Thursday, January 28, 2010

Oregon’s California State of Mind

Michelle Malkin had a post yesterday about the Oregon vote to raise taxes. As much as I’d like to use her title, it won’t fit with the limits of our PG 13 blog. Let’s just say she wasn’t impressed with their decision and its long-term effect on Oregon’s prosperity:

Big Labor poured millions of rank-and-file members’ dues into a tax hike campaign in Oregon. It worked. The “wealthy” and the “evil corporations” will now be forced to bail out government schools and social services. Look for affected business owners to start Going Galt en masse.

Blogger PatriotUSA has his own essay on the subject. He's not a happy camper. The poor guy lives in Oregon and now has to co-exist with this job-killing, union-saving, short-sighted decision by the Oregon Blues, i.e., the liberals who live in the urban areas and get their salaries paid by those taxes they just dumped on their fellow citizens:

The use of ‘scare tactics’ worked wonders here in my home state as once again, Oregonians proved how stupid they really are. The shame of this event is that these new taxes are no different than Oregon’s tax on tobacco to fund health care for children. Who are the majority of smokers? Not the wealthy or financially secure. Nothing more than a well disguised sales tax.

Oregon 66 and 67

If one looks at a map of Oregon and how people voted, one notes that the large population areas carried these two measures to victory. Only 11 counties out of 36 passed 66 and 67. All on the Westside of the state where the liberal majority lives.

[Patriot says: The green areas are the counties that passed these measures, the rest of the state did not.]

Facebook is building a huge data center here just 20 miles away from I live. This is a positive in many ways, 35 full time, well paying jobs but at the cost of 45 million dollars in tax breaks and that is just the tip of the iceberg. The people who will be qualified for these high tech computer jobs will almost come from out of this area. Central Oregon is an intellectual wasteland for the most part. Now with 66 and 67 passing, new businesses will think twice if at all, if they even consider Oregon to start a business or relocating one here. Many businesses will leave now that these have passed.

Immediate Impact

I know of five small business owners who were waiting to see how the vote went. Now all five are leaving Oregon adding about 80 people to the unemployment rolls. They notified their employees today that their jobs are gone and the companies are all closing to relocate out of Oregon.

Of these five companies, three had been here in Oregon since 1971 and all are family owned, that paid their employees very well and provided excellent benefits. The owners are offering relocation assistance to those who may be interested

Patriot is a small government, low-tax kind of guy. Oregon, however, has been flooded in the last few years by California refugees fleeing a failed state. Unfortunately, many of them bring their California Big Tax ideas with them and now, as Michelle Malkin said, “Oregon is ummm…how do I put it?….Oregon is Pregnant with Possibilities, all of them bad.”

Patriot says:

The same people who were dumb enough to elect the Obama into White House proved they have not learned a damn thing. All five companies asked me to not mention the company names to protect their employees and the companies during this most stressful time. I have honored their request. These are people I know and do some business with. It is just a shame. If I was in a position to leave Oregon, I most definitely would.

I wrote Patriot and asked for a few details. He sent me the map you see above, along with further information:
- - - - - - - - -
The liberals in Salem [Oregon’s capitol - D] haven't had a balanced state budget in years. Any crisis comes up, heap on more taxes. So the rocket scientists in Salem (a Democrat governor and legislature and so is the house, they have complete control) passed the bills on 66 and 67 into law without the peoples’ approval.

Oregon has something called “the initiative process”. If enough valid signatures from registered voters are collected, then these measures (in this case, numbers 66 and 67) are put into a referendum, which will then have to be put to a vote by the people of Oregon.

That is what happened on January 26th. The people of Oregon voted to keep these two measures and now make them permanent laws.

Here is a juicy bit for you; the taxes do not start this year, 2010. They are RETROACTIVE back to January, 2009. Nice, huh? A double redacted punch in the gut from the Liberal trolls in Salem.

Those in favor of passing these two referenda got most of the money for their campaign - $6.9ml - from the unions. This means teachers, education [administrative bureaucrats - D], and state employees’ unions. What does that tell you? They constantly pushed ads in all media saying how schools would have to close, teachers laid off, and social services cut if these referenda, 66 and 67, didn’t pass. They used scare tactics for months.

They also made it sound as though only the so-called wealthy Oregonians would pay more in personal income taxes. If you make over $125,000 and you're single or over $250,000 for married couples, they bite you for more money.[Evil rich people - D]

Businesses will be taxed on their gross total income. Even if a company posts a loss for that year, they still owe taxes on what they took in. The voters refused to see what will happen when corporations or companies have to pay more to do business. It’s the consumers who will pay more as companies raise prices to make up for the losses incurred by these new, higher corporate taxes.

