I very rarely respond directly to something my colleague Jay Bookman has written, although both of us write with some regularity about the same topics. However, I was intrigued by his post yesterday comparing Georgia and Oregon — intrigued enough to do some research of my own, which I figured I ought to share since I ended up spending so much time on it.
If you haven’t already read Jay’s post, please do so. Done? OK, let’s proceed.
Let me make one thing very clear from the very beginning: I am not accusing Jay of cherry-picking his examples of Georgia and Oregon, or anything else untoward. He chose those states more than four years ago, without knowing how events would unfold, and it’s perfectly legitimate for him to revisit that comparison now. Rather, the strikingly different performances of those two states made me wonder if they were indicative of what happened with all states that made similar policy choices in the wake of the Great Recession. It is from that point that I depart.
To select states for my own comparison, I tried to determine which states had raised taxes when their revenues were wrecked by the recession, and which ones avoided that. I found a publication — also from 2010 — from the Center on Budget and Policy Priorities, a group that advocates for higher taxes. In that publication, a CBPP writer noted that 33 states had raised taxes in response to the recession, including Oregon but not Georgia. But of course, not all tax increases are equal; 13 of those 33 raised taxes by less than 1 percent. However, 10 states raised taxes by more than 5 percent, including Oregon. Given that these 10 states together are relatively close in population and economic output to the 17 non-tax-raisers, I thought that’d make for a pretty fair big-picture comparison. Here’s what I found when I examined the same metrics Jay used to compare Oregon and Georgia: unemployment rate, real state GDP and median household income between 2010 and 2013 (or the present, in the case of unemployment). In most of these comparisons, I’ll show figures for Georgia and Oregon alongside those for the U.S. as a whole, the group of 17 “no increase” states and the group of 10 “big increase” states, with Georgia pulled out of the former and Oregon out of the latter in most cases.
1. Unemployment rate
As you can see from the above graph, both Georgia and Oregon started 2010 with jobless rates above all three groups and ended August 2014 likewise above them (in this case, I’m using the national jobless rate and non-weighted averages for the 16 other no-increase states and the nine other big-increase states; weighting this metric for population would have taken more time than I had to spend). But you can also see that the no-increase states maintained a jobless rate more than 1 percentage point below both the U.S. figure and the big-increase average until early 2014. The really strange thing is the decoupling of trends for both Georgia and Oregon from the national trend line starting earlier this year. Get the underlying data here.
2. Real state GDP
I looked at this a couple of ways. First, what did it look like in no-increase states vs. big-increase states and the national total? (In this case, growth rates are weighted for population.) As you can see in the graph above, the no-increase states have consistently out-performed both other groups — significantly so in 2010 through 2012.
It turns out that the no-increase figure goes up a bit if you remove Georgia, while the big-increase figure drops a bit without Oregon. Why? Because, as the next two graphs illustrate, Oregon is an outlier on the high side among the high-increase states, while Georgia falls toward the low end of the no-increase states and right in the middle of the big-increase states.
So, Georgia performed better than half of the big-increase states, and almost as well as two others, while ranking in the bottom half of the no-increase states. Oregon, meanwhile, performed almost twice as well as the next best big-increase state and would have been toward the top of the list among no-increase states (basically tied with Oklahoma) had I included it. (Note that, in that last graph, I didn’t include North Dakota among the no-increase states; its growth of 44 percent really skewed the graph to the point it was hard to see the other states well.) Get the underlying data here.
3. Median household income
This graph shows how each state or group of states has changed since 2010 (the group averages are again not weighted for population). This result honestly surprised me: I wouldn’t have guessed Georgia would rank above the other four in 2011 and 2012 and be surpassed only by Oregon in 2013. But once again, you can see that, minus Oregon, the other big-increase states have had trouble keeping pace with their no-increase counterparts and the national average. Get the underlying data here, Table H-8.
What does it all mean? I’m not totally sure. I think it means Oregon has had some kind of extraordinary success in recent years that helped it blow past its tax-raising peers. I think it means Georgia’s performance remains something of an enigma, as I’ve written before.
But I also think it means the picture is not terribly good for the states that raised taxes the most. And it’s worth noting that some of the tax increases in question were only temporary — including most of Oregon’s — while in North Carolina the increases were not only reversed but actually reduced below their previous levels.
Not to mention that, even though Georgia’s leaders have talked a lot about lowering taxes, they haven’t actually done it. The big tax-cutting talk of 2010 became a study committee that reported its findings before the 2011 session, during which a wide-ranging bill was debated and eventually scuttled. Some parts of the bill were passed in 2012, but most of the decreases (e.g., ending the “birthday tax” on motor vehicles each year) were offset by increases (e.g., creating a tax on person-to-person sales of used cars).
If Georgia’s economic performance has been lacking, perhaps it isn’t because it refused to raise taxes and instead cut the state budget. Perhaps it’s because it hasn’t gone as far as some other states in updating its uncompetitive, 20th-century tax code.