The mythical Laffer Curve

. . . is found to be not-so-mythical in Oregon. That state imposed a confiscatory tax on high-income ($200k) taxpayers, and saw it fall flat on its face:

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 Laffer Curve is always stronger at the state and local level. People don’t want to leave America, so at the national level their only choice is between work and leisure. Not so at the state and local level; it’s easy to move to another state. And on that point, Michael Barone’s latest is relevant:

For those of us who are demographic buffs, Christmas came four days early when Census Bureau director Robert Groves announced on Tuesday the first results of the 2010 census. . .

Growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England.

Altogether, 35 percent of the nation’s total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s