The Oregonian: Wrong on the Facts, Wrong About Tax Cuts

Quiz time!

Question: What was Economist and Oregon State University Professor Patrick Emerson talking about when he wrote the following:

“This is exceptionally poor [use of statistics]. It is intellectually dishonest or lazy or both and does not befit a board that wishes to be taken seriously.”

Answer: The Oregonian’s weekend editorial, doubling down on their argument that the state should cut taxes for the wealthy. The editorial board is pushing for a cut to the capital gains tax rate, which would mean that investors would pay a lower (perhaps much lower) tax rate than people who work for their income. 

Now, it should come as no surprise that we vehemently disagree with the bad policy promotion.

But as the old saying goes, the Oregonian is entitled to their own opinion--not their own facts. And here, the paper has wildly bent the truth in order to support their political agenda.

As Emerson wrote of the editorial’s tactics:

One of the most familiar boogymen of anti-tax activists is the tax refugee... Unfortunately for them the evidence is not on their side.    Yet, despite this the scare tactic never seems to go away.  And so it was with considerable dismay that I see that The Oregonian editorial board has decided to use the scare tactic and cite a totally meaningless statistic to back it up…  This is exceptionally poor. It is intellectually dishonest or lazy or both and does not befit a board that wishes to be taken seriously.

What Emerson is lamenting is the “data” the Oregonian used to promote their bad tax policy. The paper examined numbers provided by the Oregon Department of Revenue from 2007 and found that 297 Oregonians with capital gains income moved to Clark County, Washington. ‘Behold,’ they triumphed, ‘proof that our tax system is driving away wealthy people!’

Hmmm. Does this sound familiar? Maybe you remember when KGW attempted to make a similar claim in 2011. As it turned out, though, those Oregonians who moved out of state to avoid taxes that KGW reported on were simply Washingtonians updating their driver's licenses in response to a WA state crack-down on residents who were claiming out-of-state licenses in order to avoid paying WA’s sales tax. The misleading report came from the fact that KGW never checked with any of the residents who had moved--and their only "sources" were anti-tax activists. The station had to issue an embarrassed apology after outcry from their viewers.

The Oregonian uses a different set of data and from a different year. But it appears that they used the same follow-up checks as KGW – which is to say, none. Had the Oregonian talked to a single individual (whom they refer to as “tax emigrants”) and found anyone who claimed they moved their home and established residency in a different state all so they could sell their stocks without paying income tax on it? You can bet we’d be reading all about it.

But in reality, the only thing that the data shows is that there are Oregonians who have accrued capital gains who move to Washington’s Clark County. And we can agree with that! Some have moved to Washington during that time period. Some have also moved to New York. And to Texas. And to anywhere else in the country that people like moving.

What the paper failed to acknowledge is that many have moved into Oregon at this same time – even though an article was published in the Oregonian just days earlier discussing exactly that! Jeff Mapes reported on Californians who are moving into Oregon and bringing their wealth with them (to the tune of more than $3.8 billion in aggregate income in the past decade).

Further, according to Forbes’ immigration map, there was actually more inbound income to Multnomah County, Oregon than there was to Clark County, Washington in 2010. That means that for as much wealth as any Oregonian took with them to Clark County, more wealth moved into Multnomah County alone.

There’s certainly plenty more to say about the shoddy journalism that ‘informed’ this weekend’s Oregonian editorial, but I’ll go on and wrap with Economist Emerson’s concise points from his Oregon Economics Blog:

First, the only statistic that makes any sense to use here is the net movement of people with capital gains income (not to mention knowing the real reason these folks moved rather than inferring it is all about capital gains taxes).  Second, what evidence is there that this is hurting Oregon business? If I know a promising start up in Portland, the fact that I live in Vancouver will prevent me from investing?  This seems patently absurd.  Third, once again remember that this capital gains is taxed when the asset is cashed out and is turned into income - to be, presumably, spent.  Living in Washington is expensive in terms of consumption taxes and when that capital gains income is spent it is taxed in Vancouver at a rate of 8.4%.