When you look across the country at the 41 states plus the District of Columba that levy an income tax, a majority of those 42 jurisdictions do not tax the income of working poor families with children.
Unfortunately, Oregon’s not in the majority. Oregon’s income tax reaches families with income well below the poverty level. Oregon’s tax threshold, the level at which families begin to pay income taxes, is low compared to most states. For example, in 2010 a four-person family started paying taxes when their income was $2,414 below the poverty line, which was $22,314 a year or $1,860 month for a family of that size.
And Oregon income taxes on working families at or near poverty are among the highest in the nation. A two-parent family of four with poverty-level income paid $234 in income taxes, the fourth highest income tax bill in the nation. A near-poor, four-person family — a family with income at 125 percent of poverty ($27,893 in income) — paid $799 in 2010, the third highest income tax bill in the nation.
The most targeted and efficient way to raise the tax threshold and lower the taxes on poor and near-poor households with children is to increase the state’s earned income tax credit (EITC). Shouldn’t that be a priority for the 2013 legislature?
See the one-page fact sheet, Oregon Income Taxes Reach Into Poverty (PDF).