You asked about the businesses I personally knew who are relocating as a result of this voter insanity. Three are small manufacturing firms, one is a car repair garage, and the last is a construction company. I promised not give any details about them so I won’t. This situation is hard enough for these people to live through as it is. Many of these people are my friends and losing them will be Oregon’s loss as well as my own.

The Oregonian has the full story. It says, in part:

…Campaign ads by supporters highlighted banks and credit card companies and showed images of well-dressed people stepping off private jets. They also hammered on the $10 minimum tax that most corporations have paid since its inception in 1931.

Those messages helped counter warnings by opponents that the taxes would lead to job losses, worsening the state’s 11 percent unemployment rate, and prompt wealthy residents to move elsewhere.

It sounds as though Oregon is ramping up to become a California mini-me. I’ll bet a lot of ‘yes’ voters were California transplants. You can take the liberal out of California but unfortunately he brings his California state of mind with him.

By the way, Ms. Malkin made a prediction and I'd like to explain it for our non-American readers:

…Look for affected business owners to start Going Galt en masse.

So what is “Going Galt” you ask (you ask if you haven’t read Ayn Rand’s “objectivist’ novels, that is). Here is a good explanation, reworked for the 21st century from Ayn Rand’s ideas:

There are reports from across the country from young and old, of middle class wage earners cutting back hours or passing on career advancement to avoid paying higher taxes. They have no incentive to achieve greater earnings, only to watch a greater portion of their pie be consumed by others.

Many individuals, resentful of state tax and spend policies, along with economic difficulties, are turning to bartering or second hand purchasing to avoid paying cumbersome sales taxes, vehicle excise taxes, permits and licensing on home improvement projects and state and federal income taxes. The net result, over the course of the next few years, will be even less revenue than the already downwardly revised projections already being cited by the Obama administration and used as a reason to further increase taxes.

Unfortunately, it seems as if the only recourse the American public has to reclaim its country and foil the growth of government in scale and scope, is to “Go Galt” in its own way. By refusing to allow any more tax revenue than is absolutely possible to be taken and spent on government growth and dependence- creating government programs, the American individual, regardless of career status or creative ability now has the power to “Go Galt” in their own way.

For many Americans, long before the advent of Rand’s “objectivist philosophy” getting around the IRS (known fondly in some circles as the KGB) is a patriotic duty. The Jacksonian thread in our culture doesn’t trust “gummint” to do anything wisely. In their view, the more money you can hide from the “revenoors”, i.e., the villains who worked for the Internal Revenue Service, the more patriotic you were.

It was a man’s job to evade those tax collectors who roamed the hills and hollers (hollows) looking for moonshine stills. In the eyes of their descendants, it is still a honorable duty to hide as much of your income as possible from the prying eyes of the IRS. As the appetite of government grows, so does the underground economy. There is probably even a correlation between the level of unemployment and the increase in the amount of work done “off the books”.

It was true in Rome and it’s true today. Kill the middle class with taxes and you kill the larger economy. This appears to be a very difficult lesson to learn. The grasping unions of bureaucrats who will not make the necessary sacrifices now will be forced to make more draconian choices later.

Meanwhile the Galts among us will continue to flout the rules of the tax man. For many, it’s what any red-blooded American man (and woman) must do. The blues, i.e., the liberals, will continue to vote the rich into bankruptcy. In their eyes, these referenda were about “sticking it to the wealthy”. Unfortunately in our gummint schools, they don’t teach the basics of economic theory so we raise generation after generation of innumerate citizens who wouldn’t know compound interest if it bit them in the butt.

I don't know how the underground economy works in Europe, but in America it thrives and it's not an underclass phenomenon.

11 comments:

The Poster Formerly Known as Gordon said...

As a resident of Oregon, I have to disagree with your correspondent's analysis of the situation, Dymphna.

First, any analysis of Oregon's tax structure must take into account that the state has no sales tax. Our income tax is therefore higher than most other states. As you may be aware, the sales tax is actually a regressive tax, because it taxes a greater percentage of income from a poorer person than a richer person. It's as if we had an income tax that charged 10% on the income of someone earning $20,000 per year and 5% on the income of someone earning $200,000 per year. The concept can be found in any good economics textbook on the subject.

Second, according to the Tax Foundation, not exactly a liberal group, passage of the corporate tax increase lowers Oregon's "business-friendliness" rating re: taxes from 8th in the nation to 14th. Not exactly down there with California (48th). The state where the businesses would go, Washington is ranked 12th, not much of a difference.

I have some other objections, but I'll leave it to this, for now.

PatriotUSA said...

