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When Prosperity Passes By

News Release
September 4, 1999

Middle-Income Oregonians, Tax Cuts, and the Economic Prosperity of the Late 1990s

This Labor Day weekend new reports by economists in Oregon and Washington, D.C. show that the strong national and state economy of the last few years has failed to lift the economic fortunes of middle class workers. The reports question the impact of state and federal tax cuts on the economic plight of middle class workers.

The Washington, D.C.-based Economic Policy Institute (EPI) and the Silverton-based Oregon Center for Public Policy (OCPP) each released reports today analyzing the economic status of the middle class. The two reports note that middle class workers across the nation and in Oregon have not seen improvements in wages and benefits nor enjoyed the income gains realized by low wage workers and the wealthiest households during the economic expansion of the late 1990s.

The OCPP's report on the middle class in Oregon, When Prosperity Passes By, documents the following:

The Oregon Center for Public Policy questioned whether tax cut proposals from Washington, D.C. and Salem would help the middle class. The OCPP's report notes that "not having reaped the benefits of our economic expansion, many middle-income families might be tempted to support the kinds of tax cuts debated in Washington, D.C. and Salem. However, the income tax cuts will not solve middle income families' economic dilemmas."

The report notes that the declining wages that many workers have experienced are pre-tax declines. The tax burden has no impact on declining wages, the major source of income for middle class families. In addition, the OCPP report notes that because Oregon's income tax system is basically progressive, middle-income families pay a relatively small portion of total state and federal income taxes collected.

The authors use the distribution of the Oregon income tax "kicker" as an example of how across the board tax breaks provide little relief to the middle class. According to the OCPP's analysis:

"Middle income taxpayers pay a small portion of state and federal income taxes and receive an equally small portion of across the board income tax cuts such as the kicker," noted OCPP economist Jeff Thompson. "While the average kicker refund will be $107, the typical Oregonian will receive only $53. Averages can be misleading."

The OCPP report also noted that the middle class will reap little benefit from a tax cut proposal the Oregon Legislative Assembly referred to the November 2000 ballot. The measure would increase the amount of federal income taxes subtracted from state taxable income from $3,000 to $5,000, and:

"The small benefit to middle income taxpayers will do little to solve the problem of the middle class workers being left behind in the economic recovery of the 1990s," said Thompson.

"State and federal tax cut proposals will not seriously impact the middle class' economic well-being and will do nothing to reverse the larger economic trends that have resulted in falling wages, declining health insurance coverage, and the decline of well-paying middle class jobs," said Thompson.

"The tax cuts will largely benefit those with the greatest ability to pay taxes, while threatening the state's capacity to invest in education, workforce programs, and economic development that can improve the standard of living of middle income Oregonians," Thompson concluded.

The Oregon Center for Public Policy is a Silverton-based, non-partisan research group that analyzes budget and tax issues and government programs, and their impacts on low to moderate income Oregonians. The OCPP's report, When Prosperity Passes By is available on its web site at: http://www.ocpp.org/1999/rpt990904.pdf.

The Economic Policy Institute is a nonprofit, non-partisan economic think tank based in Washington, D.C. Founded in 1986, EPI seeks to widen the debate about policies to achieve healthy economic growth, prosperity and opportunity in the United States. EPI's site is here.

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