Pop quiz: If you compare Oregon’s economic growth from 2001 to 2010 to that of the nine states in the country that levy no personal income tax, how well did the Beaver State perform?
Answer: Oregon topped them all.
The answer comes by way of the Institute on Taxation and Economic Policy’s (ITEP) new report “High Rate” Income Tax States Are Outperforming No-Tax States: Don’t Be Fooled by Junk Economics (PDF). Their analysis examines real per capita Gross State Product, meaning that it takes into account inflation and population growth.
The answer might not have come as a surprise to those who read OCPP’s December publication If Economic Growth Assured Well-Being, Oregonians Would be Thriving. In it we pointed out, among other things, that Oregon had the second highest growth in real per capita Gross State Product from 2001 to 2010 among all 50 states and the District of Columbia.
ITEP compared not just Oregon’s economic performance but also other “high rate” income tax states with states that lack an income tax. The bottom line when looking at three measures of economic performance:
What does this mean for Oregon? It means that lawmakers should reject bad ideas, such as the (bipartisan) proposal to create a work penalty by giving preferential treatment to unearned income from capital gains (PDF). And they should extend the temporary top tax brackets voters approved in Measure 66 while cutting back tax expenditures that disproportionately favor the wealthy (PDF).
States with high income taxes have as good or better economic performance as states without income taxes. It’s time for our elected leaders to act on the facts.