THE BATTLE OF OREGON

January 18, 2010

The nation owes some gratitude to Oregon for testing whether it is possible for a state to tax its way from deep recession to prosperity, says the U.S. Chamber of Commerce. 

Oregon's unemployment rate is 11.1 percent, among the nation's highest.  Oregonians are now voting by mail whether to endorse a pair of tax increases passed by the legislature last year: one to raise the state's top personal income tax, to 11 percent from 9 percent, and another to raise the business income tax, to 7.9 percent from 6.6 percent. 

The public employee unions are the primary drivers behind the Oregon tax hike campaign.  In recent weeks, national powerhouses American Federation of State, County, and Municipal Employees (AFSCME) and the Service Employees International Union (SEIU) have poured close to $1 million into the state campaign to secure passage, says the Chamber:

  • Oregon's public employees have one of the sweetest deals in America; their average pay is about one-third higher than that of private Oregon workers, and Oregon public employees don't have to pay anything toward their health care benefits.
  • In the last budget, the Democratic controlled state legislature doled out a $259 million pay raise to the government work force, even as the state was facing a near $1 billion deficit.
  • In the last three years, the state has added 25,000 new public employees while losing 40,000 private sector jobs.

The 11 percent income tax rate will make Oregon's income tax about twice as high as the national average.   If Oregon enacts these tax hikes to fund its rising public payroll after a severe recession and amid a slow recovery, we'll revisit the state in the future to see how many private workers are still there to pay the taxes, says the Chamber. 

Source:  Brad Peck, "The Battle of Oregon," U.S. Chamber of Commerce, January 15, 2010; based upon: Editorial, "Oregon at the Tax Crossroad; A ballot showdown over higher rates," Wall Street Journal, January 15, 2010.

 

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