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Short Description: Dec 22, 2010 ... The Wall Street Journal recently published an editorial suggesting that a 2 percentage point increase in Oregon's top income tax rate caused ...
Content Inside: Institute on Taxation and Economic Policy
1616 P Street, NW · Washington, DC 20036
December 22, 2010 Contact: Carl Davis·(202) 299-1066 x29
Dear Wall Street Journal: No Need to File a Missing Persons Report
Oregon's High-Income Taxpayers Have Not "Vanished"
The Wall Street Journal recently published an editorial suggesting that a 2 percentage point increase in Oregon's top income tax rate caused up to 10,000 wealthy Oregonians to flee the state.1 In support of its claim, the Journal points to new data showing that 10,000 fewer Oregonians were affected by this tax increase than the state's Legislative Revenue Office (LRO) had originally anticipated. But there is a much simpler explanation for this discrepancy, and it's made clear both in the LRO data and in its analysis of that data. These 10,000 taxpayers earned less than the LRO expected in 2009 as a result of the economic recession, and therefore fell below the income threshold at which the new brackets took effect. The Oregon tax increase in question was adopted by the legislature in 2009 and approved by voters in early 2010 via Measure 66. It took effect at the beginning of tax year 2009. Measure 66 raised the state's top income tax rate from 9% to 11% for married couples with taxable income over $500,000 per year (and for single filers with over $250,000). It also created a new 10.8% bracket on taxable income between $250,000 and $500,000 for married couples (and between $125,000 and $250,000 for single filers). In 2012, these two brackets will merge to create a 9.9% tax bracket on taxable income over $250,000 ($125,000 for singles). Unfortunately, the economy was weaker than the LRO realized at the time this plan was enacted, causing them to overestimate its Oregon Taxpayers Moved ... to a Lower Tax Bracket potential revenue Income Range Number of 2009 Tax Returns yield by $50 Original Projection Prelim Tax Return million. As the LRO (May 2009) Data (Dec 2010) Change explained to the Over $500,000 8,753 5,578 (3,175) Oregon House $200,000 to $500,000 36,507 29,665 (6,842) Revenue $100,000 to $200,000 170,716 146,840 (23,876) Committee, this Under $100,000 1,325,600 1,386,057 60,457 was driven in part TOTAL 1,541,576 1,568,140 26,564 by overly optimistic estimates of how Addendum: Over $100,000 215,976 182,083 (33,893) many Oregonians Source: Oregon Legislative Revenue Office would earn enough
"Ducking Higher Taxes," The Wall Street Journal, December 21, 2010. http://online.wsj.com/article/SB10001424052748704034804576026233823935442.html