6 key facts about Oregon taxes

Chuck Sheketoff

1 . The personal income tax is the main way our state funds the things that matter to Oregonians

The personal income tax — the taxes we pay out of our earnings — brings in about 85 percent of all the money that goes to the state budget, generally called the General Fund & Lottery Funds Budget. About 91 percent of the state budget goes to just three things: education, health and human services and public safety.

2. Corporations’ tax contributions have shrunk over the last four decades

In the mid-1970s, corporations contributed about 18 percent of all income taxes collected by the state of Oregon. Today, corporations pay just about 7 percent, forcing families to pick up the slack. Today, the Oregon Lottery brings in more revenue to state coffers than the corporate income tax.

3 . Oregon’s tax system asks more from the poor than it does from the richest Oregonians (though not as much as most other states)

When you consider all the taxes collected by state and local governments, it turns out that poor Oregonians pay a higher share of their income in taxes than do the wealthiest Oregonians. While the personal income tax is based on ability to pay, Oregonians pay other taxes that are not connected to how much someone can afford to pay, such as property taxes and excise taxes on things like gasoline, alcohol and tobacco. Oregon’s poor-pay-more system compares favorably to other states: Oregon’s heavier burden on the poor versus the rich is not as bad as that of nearly all other states (Oregon’s northern neighbor Washington has the worst burden on the poor versus the rich).

4. Oregon taxes the work effort of poor people

Of the states that levy an income tax, Oregon is one of the few that tax the earnings of working poor families with children. The vast majority of states with income taxes do not levy the income tax on the working poor so that they can better meet their basic needs.

5 . Oregon’s biggest income tax deduction, which is also the state’s biggest housing subsidy, mainly benefits the well-off

In terms of cost to the state, the Oregon mortgage interest deduction is the biggest tax deduction on the books, costing nearly one billion dollars in the current biennium. At its current level it is also the state’s biggest housing subsidy. This subsidy, however, mainly benefits those who do not need help affording a home. If you divide all Oregon taxpayers into five groups according to income, the highest-earning fifth together collected 61 percent of the subsidy from the mortgage interest deduction in 2011. The bottom two-fifths (the lowest-earning 40 percent of all taxpayers) together received less than 3 percent of the benefits from the subsidy.

6. Some tax programs are well-designed to help people who need help

While many subsidies primarily enrich corporations and well-off Oregonians, some are well-designed, targeting assistance to those who are struggling to get by. A prime example is the Oregon Earned Income Tax Credit (EITC), which is built on the federal earned income tax credit. Long recognized as one of the most effective anti-poverty tools, the EITC has enjoyed bi-partisan support. In Oregon, the EITC helps more than a quarter-million families — mostly families with children — make ends meet.

Oregon Center for Public PolicyChuck 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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