The progressives are still tied up in their underwear trying to bash the deal between the POTUS and the GOP delaying tax increases for households making over $250,000 a year. Some are even saying that the move to delay the tax increases was somehow immoral. Obviously that is typical progressive idiocy. In an editorial today the WSJ explained not only is it moral, but they show how a recent tax increase for people over $250,000 executed in Oregon led to lower tax revenues.
Last year the Oregon raised the tax rate to 10.8% on joint-filer income of between $250,000 and $500,000, and to 11% on income above $500,000.
Instead of $180 million collected last year from the new tax, the state received $130 million. The Eugene Register-Guard newspaper reports that after the tax was raised “income tax and other revenue collections began plunging so steeply that any gains from the two measures seemed trivial.”
One reason revenues are so low is that about one-quarter of the rich tax filers seem to have gone missing. The state expected 38,000 Oregonians to pay the higher tax, but only 28,000 did. Funny how that always happens. These numbers are in line with a Cascade Policy Institute study, based on interstate migration patterns, predicting that the tax surcharge would lead to 80,000 fewer wealthy tax filers in Oregon over the next decade.
The real story is that it could have been worse, and will be worse when this years tax revenues are counted.
The tax wasn’t enacted into law until June 2009 but was retroactively applied to January 1, 2009. So for the first half of the year wealthy Oregon residents weren’t able to take steps to avoid the tax ambush because they didn’t see it coming. This suggests that a bigger revenue loss from tax mitigation strategies will show up on tax return data in 2010 and 2011. The Revenue Office has already downwardly revised tax collection projections for the first three years by one-third.
The biggest loss of revenues came from capital gains receipts. The new 11% top tax rate applies to stock and asset sales, which means that Oregonians now pay virtually the highest capital gains tax in North America. Instead of $3.5 billion of capital gains in 2009, there was only $2 billion to tax—43% less. 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.
Of course the states liberals are blaming the economy and high unemployment, but the WSJ points out that the same thing happened when Maryland instituted a millionaires tax in 2009, roughly one-third of the state’s millionaire households vanished from the tax rolls after rates went up. Maybe they can also look at Texas, who as the Census reported, grew more than any other state in the past ten years. Texas leads the nation in job creation and has a top income and capital gains tax rate 11 percentage points lower than Oregon’s. That should tell you something.
When the tax rates were lowered to the present rates during the Bush Administration tax receipts went up:
But the real jolt for tax-cutting opponents was that the 03 Bush tax cuts also generated a massive increase in federal tax receipts. From 2004 to 2007, federal tax revenues increased by $785 billion, the largest four-year increase in American history. According to the Treasury Department, individual and corporate income tax receipts were up 40 percent in the three years following the Bush tax cuts. And (bonus) the rich paid an even higher percentage of the total tax burden than they had at any time in at least the previous 40 years. This was news to the New York Times, whose astonished editorial board could only describe the gains as a “surprise windfall.”
The tax compromise, and its maintenance of present tax rates will NOT increase revenue, that was done between 2004 and 2007, but history (and Oregon) proves that if taxes were increased especially in this period of economic instability, tax revenue will not go up but will decrease. That would be very immoral.