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Ups, downs of tax structures in Washington, Oregon

The past few years of economic turmoil may not have been good for much, but it has offered what social scientists call a “natural experiment” in different taxation systems.

Washington’s tax system, as we all know, is based on sales taxes — primarily the retail sales and use tax. (The business and occupation tax, which businesses pay based on their gross receipts, also is a sort of sales tax.) Oregon, by contrast, relies on personal and corporate income taxes.

So how have the two states’ contrasting tax regimes held up?

As the accompanying chart shows, at first glance Washington’s sales/use tax and Oregon’s personal income tax seem to have behaved quite similarly during the ups and downs of the past few economic cycles.

In Washington, state sales/use tax receipts (not counting cities’ and counties’ share) fell 16.8 percent between fiscal 2008 and fiscal 2010, from $8.3 billion to $6.9 billion. Oregon income-tax collections fell at virtually the same rate, 16.9 percent, from $5.6 billion in 2007 to $4.7 billion in 2009. (Oregon reports tax data by calendar year rather than fiscal year, and there’s a two years’ delay to account for refunds, audits and the like.)

However, closer analysis indicates that the income tax is much more volatile, especially during good times.

From 2002 to 2007, for instance, Oregon’s income-tax receipts grew at a compound annual rate of 8.4 percent, while Washington’s sales/use tax receipts grew by 6.02 percent.

During the 2001-02 recession, however, income-tax collections slumped by 10.8 percent over two years, while the sales/use tax fell in just one fiscal year, and then by less than 2 percent.

We also looked at the annual change in tax collections from both states from 1996 to 2009, using two statistical measurements of variation. Oregon led Washington in terms of both standard deviation (7.83 versus 5.38) and average absolute deviation from the mean (0.06732 versus 0.03788). In each case, the bigger number means more year-to-year variability in collections.

The Oregon system’s greater volatility shows up even more strongly when comparing its corporate income tax against Washington’s BO tax, as the second chart shows.

Lawmakers and other public-policy types looking at possible changes to Washington’s tax system might do well to examine our neighbor to the south. While the income tax appears better at capturing revenue during economic expansions, the sales tax is less prone to steep falloffs during recessions.

A closer look at unemployment

We won’t get the next read on Washington unemployment until Feb. 29, when January figures come out. But thanks to the number-crunchers at the federal Bureau of Labor Statistics (BLS), we do have data on how joblessness in our state stacks up against the rest of the country, and who’s having the most trouble finding work.

Every quarter the BLS aggregates four quarters’ worth of state-level data, providing some insight as to how unemployment differs by race, age, gender and so on.

The full report for 2011 won’t be out until the end of the month, but here are some preliminary gleanings:

• Including discouraged workers and people working part time involuntarily, Washington had the nation’s eighth-highest unemployment rate last year: 17.8 percent, versus the national average of 15.9 percent. (The official unemployment rate, which uses a narrower definition, averaged 9.4 percent in 2011.)

• As in most states, men in Washington were more likely to be unemployed than women, but the male-female gap here — 10.2 percent versus 8.6 percent — was wider than in all but 15 other states.

• Blacks and Hispanics in Washington were much more likely to be unemployed than whites. The jobless rate was 9.1 percent among whites, 19.3 percent among blacks, and 14.8 percent among Hispanics. Unemployment among Washington’s Hispanic population, in fact, was the third-highest in the nation.

• Teen unemployment in Washington last year was the sixth-highest in the country: 30.4 percent, compared with 24.4 percent nationwide. More broadly, unemployment skewed even more strongly by age here than in the nation as a whole: It averaged 17.7 percent among 20-to-24-year-olds, 10.3 percent for 25-to-34-year-olds, then fell into single digits for older age groups.

Oppenheimer comes home,

but UK’s still calling

Nearly seven years ago, Deanna Oppenheimer left as head of Washington Mutual’s consumer-banking business. Oppenheimer pioneered the casual, inviting style of banking WaMu became famous for; many ex-WaMulians have speculated that things might have turned out differently for the fallen Seattle thrift if she, rather than Stephen Rotella, had become WaMu’s chief operating officer.

Instead, Oppenheimer went to London to run Barclays’ retail-banking operations. She eventually became Barclays’ vice chair of global retail banking and chief executive of European retail and business banking, before retiring at the end of last year and moving back to the Puget Sound area.

But while Oppenheimer prepares for her next venture back home, the U.K. isn’t ready to let her go yet. Last week, retail giant Tesco named Oppenheimer to its board; pending regulatory approval, she also will join the board of Tesco’s large consumer-banking subsidiary.

Comments? Send them

to Rami Grunbaum:

or 206-464-8541.

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