Oregon's vanishing millionaires

The Wall Street Journal reports:

Oregon raised its income tax on the richest 2% of its residents last year to fix its budget hole, but now the state treasury admits it collected nearly one-third less revenue than the bean counters projected. The sun also rose in the east, and the Cubs didn't win the World Series.

In 2009 the state legislature raised the tax rate to 10.8% on joint-filer income of between $250,000 and $500,000, and to 11% on income above $500,000. Only New York City's rate is higher. Oregon's liberal voters ratified the tax increase on individuals and another on businesses in January of this year, no doubt feeling good about their "shared sacrifice."

Congratulations. Instead of $180 million collected last year from the new tax, the state received $130 million. The Eugene Register-Guard newspaper reports that after the tax was raised "income tax and other revenue collections began plunging so steeply that any gains from the two measures seemed trivial."

One reason revenues are so low is that about one-quarter of the rich tax filers seem to have gone missing. The state expected 38,000 Oregonians to pay the higher tax, but only 28,000 did. Funny how that always happens. These numbers are in line with a Cascade Policy Institute study, based on interstate migration patterns, predicting that the tax surcharge would lead to 80,000 fewer wealthy tax filers in Oregon over the next decade.

The law of diminishing returns in taxing millionaires.