There they go again. Seven months ago I posted a comment about the The Unsubstantiated Tale of the Fleeing Maryland Millionaires by The Wall Street Journal and distributed by the Oregon Senate Republicans.
Well, now comes the Oregon House Republicans republishing (through email only; not on legislative website) yet another Wall Street Journal piece claiming that recent data presented by the Legislative Revenue Office (PDF) at a joint meeting of the House and Senate revenue committees (audio link) shows that 10,000 wealthy Oregonians have fled the state.
The claim is just baseless.
First, although Measure 66 applied to 2009 income, voters didn’t approve them until January 2010. For The Wall Street Journal’s claim to be true, 10,000 wealthy Oregonians would have had to master time travel and leave the state retroactively to avoid the 2009 tax.
Second, the total number of tax returns filed in 2009 is greater — not less — than what the state had predicted in May of 2009. That doesn’t suggest out migration.
The explanation for why in 2009 there were actually 10,000 fewer tax returns subject to the new rates than had been projected in mid-2009 is obvious: the Great Recession was worse than the state economists had thought in mid-2009. The recession caused income for all income groups to fall further than they anticipated. Those at the top and subject to the new tax rates — those who derive a greater portion of their income from capital gains — saw a particularly sharp decline. The Legislative Revenue Office noted last week that the May 2009 forecast for total income was off by 7 percent. The primary reason that tax dollars coming from Measure 66 were down 28 percent from the forecast is that the capital gains component of total revenue was down 43 percent from the projected level.
Yes, there were “fewer filers affected” by the measure than originally expected, but that just means that the income decline caused by the Great Recession took some people below the new tax thresholds. It says nothing about migration of taxpayers out of state.
The Wall Street Journal’s suggestion that there’s a causal link between the new tax and Oregon’s revenues being below projections or fewer filers in the relevant income brackets is tantamount to saying that “increased global temperatures during a time when the number of pirates declined shows that the decline of pirates caused global warming.” My ten year-old (who has had his own fantasies with pirates) knows better.
The Wall Street Journal doesn’t know a thing about what’s really been happening in Oregon. They demonstrate this by their claim that “Successful entrepreneurs like Nike owner Phil Knight don't get rich by being fools with their money. They don't sell tens of millions of dollars of assets when capital gains taxes go up.”
Really? Phil Knight did just that. While Measure 66 (and its companion Measure 67) was pending before the voters, Knight sold tens of millions of dollars in stock. Was he a fool as implied by Journal? No. Like an ordinary guy, he made his decision to take in more income irrespective of the tax code. Heck, if the tax code was really important, Knight would have waited until after the January 2010 vote, confident that his campaign contributions would result in a defeat of the measure. Or he’d have waited until after January 1, 2012, when he'll get an automatic cut in the income tax on capital gains as Oregon’s new top two brackets (10.8 percent and 11 percent) merge into one bracket at a lower rate (9.9 percent).
That fewer taxpayers than expected in mid-2009 ended up actually being subject to the new tax rates reflects the fact that the Great Recession pushed many people below the new tax brackets' thresholds. There’s no data to suggest that the taxpayers formerly in the new brackets are not likely still in Oregon and paying taxes. Unless, of course, you think the decline of pirates has caused global warming.