Some seniors may be wondering whether they should support the Legislature’s revenue package, given the changes the Legislature made in Oregon’s special medical deduction for seniors. A recent report by the non-partisan Legislative Revenue Office (LRO) shows that the answer is plainly yes.
All Oregonians are vulnerable to high medical expenses, but only a minority of disproportionately well-off seniors has been enjoying a special tax break to help pay these costs. The special senior medical deduction allows Oregonians over age 62 who itemize deductions to write off their out-of-pocket medical expenses.
This August, the Legislature made changes to the deduction, as a small part its revenue package for balancing the state budget and avoiding cuts to more state services. The primary change phases out the deduction as income increases. Before the Legislature’s changes, even the wealthiest senior could get the state to help pay for dental visits and contact lenses.
The LRO analysis of the changes shows that the vast majority of seniors will see no change in their tax liability as a result of the new policy. The LRO report was a bit confusing, but when you add up the LRO’s numbers you learn that 69.5 percent of all seniors will not pay any additional taxes as a result of the tax change.
Here’s how the math works:
The LRO report indicates that over half of all seniors – 53 percent – do NOT use the deduction. Only the minority of seniors – 47 percent – who itemize and have medical expenses use the deduction.
In addition, the LRO report notes that more than a third (35 percent) of those seniors who have enjoyed the deduction in the past (the 47 percent) will still be able to take the full deduction in the future. Multiply those numbers and you learn that another 16.5 percent of seniors will also see no change. The Legislature structured the changes so seniors with the lowest incomes would still get to fully use the deduction.
Since 53 percent of seniors are not benefiting from the deduction anyway, and another 16.5 percent will still be able to take the full deduction, a total of 69.5 percent of seniors will see no increase in their income tax bill.
The LRO report also notes that the average tax increase for those that utilize the deduction will be $150. Because seven out of ten seniors will see no change, the average impact of the change on all seniors will be much less. For all seniors, the average tax increase will be $71, just $6 a month.
The Legislature’s changes were a matter of priorities: cut more state services to vulnerable seniors, as well as to other services like schools and police that seniors support, or reduce a tax break that disproportionately helps a minority of wealthier older Oregonians. For all seniors, and all Oregonians, the Legislature made the right choice.
Michael Leachman is a policy analysis with the Oregon Center for Public Policy. He can be reached at firstname.lastname@example.org.