As a native Oregonian, I find it troubling that my state is in financial disarray. As a previous resident, also, of other states between my graduation from Oregon State University and my return to Oregon about 20 years ago, I benefit from a perspective that suggests our elected leaders are being outsmarted by their counterparts elsewhere.
The hard reality is that states compete for economic advantage and jobs, and Oregon is coming up short. A case in point is the Oregon estate tax — a self-inflicted disadvantage that indirectly burdens nearly every Oregonian but, ironically, will become largely ineffective at “soaking the dead rich” as intended.
Essentially, two groups are exposed to the Oregon estate tax:
1) Those whose circumstances tether them financially to Oregon (typically, job-creating small business owners, farmers, etc.), and
2) Those whose assets are portable (retirees with stocks, bonds, IRAs, etc.)
There has been some media coverage of the effects of the estate tax upon the first group but very little regarding the second. How those in the second group deal with the prospect of their estates being taxed is of compelling importance to Central Oregon because those people are major contributors to the local economy who might leave to avoid death taxes.
A few years ago, all states had estate or inheritance taxes. Accordingly, such taxes, then being inescapable, were not a significant factor in the residency decisions of retirees.
That no longer is the case. About 60 percent of states have eliminated estate taxes. West of the Mississippi, only three — Washington, Hawaii and, most aggressively, Oregon — tax estates.
Retirees with significant assets who initially retire in Central Oregon must decide at some point whether attractions of the area are worth the taxes their heirs would incur. A common scenario increasingly is playing out like this: At age 60, a person with significant savings, while giving little thought to mortality, retires to the area for the active lifestyle. Ten to 15 years later, the area remains appealing, but some of the more vigorous activities have become less so, winter driving is more challenging and estate planning, previously abstract, now must address real end-of-life concerns. Predictably, estate tax exposure becomes the pivotal factor in a decision to leave Oregon.
Because the comparative disadvantage of retiring in Oregon has evolved slowly and quietly over the past 10 years, few retirees may have opted to leave, and death tax collections have been largely unaffected.
However, the issue now is gaining wide recognition just as baby boomers are beginning to retire in large numbers and make residence decisions. The predictable result is that Oregon not only will experience declining death tax collections as retirees choose to live elsewhere but will also fail to collect income taxes from them after they leave (or choose never to live here).
Central Oregon loses a great deal when financially independent retirees leave, as they are the area’s “golden goose.”
They have substantial retirement incomes that they primarily spend locally. In addition, they pay property taxes on high-value homes, volunteer time and contribute to local charities, are law-abiding citizens who make few demands on infrastructure, take nobody’s job, have no children to be schooled and require no public assistance.
Also, they populate the small pool of investors who buy Oregon municipal bonds so essential for infrastructure development (think Bend water and sewer projects).
The Oregon ballot states that passage of Measure 84 reduces state revenue, which is correct only in the obvious sense that estate taxes would cease to be collected. It is incorrect, however, in that it fails to note that the state would collect more income taxes from more high-income retirees choosing to live in Oregon and from the economic activity their continued presence would engender.
A yes vote on Measure 84 is an important step in eliminating a 20th-century impediment to Oregon’s 21st-century progress and increasing income tax revenues.
— Joe Linman lives in Bend.