Oregon is in shameful company this Tax Day
Chuck Sheketoff
A new review of which states levy an income tax on the working poor and near-poor shows that Oregon is in the minority of states that impose an income tax on working poor families with children.
When you look at all of the tables in this recent report from the Center on Budget and Policy Priorities (CBPP) you learn that Oregon, unlike most states, starts levying an income tax at income levels below the poverty line.
Adding insult to injury, when you calculate the level of income tax paid by a family at the poverty line or a little above, you learn that Oregon's income tax is one of the highest in the nation.
It's true that Oregon does not — unlike most states — levy a general sales tax, which typically consumes a higher proportion of the income of poor families than that of wealthier households. Yet it's also true that Oregonians pay property and excise taxes (such as gasoline, utility and tobacco taxes) that fall disproportionately on the poor. This makes Oregon's combined state and local tax system regressive, with lower-income households paying a greater share of their income toward state and local taxes than the wealthiest households pay (PDF).
What should Oregon do about the fact that Oregon's income tax reaches into poverty for working families with children? Raise the state Earned Income Tax Credit (EITC). Increasing the EITC would raise the tax threshold for working families with children and could bring their income taxes down to at least zero, as is the case in the majority of states with income taxes.
See the one-page fact sheet Oregon Income Taxes Reach into Poverty.
Discuss.
Chuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org.
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1:45 p.m.
Apr 16, '12
Nice, but apart from guilt where does the revenue come from to change this?
Incidentally 7 in 10 support Buffett Rule according to CNN poll just out. And despite all the MSM idiocy, women haven't forgotten who is on their side. Pres. Obama up by 9 ,up by 16 among women. http://politicalticker.blogs.cnn.com/2012/04/16/cnn-poll-gender-gap-and-likeability-keep-obama-over-romney/
4:28 p.m.
Apr 16, '12
Bill -- it is a matter of priorities, not guilt. State economists recently estimated that the leg will have $1.9 billion more general fund revenues next biennium. How those are spent will be on the table. The leg allowed a $118 million tax cut for the wealthiest Oregonians to go into effect.
They will also have a plethora of choices about priorities among other tax expenditures, such as our subsidy of homes purchased with million dollar mortgages and a special deduction for medical expenses that disproportionately benefits wealthy seniors.
There's no shortage of policies that favor the wealthy at the expense of low- and middle-income Oregonians that can be changed to pay for this important improvement for working families with children.
3:57 p.m.
Apr 17, '12
"The leg allowed a $118 million tax cut for the wealthiest Oregonians to go into effect."
Am I mistaken, Chuck, or didn't you actively campaign for the ballot measure that included that tax cut?
1:34 p.m.
Apr 18, '12
Jack,
You are not mistaken, and like you and a supermajority of the legislature, when we supported the measure we thought the economic recovery would be quicker (less anemic) and thus state revenues necessary to support vital public services would rebound quicker.
By January of this year (if not during the 2011 session) it was clear that the time set for the temporary rate structure was too short.
10:15 p.m.
Apr 17, '12
Stated simply, Bill, from people who can afford it.
3:13 p.m.
Apr 16, '12
According to this Huffington Post story on what states tax the poor the most, Oregon comes in at #3. Awesome!
http://www.huffingtonpost.com/2012/04/14/states-taxes-poor-most_n_1424386.html
On "Up w/ Chris Hayes," David Cay Johnston mentioned that Oregon who has the shortest school year in the nation gave enough tax breaks to business to add two full days onto the school year.
This was the headline in the Register-Guard two days ago:
"Teachers’ pay cut in contract" http://www.registerguard.com/web/newslocalnews/27908720-41/teachers-district-eugene-million-union.html.csp
4:31 p.m.
Apr 16, '12
Don't confuse the income tax with taxes in general...but when it comes to the income tax we have the third highest tax for two-parent families of four with income slightly above poverty (125 percent of poverty). See Oregon Income Taxes Reach into Poverty.
3:02 p.m.
Apr 18, '12
Chuck, I'm with you on this. But passing anything on taxes is damn difficult. What seems to be much easier to pass are ballot measures increasing the minimum wage, which can ease financial pressures on low income, and builds upward pressure on wages.
9:26 p.m.
Apr 20, '12
Good point, Bill. In Oregon we actually tax our poorer citizens more fairly than most states, when one considers the total state and local tax burden.
The truth is that Oregon’s lowest quintile of income earners pay 8.7% of their income in state and local taxes and their equals in Washington state pay twice that, 17.3%. I’d rather be earning $10 an hour in Oregon than in Washington, despite the information on the map and in Chuck’s post. To talk only about income tax is misleading. Our income tax dependent state does impose the income tax income a relatively low income levels. But compared to other states we actually look good on total taxes because we aren’t charging sales tax on the first $100 a poor family earns. Talking about one kind of tax without mentioning the total tax burden isn’t exactly straightforward. The problem for poor people in Oregon isn’t really with either taxes or subsidies like EITC, it lies with the amount that employers in Oregon pay. Our per capita income is lower than in most states, by 10%. The solution isn't in the tax code; it's in the wages paid. If every employer increased wages 10%, Oregon’s lower per capita income statistics would go away.
Chuck is absolutely right about priorities. But I wonder, if we raise the EITC, will you stop writing columns about the "fact" that Oregon is one of the states that levy INCOME taxes on the working poor?