The 'Couv'

The 'Couv'

Tuesday, September 27, 2016

Oregon vs. Washington

Two great states in the mighty Pacific Northwest. Ducks versus Huskies, Beavers versus Cougars, Washington wins in the college football mascot contest, what about retiring? This region is arguably the top non-sun belt place in the country for retirees. What is the draw? The gorgeous scenery? The relatively mild climate for the latitude? The friendly people? All of the above my friends and in the case of Washington State the tax friendly environment is an added bonus.

I have discussed on this very blog numerous times the taxation difference between these two fabulous states, and Washington generally comes out on top. A couple of articles to review, here and here. If you have a strong taxable income from a healthy 401k or a pension, Washington State will save you thousands of dollars in taxes that our neighbor to the south will strip away from your bank account.

But what if you have a predominately tax sheltered income source? When the income tax issue is removed as a problem, Oregon can become competitive with Washington for retirees. Southern Oregon has a few areas that are very similar in climate to Northern California and the Oregon Coast has some breathtaking properties that are well suited to the retired. Oregon has no sales tax and that saves retirees that like to buy cars and other big ticket items more often than average a lot of money.

For Washingtonians, the sales tax issue is generally less a burden than the income tax. Although the state of Washington does have a "use" provision on the sales tax that requires residents to declare items purchased in Oregon but "used" in Washington, it is nearly impossible to enforce on things that are not registered, like vehicles. Many people flock to the stores in nearby Portland to buy TVs and other expensive items and as long as those items are not delivered in Washington the sales tax is generally avoided. Again the tax is technically still owed, it is just not economically enforceable. In principle Washington residents are supposed to pay the sales tax on all taxable items used in state and if items are purchased in Oregon, the store will not deliver to Washington State without charging the appropriate sales tax. In practice those items schlepped across the bridge in ones own private pickup or van are at the discretion of the buyer to report. Sales tax rarely is a larger burden than income tax and in Washington State it is even more prevalent due to the taxation dichotomy between the two states. As always any decisions being made based on taxation should involve a consultation with a professional tax advisor.

Those that might want to live on the lush green third of the two states west of the Cascade Mountains will find Washington and Oregon north of Eugene to be on relatively equal footing. South of Eugene Oregon begins to transition into a more California style topography and weather pattern, albeit a little cooler.

Oregon has well over 300 miles of coastline with charming little hamlets dotting the coast where as Washington is limited to just the Southwest corner of the state since the Olympic National Park occupies a huge chunk of the gorgeous Washington Coastline. Oregon has the advantage on coastal living in volume of properties but Washington has the best deals on coastal real estate so call it a tie, I suppose.

Ellensburg, Washington
Things get real iffy for the Oregon side of the issue when considering a drier climate east of the Cascades. Oregon shares the high desert plateau with Nevada and the elevation of places like Bend and Klamath Falls is well above 3000 feet and over 4000 in the case of the latter. This translates into significant snow in the winter and cold temperatures as well. Generally retirees are looking to avoid bitter cold and heavy snow. In Washington State, the central portion is just barely above sea level at the Tri-Cities and right around 1000-1500 feet at places like Ellensburg and Wenatchee. Although the winter climate is notably colder in Ellensburg than it is in Vancouver it is not as severe as the higher elevations in Central Oregon. Advantage: Washington State.

The state of Oregon does an excellent job of promoting both the Central Oregon communities and the Oregon Coast. So well in fact, that real estate prices in those two places are significantly higher than comparable spots in Washington State. This contrasts with the overall higher prices in Washington State for real estate when compared statewide with Oregon.

The bottom line is that taxation favors Washington State and geography is neutral with the advantage lying purely in the eye of the beholder.

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