workers against forced unionization would go a lot farther in turning Oregon’s economic outlook around. Slipping from 35^th to 43^rd since 2008 is bad enough; let’s encourage Oregon’s legislators to enact policies that will start turning that economic outlook ranking back up.