Let’s Be Clear About One Thing: We’d be Worse Off But for Measures 66 and 67
Chuck Sheketoff
Unfortunately, but perhaps not surprisingly, the state economist’s recent forecast that Oregon faces a budget shortfall has prompted opponents of Measures 66 and 67 to peddle an obvious fallacy. It’s the post hoc, ergo propter hoc, that goes like this:
- A occurs before B: Measures 66 and 67 occurred before the May revenue forecast showed a budget shortfall.
- Therefore A, Measures 66 and 67, is the cause of B, the revenue shortfall. That’s like saying yesterday the sun came up and after that people died, so obviously the sun caused their death.
Case in point is Dan Chriestenson’s op-ed in last week’s Oregonian, “Answers aren’t easy, but they’re simple,” in which he stated:
I also argued [in the run up to the January vote] that the revenue anticipated from 66 and 67 would never be forthcoming because small businesses, the primary target of the increases, simply don't have the means to sustain the increases. They will have to downsize, retire, leave the state or simply close up shop. This past week's revenue forecast bears this out.
Now four months later, media across the state are blaring news that after passing the largest tax increase in Oregon’s history, we’re going to have less revenue . . .
I suppose that answers are “simple,” if like Chriestenson, you rest your argument on baseless, false claims of causation – a post hoc ergo propter hoc fallacy that assumes causation. (Add to that self-contradictory arguments: Chriestenson called on the legislature to “restore school funding to adequate levels, fund public safety appropriately and cut spending.” Huh?).
Chriestenson is not alone in promoting the fallacy. In the Forest Grove News Times, State Senator Bruce Starr made a similar argument , and Albany Democrat Herald editor Hasso Hering made the same claim in an editorial.
It not just simple logic that fails the fallacy peddlers. The facts aren’t on their side either.
In delivering the bad budget news, the state economist explained the reason for the surprisingly large shortfall: the economy in 2009 was in much worse shape than previously known. “We had a horrible storm in 2009,” said state economist Tom Potiowsky. “In essence, this is cleaning up the remnants of that terrible year.”
By no means was Oregon alone in this. Just about every state got “clobbered” in terms of tax collections, state economists explained.
They noted that they are unable to predict today whether Measures 66 and 67 are bringing in as much (or more) revenue than originally projected. The reason is because a great many wealthy taxpayers filed extensions, and the wealthy are the only taxpayers affected by the measures.
Despite this uncertainty, it’s clear and obvious that the measures will generate more revenue than would have been collected if they had not passed. In a post-forecast blog post offering more analysis, the Oregon Office of Economic Analysis made it explicit for those who didn’t get it, or those who try to deceive with contrived causation claims: “Without the tax rate increases the [revenue situation] would look even worse.”
Finally, I’ll note how Chriestenson’s fretting over the impact of the measures on businesses is completely misguided.
At the same time that they announced a budget shortfall, the state economists explained that corporate income tax collections are running above projections. So far above, in fact, that they are now predicting a corporate kicker in the face of this terrible budget storm. How ironic!
In sum, Chriestenson is wrong both as a matter of logic and fact.
Later this year, when all tax returns are in, we’ll know how well Measures 66 and 67 did in terms of generating additional revenue.
Even if they did not produce as much as originally projected, let there be no doubt that our budget hole would be even deeper if Oregon voters had not enacted the tax measures.
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3:31 p.m.
Jun 10, '10
Latin is a dead language, how about we keep it that way. :-)
3:56 p.m.
Jun 10, '10
Not a fan of the second episode The West Wing eh? ;)
7:27 p.m.
Jun 10, '10
Do they have The West Wing on DVD. I discovered that show way too late.
2:36 p.m.
Jun 11, '10
Yep, they do. And the Multnomah County Library system carries the full series.
12:30 p.m.
Jun 13, '10
Great show! Oh, and great post, Chuck. Thanks for your leadership on these issues.
9:19 p.m.
Jun 10, '10
Chuck should have left his latin at home. This is NOT an example of a post hoc, ergo propter hoc fallacy. Why? because in order for it to be there must not exist any cause/effect relationship between the two events. For example,"you have a cold, so you drink fluids and two weeks later your cold goes away..so it must have been the fluids" You are geberally correct that sequences don't establish a probability of causality any more than correlations do. Coincidences do happen. However in this particular case there is a strong cause and effect relationship that exists between raising taxes on small business owners and job losses, business failures and closures. Whether or not it was the sole cause of the bad revenue forecasts would be a stretch due to all of the other factors that could impact tax revenues. But he wasn't claiming it was the only reason...my personal opinion is its a huge basket of reasons. Aggressive and draconian child support schedules and enforcement (and no I don't have any kids) drives alot of men into 'self employment" and off the books employment scenarios where the state gets cut out of the equation. Illegal aliens working under the table or working over the table but claiming M or S and 99 on their witholding and therefore paying no taxes has been another huge drain on the states revenue stream. and unfortunately raising taxes on small business vis a vie misguided and class envy driven tax increases like 66 and 67 is another job and business killer which would also feed into the revenue drop. Don't believe me? wait until you see the impact on those same people (and therfore on revenues and job loss numbers that Obama's unpopular healthcare tax is going to have on small business ... thank God cap and tax has no chance because when you combine all of those tax increases together th cummulative impact on our economy would have been biblical! You can't grow jobs by taxing the job creators ... it just doesn't work and never will work and 90% of the jobs that get created (historically) all come from small business. 66 and 67 were just two fingers in the dike to get us thru another year or two. I personally think in a state or country where the 50% of the people who pay no tax are able to fund their entitlement rich 9and dependant) lifetsyles by voting a tax increase on the 50% who do pay taxes is wreckless and shameful and the impact of those taxes is ALWAYS going to result in job loss, business failures, business relocation and ultimately in decreased revenues. So nice try in your attempt to disparage the economic realities of tax increases and the use of a Latin term I hadn't heard in quite awhile but in this case there is no logical fallacy because there is a well known and well documented causal nexus between the two
9:57 p.m.
