Study Shows Tax Cut Only Helps Upper Middle Class Minority of Households

News Release
May 25, 1999

A tax cut measure promoted by the state's business lobby directs the bulk of its cuts to a minority of Oregonians in the top income class and has significant revenue impacts, according to the Oregon Center for Public Policy (OCPP). The measure, Senate Bill 537-A, is on its way to the Senate floor for consideration.

Under current law, Oregon taxpayers can deduct up to $3,000 of federal personal income taxes paid on their Oregon tax returns. SB 537-A would increase the limit to $5,000 starting in January 2000. The measure would reduce tax revenues in the 1999-01 biennium by $143 million, and by $223 million in the following biennium. The measure is a legislative priority of Associated Oregon Industries (AOI).

Related materials:

The Consequences of Increasing Oregon’s Income Tax Deduction for Federal Income Taxes Paid (PDF), May 1999, prepared for OCPP by the Institute on Taxation and Economic Policy.

Helping the Top: SB 537-A Provides An Upper Middle Class Tax Cut, by the OCPP and the Institute on Taxation and Economic Policy, May 1999

The OCPP analysis shows that under SB 537-A, the top 40 percent of Oregon households will average a $128 reduction in their income taxes, while the remaining 60 percent of Oregon households will average less than $7 a year reduction.

Fifty-nine percent of the tax break will go to the wealthiest 20 percent of Oregon households, with an average income of about $132,000 a year. The poorest 40 percent of Oregonians will receive no benefit under the AOI proposal.

"The majority of Oregon taxpayers get no significant tax relief from the AOI proposal," said Charles Sheketoff, executive director of the Oregon Center for Public Policy. "This is an upper middle class tax cut that ignores many hardworking Oregonians," he added.

Sheketoff noted that SB 537-A will have significant revenue impacts on the state budget. The amount cut in the next biennium (1999-01) is slightly less than projected spending for all of Oregon's natural resource agencies combined, such as agriculture, forestry, fish and wildlife, parks and recreation and environmental quality. When fully implemented in the 2001-03 biennium, the cost will exceed state spending for the juvenile corrections agency (Oregon Youth Authority) or the state welfare programs (Adult and Family Services).

"Decision makers need to consider who benefits from the tax credit, and whether Oregon can afford to make such significant cuts in state spending," said Sheketoff.