Taxpayer Ambush in Oregon

Taxpayer Ambush in Oregon
The public unions win in Portland.

Originally Posted At The Wall Street Journal
January 28, 2010

It's not often that citizens vote for higher taxes, but 54% of Oregonians have done precisely that. In a rolling month-long referendum by mail that ended Tuesday, they approved some $700 million in tax hikes on business and wealthy residents.

The highest income tax rate in the state moves to 11% from 9%, which will give Oregon close to the highest rate in the nation. (New York City residents pay 12.6%.) This ballot outcome runs contrary to the current public mood about spending and taxes, so it's worth exploring how it happened.

First, a deluge of money. Local and national public employee unions bankrolled the "yes" campaign, with a $6.5 million blitz in TV and radio ads. That was $2 million more than the business community and taxpayer advocates raised. The cash helped the tax increase roll up a 71% margin in the liberal precincts in and around Portland, even as it lost in most of the rest of the state.

The union message was also as clever as it was disingenuous: All of these taxes will be paid by someone else, such as Wall Street bankers, out-of-state credit card companies, CEOs. Only the richest 2.5% will pay a little more in taxes, the unions also claimed.

The reality is that these taxes will be absorbed by employers who sign worker paychecks—from Nike Inc. to the corner grocer. Two-thirds of those hit with the new 11% tax rate are small and medium-sized business owners. Phil Knight of Nike dubbed the tax initiatives Oregon's "assisted suicide" for business. The real victims of these taxes won't be wealthy business owners, who can always move away or shelter income, but less mobile Oregonians who will find it harder to get or keep a job.

One national consequence of the Oregon vote is that we are likely to see unions finance more of these tax-the-rich campaigns in other states with big deficits. Public employee unions have a lucrative racket: They essentially leverage the tax dollars they receive in dues from the salaries and benefits of their members to lobby for more tax dollars to secure even fatter pensions and pay.

The teachers unions exulted yesterday that Oregonians voted to "protect our schools and vital public services." What was really protected was the $83,402 a year average in pay and benefits to Oregon state workers, 30% higher than what private workers receive. This is bankrupting states like Oregon, California, New York and New Jersey. On the other hand, Oregon's folly will be some other state's gain.

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