Jun 10, '10
Mr. Summer's post is nonsense. It is the exact same argument Republicans made in 1993 when President Clinton passed his budget and tax package without a single Republican vote. The higher taxes were predicted to bring on the worst recession since the Great Depression. (Go back and read the record. It is all there.) Instead, we got a booming economy and 22 million new jobs. President Bush, on the other hand, presided over the greatest upward transfer of wealth in the nation's history -- though tax cuts for the wealthiest Americans -- and we were paid back with almost no job creation his entire eight years
11:45 p.m.
Jun 10, '10
Tax increases or tax cuts had nothing to do with the booming economy of the 1990s. Here is what fueled the 1990s:
The personal computer coming into the mainstream, becoming affordable, and individual consumers supporting the hardware by buying the software. If anything, the 1990s were defined by the growth of the PC and the secondary and ancillary industries to fuel its mainstream acceptance.
Baby Boomers hit their peak in terms of earning power. This allowed higher tax revenues to local, state, and the Federal Government(s).
Generation Y entering their adolescence and teenage years. Teenagers of any generation are a boom to the economy because the disposable income that their parents would spend elsewhere are instead plugged back into direct consumer purchasing. Conversely, if Generation Y was not as big as it was in the 1990s, we may be in Japan's situation now where we have an increasingly older population who relies on a substantially smaller working population to pay into the social security and health services they rely on, while they spend their disposable income on more necessities and plugs the rest into their bank account.
The end of the Cold War and the subsequent free trade agreements. Countries who have a comparative advantage at producing certain consumer goods were allowed to after the Cold War. This meant lower prices for consumer goods, therefore more consumer goods became available to purchase and more consumers purchased them.
A greater working to retired ratio in the entire population. Kind of redundant, but the Baby Boomers who are now retiring were at their peak earning capacity in the 1990s. Today, the opposite is occurring where over the next few decades, we will see government budgets constrained and making hard choices for the pension promises they made in the late 1990s and early 2000s.
8:12 p.m.
Jun 12, '10
The Republican controlled congress and the great shape the economy was left in for him are the only reasons Clinton's presidency had anything good about it all. Had he been elected after 2 years of democrats running both houses of congress with the majorities they had for the last two terms of W he would have inherited the same pile of crap they created for Obama. The intent of my post was to point out the misapplication of this particular argument. I agree with Jack that 66 and 67 came to late to do much more than whistle past the graveyard but there is a very well documented causal effect between raising taxes and losing jobs and revenue. I don't expect too many people here to get it based upon the latest Zogby Poll which proved (beyond any reasonable doubt) that when it comes to simple economic theory: Democrats are dumber than 5th graders.
3:51 p.m.
Jun 13, '10
President Reagan raised -- yes raised -- taxes in 1982 (undoing 1/3 of the 1981 tax cut, and MORE than the Clinton tax increase)and the economy took off leading to Reagan's 49 state electoral victory. But what I find especially interesting about your post is that you apparently want to give George H.W. Bush credit for the 1990s boom. Wasn't he the guy who broke his "no new taxes" pledge and then got pilloried by conservatives for doing exactly what you say (a) is always bad for the economy, and (b) put the economy in "great shape." Democrats dumber than 5th graders? It's not a matter of party, it's a matter of knowing history.
10:05 p.m.
Jun 10, '10
Forget the Latin. The argument that Measures 66 and 67 contributed to the revenue decline fails because virtually all of the revenue decline was based on the decline in income BEFORE the election, i.e., 2009.
If Measures 66 and 67 had failed, tax revenues would have declined even more. Whatever your position was on those measures, defeating them would have made the state budget picture worse, not better.
In fact, all the Oregon-bashing that is going on would be more credible if the rest of the country was enjoying a robust recovery and we were lagging badly behind. Unfortunately, that's not the case. We continue to suffer from a national recession, not a state recession.
10:21 p.m.
Jun 10, '10
Thanks Jack. You are absolutely correct. And the Oregon-bashers also have amnesia about the fact that when the national economy does do well Oregon typically does better than the national economy.
8:02 p.m.
Jun 12, '10
Oregon was about the only state to drag themselves through bad times during the Reagan 80's while the rest of the country thrived
8:29 a.m.
Jun 11, '10
Best comment on this thread. Bar none.
8:15 p.m.
Jun 12, '10
Thank you Carla
3:22 p.m.
Jun 15, '10
Her comment was a reply to Jack.