End-of-Session Bill Number Change Resurrects Wealthy Tax Cut and Threatens Popular Government Services

News Release
July 9, 1999

End-of-Session Bill Number Change Resurrects Wealthy Tax Cut and Threatens Popular Government Services

An end-of-session maneuver, called a "gut-and-stuff," replaced one tax cut bill, Senate Bill 535, with the contents of another, Senate Bill 537-A. The revised bill, Senate Bill 535-B, is on its way to a vote in the State House of Representatives. SB 535-B would increase the amount of federal income taxes subtracted from state taxable income from $3,000 to $5,000. It would take effect in 2001 if voters approve the measure in a referral to the November 2000 ballot. The measure's primary promoter is Associated Oregon Industries (AOI), a business lobby group.

Related Material

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, May 1999, by the OCPP and the Institute on Taxation and Economic Policy

"This is a tax cut for the wealthy," said Charles Sheketoff, executive director of the Silverton-based Oregon Center for Public Policy. "On average the poorest 40 percent of Oregonians will receive no tax relief."

According to a study by the Oregon Center for Public Policy and the Washington, D.C.-based Institute on Taxation and Economic Policy:

"The impact to the state would be phenomenal," said Sheketoff. He referred to a projection by the Legislative Revenue Office showing that such a tax cut would cost the state $43 million in the last six months of the 1999-01 biennium and as much as $223 million in the 2001-03 biennium, when fully implemented.

Sheketoff notes that the $223 million price tag exceeds the Governor's Recommended 1999-01 general fund spending for all of the following agencies combined:

"It is also more than Oregon spends on juvenile justice, welfare, or the state police," said Sheketoff. "At a time when legislators are negotiating, bitterly, over how to distribute an already limited budget, they are asking voters to limit future budget options in order to benefit Oregon's most fortunate."

An analysis of the prior version of the bill is available on the OCPP web site, www.ocpp.org.

SB 535-B
Effect of Increasing the Cap of Deductibility of Federal Income Taxes to $5,000 (Oregon Residents by Income Group, 2001)

Income Group

Bracket Starts At

Average Income in Group

Tax Cut as % on Income

Average Tax Cut

Percent of Total Tax Cut

Tax Cut as % Income Tax

Lowest 20

$0

$8,800

0.0%

$0

0%

0.0%

Second 20%

$14,000

$19,800

0.0%

$0

0%

0.0%

Middle 20%

$26,000

$31,900

-O.1%

-$24

8.4%

-1.7%

Fourth 20%

$40,000

$51,600

-O.2%

-$98

34.2%

-3.8%

Next 15%

$65,000

$82,700

-O.2%

-$160

41.6%

-3.3%

Next 4%

$119,000

$169,200

-O.1%

-$182

12.6%

-1.7%

Top 1%

$273,000

$720,500

O.0%

-$184

3.2%

-0.3%

Source: Institute on Taxation and Economic Policy Microsimulation Tax Model, July 1999.

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