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No state has fallen further in terms of tax competitiveness than Oregon in the past six years, according to the Tax Foundation, a nonpartisan, boardroom-friendly think tank that has studied U.S. taxes for 88 years.
Since July 1, 2019, the Beaver State has fallen from eighth to 35th in the foundation’s State Tax Competitiveness Index, mostly because lawmakers that year passed a corporate activity tax to fund public schools.
The swoon in ratings comes amid a heated debate over taxes, especially in Portland, where special levies for homeless services and preschool make marginal rates among the highest in the nation.
Oregon levies the CAT on individuals and businesses that have more than $1 million in business receipts, with some exceptions, including gas, groceries, and the “sale of fluid milk by dairy farmers that are not members of an agricultural cooperative.” The CAT compounds “tax pyramiding,” which happens when a good is taxed multiple times as it’s produced, the Washington, D.C.-based Tax Foundation said. Firms with longer supply chains pay higher taxes, which the think tank says is unfair.
In contrast with Oregon, Tennessee rose the most in terms of tax fairness, going from 38th to eighth.
Overall, Wyoming has the most competitive tax structure, the foundation said, because it doesn’t tax individual or corporate income. But states that tax income, sales and property can score well if the taxes are rational.
“The Wyoming model may not be possible in some states—but the Idaho, Indiana, and North Carolina models are,” the foundation says. Those states rank in the top 13 even though they impose all the major taxes, because rates are moderate and the structure is sound.
“A well-structured tax code won’t make the Wyoming Basin a metropolis, nor will poor tax structure make Manhattan a ghost town,” the Tax Foundation said. “But tax structure does play a role in a state’s economic successes or failures, and often a substantial one. Every state can benefit from a simple, neutral, transparent, pro-growth tax structure.”
