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How Would Expanding Oregon's Deduction for Federal Income Taxes Paid Affect Elderly Oregonians?

A Distributional Analysis of Ballot Measures 88 and 91

Executive Summary

Oregon is one of nine states that allow taxpayers to claim federal income taxes paid as a deduction on personal income tax forms. Oregon taxpayers can deduct up to $3,000 of federal personal income tax on their Oregon tax returns. There are two initiatives proposing changes to this structure. Measure 88 would increase the deduction of federal income taxes from $3,000 to $5,000. Measure 91 would allow Oregonians to deduct all of their federal personal income tax. This analysis assesses the impact of these two initiatives on elderly taxpayers at different income levels.

Distributional Effects of Measure 91:

• More than three out of every four dollars (78 percent) cut from taxes of the elderly would go to the wealthiest six percent (6 percent) of elderly Oregon residents—those with incomes over $100,000.

• The average tax cut awarded to these wealthiest of Oregon's elderly would be over $4,000.

• Those earning $50,000 or less comprise 73 percent of elderly taxpayers. They would receive only one percent (1%) of the tax cut created by this measure, and would enjoy on average a $4 tax cut.

• Only about four percent of this group would receive any state income tax cut at all.

• Of the entire elderly population, three out of every four will receive no benefit from Measure 91.

Distributional Effects of Measure 88:

• The lowest-income 73 percent of elderly Oregonians (those earning $50,000 or less per year) would receive only 5 percent of the tax cut from Measure 88, and their average tax cut would be $3.

• The best-off six percent (6%) of Oregonians over 65 would receive thirty percent of the Measure 88 benefit.

• As with Measure 91, three out of four elderly Oregonians would receive no tax cut at all from the Measure 88 change.