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By Eric Revell, Cascade Policy Institute
As the state of Oregon struggles to turn the corner and put itself on a path to economic recovery, impediments to economic revitalization must be removed. Oregon’s overall tax burden is among the highest in the country, both in terms of the 9.9 percent personal income rate and perhaps more importantly when it comes to fostering economic growth, in capital gains, which are also taxed at the 9.9 percent rate. A commonly held misperception about the capital gains tax is that it only affects the rich. In truth, the chilling effect it has on investment has a much broader reach.
Consider the following quote from President Kennedy nearly four decades ago:
“The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital…the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.”
For businesses to make sound decisions regarding new projects and hiring that can lead to growth, they require a tax regime that doesn’t discourage private individuals from risking their assets in the marketplace.When individuals view a particular state or country as especially hostile to investment, they simply relocate to a friendlier environment, taking jobs and tax revenue with them.
But such an onerous business climate has become the norm in Oregon, which is currently vying with Massachusetts for the highest capital gains rate in the Union. Washington, our neighbor to the north, has no state tax on capital gains, so investments made there are only subject to the federal capital gains rate (which currently sits at 15 percent), a far more palatable overall tax burden than what Oregonian investors face.
For Oregon to spur the economic growth necessary to put its fiscal house in order, its lawmakers would do well to significantly reduce―if not eliminate―the capital gains tax in the Beaver State.
Read the original article at Cascade Insider.
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