A teachable moment: When reporting on 66 and 67, insist that critics show you the math
Kari Chisholm
So, there's been this big kerfuffle about the reporting done at OPB regarding the company in Sisters that claims it's selling out to out-of-state buyers because of the tax increases contained in Measures 66 and 67.
Now, let me start by saying that I think that OPB generally does some of the best journalism in this state - especially given that they're doing it with fewer words than anybody working in print, and without visuals to boot. I'm prepared to give 'em a mulligan, and blame this shot into the sand trap on a desire to spend less time working, and more time enjoying this beautiful Oregon summer.
But before I do, let's take note of the teachable moment here. One that every journalist (and yes, blogger) around these parts should heed.
Whenever someone tells you that Measure 66 or 67 caused them to close their business, lay off employees, or take any action whatsoever, the response should be simple.
Very simple. "Show your work."
It's the same rule that applied in math class in junior high. You can't just state your answer -- you have to show your work.
OPB's managing editor told Rev. Currie that "questions about how the new tax measures are affecting businesses in the state are complex" -- but they're really not.
It's not complex at all. It's simple math.
People who claim publicly that Measures 66 or 67 have adversely affected them should be required -- yes, required -- to disclose the math. How much did your taxes actually go up?
We shouldn't be relying on political rhetoric here. This is a math question, with a numerical answer. And it's not particularly difficult math. (Under 67, for LLCs, LLPs, and S-Corps taxes went up $140. For C-Corps, a sliding scale based on either Oregon profits or Oregon sales. See the simple Measure 67 flowchart from OCPP, via PDF.)
The purpose of journalism is to reveal the truth. That's often very hard. But when it comes to Measures 66 and 67, it's very simple. Show your work.
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3:09 p.m.
Aug 8, '10
Right!
3:20 p.m.
Aug 8, '10
It will be interesting to see if we will be able to determine the effective tax rates of companies subjected to the minimum tax when the data for TY2009 is available.
3:55 p.m.
Aug 8, '10
The other question that needs to be asked is would they still move if M66/67 hadn't been passed. There have been a number of high-income individuals who moved across the river to avoid paying personal income taxes. We have one, Washington state does not. Those people moved long before M66/67 and are concerned about income tax period, especially capital gains taxes. So if you hear of an individual moving and claiming it is M66, they need to be asked if they would stay if the tax rate was still at the pre M66 rate.
It will be almost impossible to find a business that moves out of Oregon because of M67, but personal income taxes do have an impact when we are bordered by two states w/o income taxes (Nevada and Washington).
5:43 p.m.
Aug 8, '10
But if the high income person was still working in Oregon, they still owe Oregon taxes on that income. That wouldn't apply to people making their income from investments elsewhere.
8:54 p.m.
Aug 8, '10
Joanne's right when it comes to income earned in Oregon -- doesn't matter if you live in Vancouver WA or Miami FL, if you earn income in Oregon, you have to pay income tax in Oregon. (NBA players know this well.)
What John's surely referring to, however, is the pattern in which people spend their entire working lives in Oregon, contribute tax-deferred income to retirement funds, move to Washington, and then cash in those retirement funds - avoiding Oregon taxes on that income.
When one state has an income tax, and another doesn't, that's going to happen. But Measure 66's effect in that regard is only slight - since it raised taxes only on that portion of income over $250k per couple (and that, only by 1.8-2.0%, and then back down to 0.9% in 2012.)
10:02 a.m.
Aug 9, '10
My experience is that it is not so much the deferred income in retirement funds so much as capital gains from the sale of a business or the fact that post retirement most of one's income is not from Oregon.
11:49 a.m.
Aug 9, '10
"post retirement most of one's income is not from Oregon."
Wouldn't that be investment income, mostly retirement funds?
2:09 p.m.
Aug 9, '10
Yes investment income, but it is not just from 401k's which retirement funds implies. If Phil Knight moves to Washington and sells Nike stock then it will not be either retirement funds or Oregon taxable income. Successful entrepreneurs or senior executives have been making the trip across the river for years and their wealth is not retirement funds as most of us would define it.
10:27 p.m.
Aug 9, '10
Fair enough.
11:59 a.m.
Aug 9, '10
It all depends on the address of the accounting entity that receives the "income".
If you receive income via a 1099 (Kari is right, dividends, royalties, and IRS distributions, but more importantly perhaps self employed, independent contractor, consultants) then your income comes to your "home" address or "business" address, and if you are self-employed, the "business" address is usually your home.
I have searched fruitlessly on the web to find out the percentage of tax returns that include 1099 income, and whether the use of 1099's is correlated with income (I suspect it is).
In my own case, considering both 1099 income and differences in property taxes, my additional cost of living in Oregon rather than moving up the Vancouver has been pretty substantial a number of years.
9:27 p.m.
Aug 8, '10
Michael Pingree: That's easy. It's about 0.09 percent for those above the $150 minimum. It varies between 0.08 percent and 0.10 percent depending on where you fall in the bracket.
Any way you look at it, it's peanuts compared to all other business expenses, and especially when compared with the Washington B&O tax, or the new gross receipts tax of 0.26 percent in Ohio, where the hand cream company was moved.
10:53 p.m.
Aug 8, '10
It's not just a math problem.
Eve Epstein wrote "Questions about how the new tax measures are affecting businesses in the state are complex, as our story pointed out. But they're serious enough to prompt state economists to look into the matter. Their research could take years. In the meantime, businesses are making decisions that we feel are worthy of exploration."
I hadn't heard of such a study, so I checked with the state economist's office and learned "We [the state economists] are not planning to do any business location study" as implied by OPB. They are looking at migration data and people changing status to part-time from full-time residency, and to the best of my knowledge they recognize there are lots of factors over the years that affect individuals migration and change of status and are not necessarily trying to pin a causal connection between migration and change of status to Measures 66 and 67.
11:52 a.m.
Aug 9, '10
True, true.
However, if we can start by convincing local media to insist on getting the hard numbers and doing the simple math, we'll have gone a long way toward validating whether these claims of "job-killing taxes" are true or false.
Facts matter. Truth matters. Not just passing along both sides of the arguments.
6:31 a.m.
Aug 9, '10
Sputtering my first gulp of coffee Kari because I've had the OCPP flow chart tacked up on my wall in my home office since the campaign.
8:47 a.m.
Aug 9, '10
And I remember posting links to it on Twitter during the campaign so often I lost count. Good stuff!
12:24 p.m.
Aug 9, '10
But when has math ever backed up the GOP's economic claims (aka snake-oil )...?
Be they welfare queens that don't actually exist in the real world, or supply-side voodoo economics, their math never adds up.
1:11 p.m.
Aug 9, '10
The fact is, this was just lazy, sloppy reporting. There is no excuse for it. If OPB wants to keep coming to us for money to support this kind of sham, they can forget it.