Don't Forget the Minimum Wage

The entire Pacific coast is vying to become the next rust belt.  Only the nice climate and beautiful scenery will keep anyone there.

The Labor Department reported yesterday that Oregon's unemployment rate soared to 12.4% in May, the nation's second highest after Michigan's 14.1%. What to do? If you're the geniuses in the state legislature in Salem, you naturally raise taxes.

Last week the legislature approved a $2 billion tax hike on personal income and small businesses that haven't already left the state. The highest tax rate on income above $500,000 would climb to 11% -- up from an already high 9%. Oregon will soon boast the second highest income tax rate in the nation, moving ahead of California (10.55%), and only slightly behind New York City (12.6%). Corporations will pay a 7.9% tax on gross receipts, up from 6.6%.

To be fair, Oregon does not really have a sales tax, so it is hard to compare apples and oranges on taxes.  But missing from the article is another factor in their unemployment, and the reason our company ultimately had to leave the state:  Oregon has the second highest minimum wage in the country (just behind Washington State and just ahead of California), and it is getting higher every year as it is automatically indexed to something or other that seems to be rising faster than inflation.

  • GU

    "Only the nice climate and beautiful scenery will keep anyone there."

    I think we can pretty safely say "Only the nice climate and beautiful scenery keep anyone there now."

    I currently reside in California. When reflecting on this state, my most common thought is "Paradise Lost."

  • Methinks

    "as it is automatically indexed to something or other that seems to be rising faster than inflation."

    Politicians' self importance?

  • DaveK

    The Oregon Legislature may have approved the tax increase, but it's highly probable that this will have to go to a referendum vote. Even small tax increases have had serious trouble passing that hurdle, so the proponents of this one have their work cut out for them. I certainly know how I'll vote on it!

  • ElamBend

    Aha! Last week I was looking at the unemployment figures and I couldn't figure out why they were so high. Even taking into account a decrease in natural resource extraction, it didn't seem enough of an explanation.
    This however, makes perfect sense.

  • mishu

    Good one Methinks. Now we know where the IPCC got that huge positive feedback multiplier.

  • Allen

    Seems a bit like many of the Oregonians, especially those around Portland, have it in their heads that they need to scare away business because they're growing too much.

    As for the income vs sales tax, I agree all taxes need to be taken into consideration when making comparisons. But for the sake of marketing, sales tax or not, having the 2nd highest income ax in the country isn't going to much good on the PR front.

  • Rick

    Hello everyone - long time reader here, Oregon resident, and first time commenting.

    I live in Washington County, not far from Portland. There are actually some businesses left out here (many have closed though) and there are some nice wine estates in the Willamette Valley. There are some beautiful places to go visit in Oregon, especially if you like the outdoors. So trust me when I say there are still many Oregonians who would be happy to see you visit!

    That said, if it wasn't for the liberal democrats in Salem and the "progressive" demos in Portland then starting a business in Washington County would be easier because it's a lot more business and property tax friendly than Multnomah County. And yes, there is no sales tax in Oregon which saves me thousands annually.

    The problem with Oregon is that Portland voters dominate the popular vote and most of them are intellectually lazy liberal democrats, many of them converting to it because it's trendy to be green or they disliked Bush. A lot of northern California transplants too. Really though, the place is like a big version of a small college town... filled with spoiled drunks and corrupt city officials who like to party and eat at trendy restaurants every night (restaurant bubble here), but they feel guilty if they don't recycle the beer bottle.

    A lot of people don't like "growth" in places like Washington County. This despite many Portlanders working there. But they almost never go there socially... either because they have this pedantic dislike of the "suburbs" or because they don't have cars. Some in Portland, and Oregon in general, can be very provincial and therefore many protectionist schemes are afoot in Salem. Public employee unions are also very powerful.

    Combine all of that with a big spending government and what you get is a clean air version of California or Michigan. As a long time California resident who moved to Oregon and see what's happening to places like Phoenix and Vegas because of the housing bubble, I find myself a west coaster stuck between the proverbial rock and a hard place.

    Sorry if the post seems too long!

  • Bob Smith

    Corporations will pay a 7.9% tax on gross receipts

    This had better be a typo. 7.9% makes zero sense as a tax on gross receipts. As a tax on net income, it's darn high, but plausible.

  • Rick

    Bob,

    The article I read about this at the Cascade Policy Institute website said it was a "corporate income tax". The "...top corporate tax rate would be increased to 7.9% for 2009 and 2010... with it going 'slightly lower' in later years."