Your Constituents Utilize the EITC

May 12, 2009 Download PDF

Improving It Should Be Part of Any Revenue Package

As the 2009 legislature enters its final weeks and considers revenue bills to balance the budget and make the state tax system more fair, each legislator should know that a significant share of their constituents utilize the Earned Income Tax Credit (EITC). The following tables and maps show that in the average legislative district one in seven taxpayers receives the EITC. In some districts, the figure is more than one in five.

As noted in the following tables, in 2006 the federal EITC brought $391 million in federal dollars into Oregon, averaging $6.5 million per House district, $13 million per Senate district.

Oregon supplements the value of the federal credit with the Oregon EITC, which currently equals 6 percent of the federal credit.

Oregon’s credit is small. The average recipient gets about $85. Oregon’s EITC is among the smallest of state EITC credits. At 6 percent it is only one-third the size of what it would need to be to rank in the middle of the pack among state EITCs. If increased to 18 percent, it would not only match the typical state EITC, but it would spare working poor families from paying income taxes on their wages.

Most states have moved away from levying income taxes on the working poor, but Oregon has not. Raising the Oregon EITC is the most targeted way to accomplish that goal.

Increasing the Oregon EITC would be a small but important step in making Oregon’s overall tax system more fair. When state and local taxes are combined, Oregon’s low-wage workers pay a higher share of their income in taxes than the highest-paid workers. The 20 percent of non-elderly Oregon families at the bottom of the income scale pay 9.3 percent of their income in state and local taxes, while the top 1 percent pay only 6.7 percent.

Increasing the Oregon EITC would start to reverse that imbalance. Moreover, it would help counter some of the regressive proposals seriously under consideration as the session enters the final weeks, such as increases in fuel and vehicle taxes and fees and increases in beer and tobacco taxes.

House Bills 2066 and 2768 and Senate Bill 392 each propose to improve Oregon’s EITC by increasing its size to 18 percent of the federal credit. A significant number of constituents in every legislative district utilize the EITC. Improving the Oregon EITC should be part of any revenue package the legislature develops this session.