TPFKAG:
You can disagree all you
want to,Gordon. It does
not change the facts for
those five companies
now leaving the state.
Ask the owners of Wilco
dairy how much retroactive
taxes they now will have
to pay, going back to
wJanuary 2009. A sales
tax would have been
better because evryone
would pay it, including
visitors to Oregon.
If they ever passed a
sales tax here but be
fooled for a second
the liberals would roll
back our personal income
and property taxes
at the same time. Not
in this state.

We do not know how far
down the business
friendliest rating Oregon
will fall yet. Businesses
have not goten their tax
bills yet. You can et it
will much farther down that
what Gordon has stated. The
bottom line is this,
Oregon's answer to every
fiscal crisis is to raise
taxes, over and over. Did
you notice the liberals
come right out and say this
does not get out of the woods
for the NEXT budget cycle?
That means even after
passing 66&67, it is still
not enough money for the
state to run as it is today.
They never mewntioned that
before the election day.
Salem must learn to
make drastic cuts on state
and public employees benefits(state pay for entire
family 100%) plus the Pers retiremnet system. Oh yeah,
now the governor wants to
keep part of the "kicker
fund".The kicker is a fund
that is held in reserves and
when the kicker funds hits
a certain percentage over
what the state needs and
does not spend, that money
is supposed to refunded back
to the people of Oregon. So
tell me and the people of
Oregon, Gordon, when does
this stealing of our money
stop in Oregon. When and how?

Dymphna said...

The end result of taxing businesses is the loss of those businesses to other states which understand basic economics.

Taxation is regressive. Taxation on producers is even more regressive. Taxation in order to fund benefit programs for bureaucrats (who produce nothing) is the worst tax of all.

When a state's unemployment level is double-digit and rising, applying another tax is like using leeches to improve someone's health. Unemployment is now guaranteed to rise.

On the national level, there is going to be a big push for tax reform in the next two election cycles. It's been sidelined by the wild spending of the current Congress and president but look for the issues of taxes to return to the table. In fact, nothing could make small to medium businesses increase faster than a rollback on taxes.

Unfortunately, Oregon appears to have a lot of union muscle ready to skew the health of its economy. That's a shame.

The Poster Formerly Known as Gordon said...

Dymphna and PatriotUSA: I don't deny that increasing taxes decreases business prosperity. But there are certain services government provides that also help businesses, like educating our children, providing university graduates with skills for the job market, providing roads, providing a functioning justice system, that will certainly hurt a business climate if not provided just as much as higher taxes.

My last thought - this is an example of why our federal system makes so much sense - it lets each state make its own decisions on a lot of these issues. So Oregon can try to get out of its fix by raising taxes, while Arizona tries to get out of its fix by selling its public buildings, and other states will try their own ways, and then we can all argue about which worked best and which didn't work at all.

Perhaps we should try a similar approach with our current health care dilemma.

xlbrl said...

It is impossible to get a correct answer when we are forced to ask the wrong question.
Oregon spends at least 12k per public school student. Since the system has failed to deliver, it is the system that must be fired, not the taxpayer who must be fried.
In government, it is invariably the least effecient organs that get the largest increases in funding. The money is there in great abundance for schooling, but the void that is in anything "public" is infinite.

ThinkOregon said...

President Obama's State of the Union Address and Virginia Governor Bob McDonnell response simply came two weeks too late. Had they been delivered sooner, Oregonians would have a lesson in Econ 101 from both political parties. It may open some eyes.

ThinkOregon

Dymphna said...

@Think Oregon:

good site you have. This is enough to make anyone weep:

Fred Dickson, senior vice president and chief market strategist for Northwest financial firm D.A. Davidson & Co. told Greg Stiles, "Passage of ballot measures 66 and 67 this week already have produced negative effects on Southern Oregon's economy, he said. "I don't think Oregon's voting base realized the implications of (Measure) 67," he said.

As an example, Roseburg was one of three or four cities an out-of-state company was considering for relocation, he said. But it had to withdraw after the measures passed. Oregon is not a tax-friendly state," he said.

This makes the earlier story about Chicago Mayor Daley poaching Oregon companies even more interesting. Oregon now has a double negative in play because of it's newly adopted tax measures: we can't attract 'em, and they're getting lured away. Peachy. Just peachy.


That tax money won't produce any wealth for Oregon. It will be poorer and have a higher unemployment rate. The ignoraqnce of basic economics is simply astounding.

Thank heavens for our new governor in Virginia. He's going to privatize things that aren't government's business and which it does poorly --e.g., run liquor stores.

McDonnell is going to be a boon for our economy. Now all we locals have to do is get rid of the Congressional rep who voted for Cap'n Tax and the Porkulus.

Can't wait till November.

pdxr13 said...

I waited until 6PM on the night of the election to cast our pair of "NO" ballots. The polls were hopeful with "too close to call".

