Cutting Oregon’s tax on capital gains income, as proposed by the two major party gubernatorial candidates, will hurt Oregon’s economy, according to a new analysis released today.
One of the plans, proposed by Republican Kevin Mannix, would reduce the tax on capital gains from 9 percent to 5 percent. “The Mannix plan claims to boost investment, but it actually drains over a hundred million dollars out of Oregon’s economy,” said Jeff Thompson, economist with the OCPP. Thompson noted that the Mannix plan would send millions out of the Oregon economy in the form of higher federal income taxes and would trigger a loss of federal matching funds. The analysis shows the Oregon economy would lose $110 million from the increase in federal taxes and the loss of federal funds to run state and local programs.
Download the Executive Summary (PDF) of the report.
Download the Full Report (PDF).
“Research suggests little or no economic growth would result from a capital gains tax cut. Even if any new investment occurs, its impact will be swamped by a flood of money leaving the state,” Thompson added.
“Sending Washington, D.C. millions of dollars in higher federal taxes and losing even more in federal matching funds will result in job loss, reduced consumer spending in Oregon, and further decline in state and local tax collections,” continued Thompson.”
The report shows that reducing Oregon’s capital gains tax to 5 percent, as Mannix proposes, would result in a $177 million annual reduction in state general funds and at least $68 million in lost federal matching dollars, requiring even greater budget cuts than currently anticipated.
“The Mannix plan would result in cuts to programs that all Oregonians use, like education, public safety, and human services. But the benefits of the tax cut would accrue to a small group of well-off Oregonians,” Thompson said.
Analysis of the Mannix plan shows that the top one percent of Oregonians would get an annual state tax cut of $5,634, while middle-income households would average just $10, and low-income households would get nothing. The richest five percent of Oregonians would receive 73 percent of the benefit of the tax cut.
The study also discusses proposals by Mannix and Democrat Ted Kulongoski to provide a tax deferral for capital gains reinvested in Oregon companies. “The deferral plans carry a smaller price tag, and cause less damage than a general rate cut, but they won’t help the economy either,” said Thompson.
“The legislature already experimented with this type of program in the 1990s,” Thompson noted. “The deferral program was tried and studied, shown to be a failure, and dumped. There is no reason to waste time and Oregonian’s precious tax dollars on another program to defer taxes on capital gains in Oregon,” Thompson continued.
The Oregon Center for Public Policy is a non-profit, non-partisan research institute that addresses budget, tax and other issues important to low and moderate income Oregonians, the majority of Oregonians.