Why was Oregons state budget hit so hard in the recent recession?
All five of the nationwide factors identified in FAQ #3 had strong impacts on Oregon. In addition, several others factors converged to make Oregons fiscal situation among the worst in the countrya kind of fiscal perfect storm. Those factors included the following. Reliance on income tax: Oregon relies more heavily on income taxes than any other state. Income taxes are particularly procyclical, meaning they rise when the economy is strong and fall when it is weak. Sales taxes also are procyclical, but they are more stable than income taxes. One reason is that individuals tend to save in good years and spend out of their savings in bad years; thus, spending fluctuates less than income. Also, the sales tax is a single flat rate. With income taxes, on the other hand, not only does taxable income drop during a recession, but lower incomes also mean lower tax rates. On average, states rely on income taxes for 37 percent of state tax collections. Oregon leads the nation in its reliance on inc
