New Study Finds Raising Income Taxes on Millionaires Didn’t Hurt Oregon Economy

A new study of eight states—including Oregon—that raised taxes on its highest earners found few negative impacts from those tax hikes.

Historically, critics of such taxes have suggested that taxing high-income earners creates a disincentive and can cause significant relocation to lower tax states.

But the study, published by the Washington, D.C.-based Center on Budget and Policy Priorities, found that wasn't the case after recent tax increases at the upper end of the income scale.

"Seven of the eight states had per capita income growth as least as good as their neighbors after enacting a millionaires' tax," the report found. "California, Minnesota, and New York exceeded their neighbors' average by at least 5 percentage points, while the District of Columbia, Maryland, New Jersey, and Oregon met or slightly surpassed it." (Connecticut was the one state among the eight that raised taxes on the highest earners and saw its economy suffer.)

Here are two charts included in the report that show recent history:

First, on gross domestic product.

Second, on personal income:

As the study notes, the concentration of wealth in the U.S. continues.

"The top 1 percent of households accounted for 21.5 percent of income in 2017, compared to only 9 percent in 1970," the study says.

Oregon last raised top rates on high earner in 2009, temporarily raising the rate on households earning more than $500,000 to 11 percent before dropping that rate to 9.9 percent in 2012. Although the Legislature is considering large new tax increases currently, most of the discussion centers around new taxes on businesses, rather than individuals.

That's good news for Oregon's wealthiest citizens, such as Nike co-founder Phil Knight, Columbia Sportswear CEO Tim Boyle and Harsch Investment Properties CEO Jordan Schnitzer.

But as the study points out, there's little evidence to suggest that high earners move because of tax increases.

"A landmark analysis in 2016 by researchers from Stanford University and the U.S. Treasury Department reviewed tax returns for all million-dollar earners nationwide over 13 years and found that millionaires rarely move from one state to another, and when they do, it's usually not because of taxes," the study says. "The primary reasons cited for low migration are family obligations, such as the desire to remain close to grandchildren, and business needs, such as a company's founder needing to stay close to existing professional networks and customers."