Scott Bruun: Death and Taxes in Oregon

Wednesday, April 15, 2015

Scott Bruun, GoLocalPDX MINDSETTER™

Today is tax day. The infamous April 15th. For many of us, today does not earn a smiley-face on the calendar. Instead, today ranks right up there with that first Monday following “Spring Forward,” the day we each have to get by on an hour less sleep.

As Yoda might have said, “tax day a fan, I am not.” And yes, complaining about tax day – or taxes in general – is like pounding sand. After all, along with death, taxes make up one of the only inevitable things in life. But at least death only comes once. April 15th, on the other hand, tends to come every year.

For solace, I’m reminded of an old political cartoon. The cartoon had three panels. The first showed a couple embracing and read “Valentine’s Day, the day everyone’s a lover.” The second had an African-American man wearing a leprechaun hat and read “St. Patrick’s Day, the day everyone’s Irish.” The last panel showed a middle-aged guy, looking weary, and read “April 15th, the day everyone’s a Republican.”

Truth be told, tax day has gotten much easier. Automatic-withholdings from our pay, coupled with easy-to-use tax preparation products like Turbo Tax have, may serve to anesthetize many of us from feeling the full burden of taxation. This is unfortunate. Unfortunate because the ease of paying taxes may handicap awareness of just how bad our tax system truly is.

Modern tax conveniences are like lipstick on a pig. And here in Oregon, that lipstick covers one ugly pig.

Arguably, Oregon has the worst tax structure in the nation. Oregon taxes work, savings and investments at some of the highest rates in the country. At the same time, defying nature (or at least common sense), Oregon’s tax system is simultaneously progressive and regressive.

Meaning, Oregon’s system is progressive in that tax rates for investments and incomes for the state’s top-earners are among the nation’s highest. At the same time, tax rates for lower-income wage earners are not that much different. Consider, while Oregon’s top earners pay an income tax rate of 9.9 percent, the vast majority of Oregonians pay 9.0 percent. This 9.0 percent rate covers everyone earning below $125,000, all the way down to those making only $8,251 a year.

Said differently, the State of Oregon taxes low-income households, households that fall within federal poverty-level guidelines, 9% per year. Sure, Oregon offers some exemptions. Nevertheless, the burden Oregon places on its lowest-income workers is embarrassingly regressive. Regressive to the point where it would be criminal if it weren’t, you know, Oregon law.

The American Legislative Exchange Council (ALEC) publishes an annual report called “Rich States, Poor states.” The purpose of ALEC’s report is to compare and rank the economic outlook for all fifty states based on series of tax and regulatory metrics. In its 2015 edition, Oregon ranked 45th out of 50 states.

Compared to all other states, Oregon has the fourth highest rate of personal income tax and the third highest rate of tax on businesses. But if you’re feeling particularly competitive, don’t worry. We are number one in inheritance taxes. In other words, while Oregon may be a pretty bad place to work or start a business, it is literally the worst place in the nation to die.

Economic history demonstrates time and again that we get less of whatever we tax. That’s the science. The art is in finding the level or forms of taxation that most minimize the negative impacts of taxes, while also assuring sufficient resources to fund the legitimate functions of government.

Here, Oregon has not done well. We have some of the highest tax rates on work and investment, and therefore get less of both. Certainly Oregon’s tepid history in job creation and wage growth, not to mention our lack of Fortune 500 representation and 45th ranking in economic outlook, suggest that our tax system is broken.

A drive through some of the nicer neighborhoods in Vancouver will anecdotally verify Oregon’s problems. There, you are likely to see more Oregon Duck flags hanging from houses than you are to see Husky or Cougar flags. Oregon taxes income and investment more and gets less. Washington taxes less and gets more.

Yet on this tax day, there may be some good news after all. Given that our state ranks first in inheritance tax, and assuming we get less of whatever we do tax, could it then mean fewer deaths in Oregon? That would be good news, especially when we compare ourselves to Washington. Sad to say, but I’ve heard that their coroner in Clark County has never been busier.

Once again, Oregon stands alone. We are unique. Unlike every other state where death is part of the deal, the only thing inevitable in Oregon is taxes.

Lucky us.

Scott Bruun is a fifth-generation Oregonian and recovering politician. He lives with his family in the 'burbs', yet dutifully commutes to Portland every day where he earns his living in public affairs with Hubbell Communications.