States are facing significant budget deficits for this and the next fiscal year. Oregon is no exception, with a $733 million budget gap this year. There are good ways to close a gap and bad ways. In a referendum last week Oregon chose a decidedly wrong way.
According to the secretary of state’s office, Ballot Measure 66 was approved by voters 53 percent to 46 percent. The measure would increase income taxes for high-income residents earning $125,000 as individuals and $250,000 as a couple.
Ballot Measure 67 was also approved by voters 53 percent to 46 percent. The measure increases taxes for corporations and some businesses from the minimum of $10 a year.
The worst of these two is the corporations tax. If you want businesses to stay in your jurisdiction, then increasing their taxes is not the way to go. The WSJ reports:
By targeting out-of-state corporations in campaigning for the new taxes, proponents of the measures persuaded many voters that much of the new funding needed to close the state’s budget gap would be borne by outsiders. Opponents disagreed with that analysis, arguing that only 3% of the targeted revenue would come from corporations with headquarters outside Oregon.
Targeting out-of-state companies, even if a small amount, just encourages them to invest their resources elsewhere. This is likely to mean less revenue rather than more as corporations either leave Oregon and/or stop coming.
The personal income tax hike also has the potential to drive some residents out of the state—as Maryland has recently faced after implementing a “millionaire” tax. After their tax went into effect one-third of the states residents impacted by the tax moved away.