Did you know that Oregon’s wealthiest households are slated to get a big tax cut next year, even though a $3.5 billion revenue shortfall threatens schools, health and human services and public safety that the majority of Oregonians rely upon each day?
On January 1, 2012, the state’s top income tax rate drops from 11 percent to 9.9 percent. That’s a 10 percent tax cut on couples’ income in excess of $500,000, and an 8 percent tax cut on their income from $250,000 to $500,000.
The result: the 4 percent of Oregon households with income of $250,000 or more will reap a $134 million tax cut in the next two year budget period, and $247 million in savings in the 2013-15 budget period when income from capital gains are expected to have rebounded to pre-recession levels.
The 2009 legislature wrote the tax cut into the law that eventually became Measure 66, approved by voters in January 2010. When lawmakers made the decision in June 2009, state economists were forecasting a faster and stronger recovery from the Great Recession than what has taken place, so lawmakers assumed we could afford to reduce the top tax rates for the wealthiest. Back then Oregon was projecting adequate revenues for the 2011-13 budget period.
Members of the corporate lobby want to keep the tax cut a secret. They spent millions of dollars on a campaign calling the 11 percent rate “permanent.” And at a recent legislative hearing on a bunch of bills on capital gains, not one proponent of cutting the income tax on capital gains — a tax cut that benefits speculators and other wealthy Oregonians and creates a work penalty in our tax structure — mentioned that the wealthiest Oregonians who realize most of the capital gains income were already going to see their taxes go down in January. Listen to the hearing.
It’s not as if moneyed interests haven’t already gotten hefty tax cuts and breaks. Earlier this month, the big business lobby succeeded in pressuring the legislature to pass a tax cut for businesses to the tune of $93 million. Even though economists have found these loopholes to be ineffective at stimulating the economy, the big business lobby’s strong-armed tactics muscled through the giveaway.
With a $3.5 billion recession-induced revenue shortfall, the legislature needs to act in the interest of middle class and low-income Oregonians. The well-off are precisely that — well off and doing fine, thank you. Keeping the top tax rates at the current level won’t negatively affect them in any meaningful way.
The $134 million is real money. Rather than spending it on another tax cut for the wealthy, that money would be better spent helping the middle class by shoring up schools, health and human services and public safety.