Oregon’s Tax System: Poor and Middle Pay More than Rich

Chuck Sheketoff

A new report by the Institute of Taxation and Economic Policy (ITEP) makes clear that Oregon’s tax system — the combination of all state and local taxes — asks more of low- and middle-income families than it does of wealthy families.

While Oregon families in the bottom fifth of the income scale pay 8.3 percent of all of their income in state and local taxes, the rate is 7.6 percent for families in the middle of the income scale, and 7.0 percent for the wealthiest 1 percent of families (PDF; 2-page summary).

That said, Oregon’s tax system compares favorably with that of nearly all other states in the nation. The report lists Oregon among the five states with the "least regressive tax systems." The others in this group are Delaware, the District of Columbia, New York and Vermont.

What features of our tax system make us less regressive? As ITEP notes, we have a progressive income tax system, we have a modest refundable Earned Income Tax Credit for working low- to moderate-income families, and we don’t have a general sales tax. The ITEP report also notes that the wealthiest Oregonians saw their income tax rates reduced in 2012.

Who has the most regressive tax system? Our neighbor to the north. According to ITEP, in the state of Washington, families at the bottom fifth of the income scale devote 16.9 percent of their income to state and local taxes, while those at the top of the income scale pay only 2.8 percent.

Of course, as Jesus and Adam Smith would tell you, any tax system where the wealthy don't pay a greater portion of their income in taxes than the poorest pay — including Oregon's — is unfair.

While we might take some comfort in knowing our tax system ranks "less bad" when compared to others, at OCPP the struggle continues to base our tax system on ability to pay.

---

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.

By Chuck Sheketoff Feb. 01, 2013 Posted in open discussion.