Who Pays the Most Taxes?

By Kris McDowell

According to the Institute on Taxation and Economic Policy (ITEP), Oregon’s poorest families pay more in taxes as a share of income than any other group in the state. The ITEP report, which the Oregon Center for Public Policy (OCPP) helped to release, shows that the state’s tax system remains inequitable, with middle-income families and the rich paying a smaller share of income in taxes than the poorest families.
The report, entitled “Who Pays?,” is an analysis of all 50 states and the District of Columbia. It assesses how progressive and regressive various state’s tax systems are, providing a detailed analysis of features of each state tax code and profiles that provide baseline data to help lawmakers the public understand how current tax policies affect taxpayers at all income levels.
Regressive taxes are “upside-down,” meaning that low- and middle-income families pay a greater share of their income than wealthy families do. According to the ITEP, “On average, the lowest-income 20 percent of taxpayers face a state and local tax rate nearly 60 percent higher than the top one percent of households.”
Oregon is one of the 10 jurisdictions with the least regressive state and local tax systems. Seven of them have state and local tax systems that do not worsen income inequality overall (and actually lessen it for some groups) and the other three, including Oregon, have tax codes that tilt slightly regressive overall. While Oregon’s tax structure looks better than many states in a national context, taxes take up approximately 12 percent of the income of Oregon’s lowest-earning tax filers while the middle fifth pays 9.7 percent and the richest one percent pays 10.4 of their income toward taxes.
Daniel Hauser, Deputy Director of the OCPP, said, “Oregon’s lowest-income residents are struggling to afford rent and put food on the table. Asking these Oregonians to pay a larger share of their income in taxes than the highest-income Oregonians is a disgrace.” To reverse this situation he advocates increasing taxes on the rich, adding a tax bracket for those with more than $1 million in annual income and ramping up the Earned Income Tax Credit (EITC). The state EITC is a refundable tax credit that mirrors a federal tax credit with the same name and helps low-income working families.
The ITEP has identified several important factors of states that have more equitable tax systems. These include highly progressive income tax brackets and rates; the use of targeted, refundable low-income credits; broad-based income taxes; and a higher reliance on income taxes and lower reliance on regressive consumption taxes. In Oregon, progressive tax features include an absence of a statewide sales tax; a graduated personal income tax structure; a refundable dependent care tax credit; a refundable Child Tax Credit (CTC) for young children; and a refundable EITC. Oregon also levies a state estate tax and requires combined reporting for the corporate income tax with some foreign tax haven income subject to Global Intangible Low Taxed Income inclusion.
On the other side of the coin, Oregon’s EITC is comparatively low and there is no property tax “circuit breaker” credit for low-income homeowners or non-senior renters to help them pay their property tax bills. Two other regressive tax features in Oregon are lower personal income tax rates for pass-through business income (advantageous to high-income and disproportionately white taxpayers) and a partial income tax deduction for federal income taxes paid, allowing taxpayers to reduce their state taxable income by the amount of federal income tax they pay (which is progressive and heavily favors upper-income families).
Hauser said, “Oregon’s tax system remains inequitable. Our tax system should reduce Oregon’s record-high levels of income inequality, but instead it makes it worse.” He called on the Oregon legislature to take steps to reverse this situation by “working on both ends of the income ladder.” Those steps would include adding “Millionaire’s Tax” (an additional tax bracket for people who have more than $1 million in annual income) and ramping up Oregon’s EITC to lower the taxes of those who earn the least.

Who Pays the Most Taxes?

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