Courting Senior Citizens

Right From the Start

Oregon’s economy continues to founder.  Nearly 151,0000 private sector jobs were lost from the beginning of the Bush/Obama recession to its nadir – a period of twenty-six months.  Nearly 66,000 of those jobs remain unrecovered forty months later and that does not take into account the roughly 1700 people per month who enter workforce availability with no prospect of finding a job.  In large part, this anemic recovery is due to Oregon’s notorious anti-business attitude – no that’s not right, it is due to the notorious anti-business attitude of Oregon’s politicians.

CEO Magazine has listed Oregon, for the second year in a row, as one of the ten worst places to do business.  Yes, I realize that there are conflicting surveys about Oregon’s business climate which simply reflects the bias of those formulating the questions – those attempting to indicate a favorable climate emphasize quality of life issues while those attempting to demonstrate an unfavorable climate emphasize tax and regulations issues.  But the survey by CEO Magazine is different – it reflects the attitude of over 500 business leaders from across the nation.
These are the people who make the decisions whether to locate, expand or reduce their businesses in the various states.  It doesn’t make any difference as to what the basis is for those decisions, it is their decisions to make and those making them view Oregon with high negative attitudes.  It is also notable that the survey comes from CEOs who were asked to only “grade states in which they do business.”   The survey reports actual comments by some of the CEOs and in last years survey the following observations were made:

“Oregon is a great place to start a business, but all successful businesses move out when the founder leaves.  And so does he.  The tax structure drives all movable wealth out of the state.

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“Oregon has taken the approach during the recession that since business tax revenues and personal tax revenues are down, it is not their job to help ease the burden and create easier competitive environment, but instead to increase taxes and regulatory fees to keep government in place.  That attitude has crushed many businesses in Oregon and caused most of our customer base to leave the state.”

That attitude is unlikely to change in Oregon given twenty-six unbroken years of Democrat administrations and Democrat control of every statewide political office.

So what is Oregon to do?  Well, you could depend on tourism given the natural beauty and diverse landscapes of Oregon.  But that has been tried for years with mixed results and a growing antipathy from the government class since, lacking a sales tax, tourism provides little to finance the growth of government.  Oregon government has already destroyed much of its natural resources industry.  And today it’s attention seems to be focused almost entirely on “green energy” with windfarms, solar energy and biomass (so long as it doesn’t come from trees) while simultaneously blocking transmission facilities between where the energy is produced and where it is used.  Portland is too small and its port facilities are too antiquated to compete for the import/export business that has migrated to Washington and California.

So, given all of that, how about giving senior citizens a try.  Today we are at the dawn of the “baby-boomers” retirement.  According to Pew Research nearly 10,000 “baby-boomers” will reach retirement age EACH DAY for the next nineteen years.  Oregon is uniquely situated to attract many of those retirees.

For many, retirement means leaving all of the discomforts they have endured during their working lives.  Many seek to leave the crime, filth, incessant panhandling and living cheek to jowl with thousands of their closest neighbors – most of whom are still strangers.  Well that pretty much leaves out downtown Portland but the rest of the state is pretty much placid and pastoral and uncrowded.

For many it means leaving behind inclement weather – snow, sleet, and bitter cold for the winters and hot, humid and breezeless for the summer.  And while Oregon clearly has all four seasons, all are moderate.  Yes, I know that it rains for eight months in the Willamette Valley but ask the people of Chicago, New York City and all of New Jersey if they would take rain and moderate temperatures over the winters in their current cities.

And for still others it means leaving the coat, tie and brief case behind and catching up on all of the activities they have denied themselves during their working years.  Oregon’s recreational opportunities are unparalleled.  There are the mountains, the ocean, the high plains desert and the still wild and scenic rivers.  There are professional sports, world class college sports, and premier theatre companies.  The arts abound throughout Oregon and while the museums are not all that awesome the history of the state as told in the dozens of interpretive centers is fascinating.  And Oregon’s healthcare providers are second to none.  OHSU, Providence and Legacy all provide excellent care and are staffed by renowned doctors and researchers.

Other states have their own checklist of values embraced by senior citizens and, therefore, Oregon is forced to compete.

Despite all of the attractive features of Oregon, there is no migration of retirees.  In fact, Kiplinger has listed Oregon as one of the ten worst states within which to retire.  And the reason is high taxes.  In addition to all of the other things mentioned above, retirees are looking to stretch their fixed incomes and limited investments as far as they can.  Many are also convinced that the economic realities of today’s America may make their children the first generation that cannot achieve incomes or lifestyles equivalent to their parents and, therefore, they hope to pass along some portion of their assets to their children.

But in Oregon, the income tax rates escalate rapidly and most people find themselves paying between 9% and 10% with the upper bracket being 11% – the highest in the nation.  While the income tax rates do not apply to Social Security payments they do apply to public and private pensions, IRA and 401K distributions.  Capital gains and dividend income (the principle sources of earnings for retirees outside of Social Security and pensions) are treated as ordinary income and taxed at those same high rates.  Oregon’s estate tax rate exempts the first $1 Million (an amount insufficient to cover the transfer of most farms, ranches and small businesses in Oregon) and taxes the remaining portions at rates that escalate quickly to 16%.  Currently there of 32 states that do not have an inheritance or estate tax putting Oregon in a distinct minority of state governments particularly with regard to other Western states such as Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming.

Given Oregon government’s distaste for business, it should embrace a potential migration of senior citizens since they basically exude all of the attributes that Oregon government maintains it holds dear.  These retirees have very low impacts on communities – they are generally law-abiding, self-sufficient and provide a pool of volunteerism second to none.  They bring accumulated wealth with them and spend it locally thus supporting local businesses.  They utilize restaurants, and vacation/recreational facilities thus providing job opportunities in the service industry that, based on employment growth, appears to be the preferred commodity by Oregon government.  They do not impose additional burdens on the police or prisons – unlike the influx of street people and homeless preferred by Portland government.  They spend an inordinate amount of time and effort beautifying their property and neighborhoods instead of urinating, defecating and copulating on public streets (e.g. Portland – again).

What’s not to like?  And minor changes in Oregon’s tax codes could provide the stimulus for a new, low impact, industry.  Here are the type of changes that would be beneficial:

1. Raise the amount of income exempt from taxation to at least the annual minimum wage amount.
2. Reduce the tax on passive income (pensions, IRA and 401K distributions, royalties, dividends and capital gains) for those sixty-five and over to two percent on the first $100,000 and four percent for amounts exceeding $100,000.
3. Eliminate the estate tax.

It’s not a long list.  The minor initial reduction in tax revenue will be recovered through stimulation as more people elect to retire to Oregon.

But none of this is likely to occur because Oregon government is focused on the immediate funding and growth of government and not on the opportunity for economic expansion. Senior citizens are different from others and the difference is mobility.  As the legislature continues to make Oregon’s income and estate taxes among the highest in the nation, the real “wealthy” simply leave or retire elsewhere.  There are other states that actively recruit retirees, including Oregon’s retirees.  Again from CEO Magazine:

“[Oregon’s] tax structure drives all movable wealth out of the state.”