LORI CAIN / PHOTO
Wayne Brady carves a wooden rocking horse at Walker Studio. Brady, who is retired and owns rental properties that will be affected by a tax increase, opposes Measure 30. “I think if we just keep on feeding (legislators), they’re just going to keep on spending,” he said.
January 18, 2004
At $1.2 billion, the state tax package on the Feb. 3 ballot amounts to one of the biggest tax increases in Oregon history.
Citizens for a Sound Economy—which led the initiative drive to send the package to voters as Measure 30 — gives it a price tag of $825 per household.
But the hit to Oregonians’ wallets is highly variable, much like President Bush’s tax cut in reverse. Well-off Oregonians pay much of the tab, as middle- and lower-income people get off relatively lightly.
Salem retiree Wayne Brady, who owns 13 rental properties, expects to pay an extra $1,300 per year.
Gary Obery, a state traffic engineer from Salem, will pay about $50 more per year.
Brady predicts that the tax increase will send businesses packing to other states.
Obery isn’t complaining, especially after getting a state “kicker” tax rebate of more than $100 in 2001, when the state was flush with money.
“Unfortunately, the state doesn’t have a rainy-day fund, so I guess this is how we make it up this year,” Obery said.
Mindful that Oregon’s jobless recovery has left many people in precarious straits, the 2003 Legislature designed the tax package on an ability-to-pay basis. With some exceptions, those who have the most money pay most of the freight, sparing those who don’t have much to give.
“The biggest concern was the distribution of the burden. You’re looking at trying to minimize the effect at the low end,” said Paul Warner, the Legislature’s nonpartisan revenue officer.
People with taxable incomes of less than $10,000 won’t pay extra for the income tax surcharge that is the centerpiece of Measure 30.
All lower- and middle-income Oregonians with adjusted gross incomes of less than $50,000 would pay one-tenth of the total surcharge, even though that is two-thirds of all taxpayers.
A married couple with $65,000 taxable income would pay less than $100, or 4 percent more than before.
Oregonians with adjusted gross incomes of more than $200,000 would pay more than one-third of the total surcharge. Their state income taxes would go up 9 percent.
The average income tax increase for all Oregonians is $133 per year, Warner calculated, or $111 after adjusting for the extra federal tax deduction that they will get.
“For only $10 a month, it’s a good deal for the working families of Oregon to maintain theses services,” said Tim Nesbitt, president of the Oregon AFL-CIO.
State Sen. Kurt Schrader, D-Canby, argues that Oregonians will wind up paying less in overall taxes each year because of the 2003 federal tax cuts. Those cuts will reduce Oregonians’ federal tax bill by $1 billion for 2003, Warner said, more than the hit from Measure 30.
Critics say making the well-off shoulder most of the burden will backfire. “The people that have the money are the ones that create jobs,” said Brady, the real estate investor.
Sheer numbers don’t tell the full impact of Measure 30, said Russ Walker, Oregon leader of Citizens for a Sound Economy. One person might only pay $34 in taxes, he said, while someone in the same income bracket might lose their job because their company went out of business.
Other elements of Measure 30 could prove costlier to some Oregonians than the income-tax surcharge.
Judith DeSpain of Keizer fears the erosion of Oregon’s special medical tax break for seniors—the only one of its kind among the states — will prove costly when she turns 62 in a few years. Her husband is on disability, and they are paying $819 per month for health insurance. “We’re paying more for health care than for our house payment,” she said.
Other groups affected by Measure 30:
# Smokers will continue paying an existing 10-cents-per-pack cigarette tax that would be voided if Measure 30 fails. At two packs per day, that is $73 per year.
# Property owners who pay their annual tax bill in a lump sum will see the early-payment discount chopped from 3 percent to 1.5 percent. That is more than $33 per year for owners of a home with a $150,000 taxable value.
# Corporations could no longer pay the $10 minimum corporate tax, as enjoyed by Portland General Electric. The minimum tax would rise to $250 to $5,000, depending on sales and the type of corporation.
# Some corporate tax breaks would be deferred for three years, although companies could carry the deductions forward and declare them later.
# Exporters would lose a tax break for offshore income.
# Corporations with subsidiaries would lose half their tax break for dividend income for three years.
# Sport utility vehicle owners would lose a special tax break.
The government gives and the government takes away
Here are the added state taxes that Oregonians would owe, in four income categories, under Measure 30. It’s less than they got back from the 2003 federal tax cut and 2001 state kicker rebate, but that may not make it any easier to swallow.
Lower-Income Taxpayers ($10,000 to $20,000 Adjusted Gross Income) Moderate Income ($30,000 to $40,000 AGI) Higher Income ($70,000 to $100,000 AGI) Highest Income ($200,000 or more AGI)
Measure 30 income tax increase (does not include other elements of the tax package) $4 $46 $228 $2,348
2003 federal tax reduction $31 $176 $1,189 $11,499
2001 state kicker rebate $29 $103 $297 $2,478
Sources: Legislative Revenue Office, Oregon Revenue Department
Steve Law can be reached at (503) 399-6615.