According to a new report by the Washington, D.C.-based Center on Budget and Policy Priorities (CBPP) (PDF), Oregon remains among a minority of states that tax the income of poor families and our income tax on working poor and near poor families is among the highest in the nation.
In 2009 Oregon income taxes kicked in at $19,800 for a married couple with two children — about $2,150 below the poverty line for a family that size.
Of the 42 states (counting the District of Columbia as a state) with an income tax in 2009, only nine other states imposed income taxes on four-person families with less income.
The vast majority of states — 29 of the 42 with income taxes — do not tax the poor.
A two-parent family of four living at the poverty line with just $21,947 in income had to pay $200 in Oregon income taxes in 2009, the fifth highest amount among states for a family of four at that income level.
A nearly poor family of four — a family with income at 125 percent of poverty, or just $27,434 — paid the fourth highest income tax in the nation, $764.
The bottom line is that Oregon not only sets the level for having to start paying income taxes much lower than most other states, but it also imposes one of the heftier income tax bills on low-income families once they rise above that income level.
Many states either levy no income tax on poor working families or even offer what is essentially a negative income tax, where the families get more money back than they pay in.
The report’s findings confirm the need for a robust improvement to Oregon’s Earned Income Tax Credit (EITC). A boost to the state’s EITC is the most efficient and targeted way for Oregon to raise the income tax threshold and end the practice of taxing the work effort of working poor families.
Links to the CBPP study and a summary for Oregon are located at www.ocpp.org. And if you want to join the effort to increase the EITC, visit Oregonians for Working Families — a coalition of over 95 health and human service organizations, labor groups, businesses and local governments pushing for a significant increase in the state EITC.