The last 10 weeks have been a barrage of "it's for the children" and "Rich Oregonians and Corporations aren't paying their fair share" in all media. It seemed at least 4 to 1 ad's for vs. ad's against.

Anyone who bothered to read the very short description on the ballot would have seen that it's all about "fairness" not about raising revenue in the long term. It's so ....Obama/Wright/Alinsky.

No one mentions where the money is going: PERS and other unreformed State ratholes. Where is it that I can get a GUARANTEED 8% APR on my retirement fund with absolutely no risk? Only in PERS Tier1---until the State defaults due to every money-making citizen moving to WA/ID/NV or dropping down to the underground economy (which is huge already!).

Let's learn from Willamette Valley snowstorms and look at those State employees who are designated "non-essential" to arrive at work until the storm is over and cleared (by melting, not plowing, because we are snow morons). Why do they EVER need to come in?

Oregon has doctor-assisted suicide, and now has group economic suicide. Time to hunker down and go non-profit.

I was born in North Portland 42 years ago and attended racially-bussed Seattle Government Schools in the 1970's and 1980's. Seattle is command-economy crazy much like Portland.

Cheers.

Dymphna said...

pdxr 13 & xlbrl & Think Oregon:

getting the populace to vote 'yes' on economically unproductive referenda requires two things: lots of union money for bullying and inciting envy and an ignorant populace to fall for such balderdash. With the current teacher union in place, they are guaranteed an economically ignorant populace.

The union will try this again in other states. With the sad fate of Oregon being used as a weapon against the socialists, perhaps their opponents will be able to use your case effectively to prevent it happening elsewhere.

Certainly the assisted suicide program in Oregon got people's attention. Ugly.

You guys are on the way to being a soviet state economically and morally. I am truly sorry for your fate. It's time to start printing bumper stickers that read:

"BROKE OR JOBLESS? THANK AN OREGON TEACHER FOR 66 &67.

The teaching "profession" really is to blame for this. Putting their greedy pensions aside for the moment, consider that public education teaches nothing about basic economics, even though it's a major factor in people's lives. Unfortunately, that's partly because if folks were educated in simple economic realities, the teachers' benefits and salaries would not be well ahead of the state average.

From Think Oregon:

Justin Carinci, reporter for the Portland Daily Journal of Commerce nails it: the passage of Oregon Ballot Measures 66 and 67 means either lay-offs, pull-stakes and leave the state or outright shuttering for some Portland area contractors who are barely hanging on in the midst of the worst economic downturn since the Great Depression. Justin covers the limited options available to small business owners struggle to survive:

[...]

“...It seems silly to be hurting the businesses that Oregon actually needs to pull out of this. “Someone has to be making money for a tax base to exist.”

[...]

Blue-collar workers got walloped over the last decade. Manufacturers dropped 60,000 jobs in the decade, a 27 percent decline.

Loggers and sawmill workers took hits from imported wood products and steep drops in demand from home builders. Technological advances made manufacturing more automated and outsourcing pushed labor-intensive jobs to Mexico, India and China.

[...]

The high-tech employers who were supposed to be the bedrock of the state's new economy have actually slashed payrolls by nearly 19 percent. The three sectors most connected to high-tech employed 52,700 in December.

"That should be a concern. If you're not seeing that job growth, what's left?" Duy asked.


What's "left" is leftist economics: the destruction of the middle class, stagnation, a decline in the numbers of young people who look for a future elsehwhere, and a growth industry in producing poor people. Fortunatley, unlike the USSR, Oregon hasn't built walls to keep the escapees from leaving.

Remember when Oregonians said smugly that outsiders could visit but they shouldn't stay because increasing the population would ruin the beauty of Oregon?

They don't have to worry about that anymore. The only people who can afford to live there will be government employees and trustafarians.

Government: the new growth industry.

Henrik R Clausen said...

Rich Oregonians and Corporations aren't paying their fair share.

This sounds like a phrase right out of "Atlas Shrugged" - from the side of the villians:

It's 'unfair' to be rich, 'money' belongs to people based on their 'need', and if you made any savings of significance, it is 'an obligation to society' to share them.

Not to worry. If this disrespect for private property continues, there will soon be much fewer rich citizens in the state. The smart ones leave, the rest get fleeced.

Savings is crucial to make society prosper. If savings are plundered, poverty will ensue.

It's time to put our money on strike.

Henrik R Clausen said...

If you're not seeing that job growth, what's left?

You'll have a 'Jobless recovery'. Most puzzling to those who do not understand it. For those who do, it is a rather trivial observation to notice that the 'recovery' is fake.

A key problem is that GDP is being used as a yardstick for economic health. It is a bad one, easily manipulated through 'stimulus', and easily inflated by upping the money supply.

See also: Shadow Government Statistics.