Oregon’s Taxation Laws Favor the Rich, Report Says

Although Oregon is ranked as one of the least regressive states in the country, its taxation laws are skewed in favor of the wealthy. According to the latest Tax Inequality Index by the Institute on Taxation and Economic Policy (ITEP), only six states and the District of Columbia have lower tax rates for low-income families.

Oregon’s Low-Income Population Pays Highest Taxes

Although Oregon is one of the least regressive states in the country, its taxation laws favor the wealthy. According to the latest Tax Inequality Index by the Institute on Taxation and Economic Policy (ITEP), only six states and the District of Columbia have lower tax rates for low-income families.

In Oregon:

• Residents earning less than $23,700 comprise 20 percent of the population and pay taxes at the highest rate of 12 percent.
• Oregon’s wealthiest residents comprise 1 percent of the population. With an income over $702,500, they pay 10.4 percent.
• The state’s lowest tax bracket, at 9.7 percent, belongs to 20 percent of the population who earn between $44,100 and $81,200, a substantially larger income than the 12 percent tax group.

This skewed taxation scale also applies to property taxes. Low-income earners pay 4.8 percent, while top-income earners pay the lowest rate of the entire population at 2 percent.

However, when it comes to personal income tax, this scenario is swopped around with the wealthy taxed at 7.7 percent and the lower bracket at 1.9 percent.

According to the report, Oregon’s tax system is skewed towards regressive because the high-income bracket pays less than some middle-income groups while its low-income families are the most heavily taxed.

Oregon’s Progressive and Regressive Tax Features

Some of the progressive taxation features that drive the Oregon regressive table include:

• Graduated personal income tax structures
• No sales tax statewide
• A refundable Child Tax Credit (CTC) for children under six years
• A refundable Dependent Care Tax Credit
• An Earned Income Tax Credit (EITC) refund
• Estate tax levies

On the opposite end of the scale, Oregon’s regressive taxation features are:

• No property tax credits for low-income homeowners and tenants
• A lower personal income tax rate on ‘pass-through’ business income
• Partial income tax deduction for federal income tax payments
• A comparatively low Earned Income Tax Credit (EITC)

Low-Income Earners Pay Nearly 60 Percent More

The report highlights the fact that Oregonians who earn the least, pay the most tax – the lowest-income taxpayers face a state and local tax rate of nearly 60 percent more than the top 1 percent of wealthy households.

Comparatively high tax rates on low-income families are the national norm, despite recent steps to lower taxes for this group by bolstering refundable tax credits, says the report. It points out that tax structures exacerbate inequality in 44 states.

Oregon’s Tax Policy Must Become a Force for Good

The deputy director of the Oregon Center for Public Policy, Daniel Hauser, says that while the state has one of the lowest regressive tax systems, low-income residents remain over-taxed.

Hauser contends that Oregon’s taxation policy should reduce inequality by becoming ‘a force for good’ and has called for a new tax bracket on millionaires.

But the research director of the taxation think-tank, Carl Davis, points out that the state’s tax system is one of the best in the country. There is no sales tax, and personal income taxation is progressively higher from low to top-end to income-earning groups. He also points out that Oregon’s Earned Income Tax Credit is among the lowest of any state in the country.

Another plus factor of Oregon’s taxation system is the Child Tax Credit (CTC) signed into law by Governor Tina Kotek last year for families earning below $30,000 annually. They are entitled to a $1,000 credit per child under the age of six years.

Last year, State Republican E. Werner Reschke (R-Klamath Falls), sponsored a new tax system bill that died in committee. It called for the creation of new income tax brackets offering lower rates.

References

https://itep.org/whopays-7th-edition/