On Whose Backs?

Report

Tax Distribution, Income Inequality, and Plans for Raising Revenue

Executive Summary

Oregon’s current $3.2 billion revenue shortfall and projected revenue shortfalls over the next few budget periods have prompted discussion of major tax reform. As policy makers address tax reform, they will need to consider who will bear the costs of changes to the tax structure.

This study reviews the distribution of Oregon’s current state and local tax system, shifts in the tax burden across the last decade, and trends in income inequality. Low-income households face the highest state and local tax burden, experienced the largest tax increases over the last decade while the wealthy saw their taxes decline, and benefited least from the economic prosperity of the 1990s as income inequality grew.

Download a copy of the report:

On Whose Backs? (PDF), July 1, 2003.

Download just this Executive Summary (PDF).

The study shows:

One theme present in several tax reform proposals is to scale back the income tax and adopt new consumption taxes. These proposals would raise the tax burden of low-income households while decreasing it for affluent households, further skewing the distribution of taxes and exacerbating the problems associated with growing income inequality.

The “ability to pay” principle suggests that tax reform efforts designed to raise more revenue should be targeted to the affluent households who today enjoy the lowest state and local tax burden and who benefited most from the tax cuts and economic prosperity of the 1990s.