Living in poverty? Oregon is still going to tax you

Central Oregonian (Prineville)
January 2, 2012

Oregon is one of 15 states that taxes families living below the poverty level

According to a recently-published national report, Oregon residents in poverty pay more on income taxes than most other states.

The Washington, DC-based Center on Budget and Policy Priorities (CBPP) found that a family of four begins facing income tax liability if they earn $19,900 or more per year. The amount falls $2,414 short of the federal poverty level for a four-person household.

Of the 41 states and District of Columbia that levy an income tax, only 15 states tax a four-person household at an income below the poverty level. Of those, only nine tax households at a lower rate than Oregon’s $19,900.

For Jason Gettel, policy analyst with Oregon Center for Public Policy, the taxation on such a low income stresses impoverished households and makes it more difficult to escape poverty.

"Those families and our state as a whole would be better off if poor, working families could devote all of their income to putting food on the table, paying for transportation, housing and health care costs, and covering other basic needs," he said.

In Oregon, residents become liable for state income taxes once their income exceeds the standard deduction amount. According to Derrick Gasperini, communications manager for the Oregon Department of Revenue, that amount is determined by state statute.

"It's a set calculation based on consumer price indexes and some economic indicators," he explained.

Oregon Senator Doug Whitsett (R-Dist. 28) believes the standard deduction should be adjusted above the poverty line.

"I would agree with the premise that the income tax obligation starts at a pretty low level in Oregon," he said. "It should be based on the ability to pay."

Whitsett is not the only legislator who believes the standard deduction is not high enough.

"There is recognition by many in the state legislature that the trigger for state income taxation is too low," said Oregon Representative Mike McLane (R-Dist. 55).

He went on to add that Representative Katie Eyre Brewer (R-Dist. 29) intends to introduce legislation in February that will address the low standard deduction.

While that is the case, McLane has not decided whether he would approve such a bill or not. Furthermore, he wonders if other lawmakers will support it since an increase in the standard deduction likely means a drop in state revenue.

At the same time, like Whitsett, McLane can understand the need for such a change given the tough times people currently face.

"In the recession where we have disproportionately higher unemployment and food stamp use, it may need to be adjusted to reflect these recessionary times," he said.

Although the threshold for state income tax liability has not changed in recent years, Gasperini pointed out several credits that help offset the challenges impoverished Oregonians face trying to pay income taxes.

"There are earned income credits, working family credits, and childcare credits that folks can qualify for," he said.

Although it helps, Gettel believes the earned income credit is "too small for the task at hand." He went on to say that an increase in the credit would provide households in poverty the most help.

"A meaningful boost to the state’s earned income tax credit is the most efficient and target way for Oregon to raise the income tax threshold and end the practice of taxing the work effort of working poor families," Gettel said.

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