Oregonians in low-wage jobs are paying some of the nation’s highest state income taxes, according to a report released today by the Washington, D.C.-based Center on Budget and Policy Priorities and the Oregon Center for Public Policy. The income tax burden borne by families just above the poverty line in Oregon is one of the highest in the nation.
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State Income Tax Burdens on Low-Income Families in 2001 from the Center on Budget and Policy Priorities
“The majority of states with income taxes don’t tax the work effort of families with incomes below poverty,” said Chuck Sheketoff, executive director of the Oregon Center for Public Policy (OCPP). “In contrast, Oregon taxes the work effort of poor and low income families.”
A two-parent family of four in Oregon earning about $10.88 an hour in 2001, or about 125 percent of the federal poverty level, can expect to pay $749 in state income taxes, an amount exceeded in only two other states. The tax on families of three at 125 percent of poverty in 2001 is $424, the fifth highest in the nation. Oregon’s income tax on a family of three working full-time at minimum wage in 2001 is the eighth highest in the nation.
“Oregon should not be pushing low-wage working families deeper into poverty,” said Sheketoff.
The research group said there is an easy fix that can help low income families. “Expanding the state Earned Income Credit is the most targeted and effective way to lower the tax burden for low income working families,” said Sheketoff. Sheketoff said the tax credit for low income working families should be increased and made refundable, so even the lowest income Oregonians can fully benefit.
Sheketoff noted that Oregon’s tax on the poor is particularly troubling given the dramatic increase in the number of working families with children who are in poverty. According to Census data analyzed by the OCPP, from the late 1970s to the late 1990s the share of Oregon working families with children who were poor doubled. As the decade ended, even before the current recession, one out of seven working families with children in Oregon was poor.
The national report focuses on the income tax, but many states have other taxes that disproportionately impact the poor. Sales taxes, excise taxes, and property taxes typically consume a higher proportion of the incomes of poor people than of wealthier people. In those states people often pay more in consumption taxes than they do in income taxes. Nonetheless, income tax burdens on the poor are significant because income tax reform can easily target tax relief to low income families and can support welfare-to-work efforts.
In Oregon, the poor have the highest overall tax burden when all local and state taxes are taken into consideration. According to a report by the Legislative Revenue Office and Oregon State University, Oregon’s lowest income households, those earning less than $14,525, pay 13.1 percent of their income in state and local taxes, while the most well off households, those earning over $126,172, pay 12.4 percent of their income in taxes.