Vote Facts, Not Fear
On Ballot Measures 66 & 67
By Robert Olsen, Ph.D. economist
Ballot Measures 66 & 67 have created the usual blizzard of half truths and outright lies as special interests attempt to defend their privileged financial positions. Those who stand to lose the most develop catchy simpleminded messages that distort the facts in order to deceive voters into voting against community interests. The Oregon taxation situation is quite clear. Some of the most relevant facts are briefly discussed in this letter. However, two important points need emphasis.
First. What is most important is how much a person or corporation actually pays relative to its taxable income. Therefore only “effective” tax rates matter, not the “statute rates” as stated by a taxing authority. Taxpayers are subject to exclusions and deductions that allow them to legally avoid some tax burden and thus realize very low “effective” tax rates. Thus their nontaxed profit (income) is much larger than one would otherwise suspect.
Second. Economists and psychologists acknowledge that the value of a dollar becomes less as a person becomes more wealthy. For example, an additional $100 to the food budget of a struggling family improves their quality of living more than $100 to a millionaire. This is one reason why it is usually been deemed socially desirable to tax the wealthy at higher rates than the poor. Now for some facts!
Individual Income Tax Burden
The poor in Oregon experience higher effective tax rates than the wealthy. The poorest 20 percent of the population pay total taxes (income, excise, property, etc.) at a rate of approximately 9.2 percent while the richest 20 percent pay taxes at a rate of about 7.2 percent. The middle income folk pay at a rate of about 8 percent.
From 1977 to the start of the recent recession the income gap between the average and wealthiest (top 1 percent) families in Oregon rose 266 percent from about $300,000 to $800,000. Thus the rich have gotten very much richer relative to the poor and the middle class since 1977. In Oregon the wealthiest 20 percent of the population receives about 50 percent of the total state income while the remaining 80 percent of the population share the remaining 50 percent.
Average Oregon personal effective income tax rates are lower than the national average (5.7 percent versus 6.7 percent) while the effective tax burden on the wealthy is below that for the U.S. as a whole. The proportion of Oregon fulltime working families who fall below poverty guidelines has risen by 50 percent, from 4 percent to 6 percent of all families, between 1979 to 2009.
Corporate Income Tax Burden
Oregon corporate tax burdens are low compared to the U.S. as a whole. In particular Oregon corporate income taxes, as a percent of total state gross income, is about 5.6 percent. compared to the U.S. average of 6.5 percent. In addition more than 50 percent of Oregon corporations pay the minimum $10 per year income tax. The total tax burden on Oregon corporations (income, property, etc.) is now about 1.8 percent of state gross income and below the national average. These low tax burdens when combined with the fact that nationally state and local taxes make up only about .8 percent of corporate business costs suggests that higher state income taxes will have a negligible effect on economic investment and growth.
Since 1970 the state total tax burden has been shifted from corporations to individual citizens. In 1970 corporate income taxes made up about 16 percent of total state income tax revenue. Currently corporate taxes make up only about 6 percent of total state income tax revenues. Similarly, corporate property taxes have fallen from 50 percent of total state property tax revenue to about 40 percent.
Multi-state national firms have been the primary beneficiary of declining Oregon corporate tax burdens. About 85 percent of total state corporate taxable income is generated by non-Oregon chartered firms.
In summary there appears to be little doubt that the large multinational corporations and wealthy individuals in Oregon do not pay their fair share of taxes. By voting yes on Measures 66 and 67 you are demonstrating that you no longer want to subsidize the rich and that you want them to pay a fair share for the better jobs, schools, health care, roads, etc. that Oregonians need if the state is recover from the current recession.
Robert Olsen, Ph.D., is a professor emeritus at the UO Lundquist College of Business Finance and Marketing Department. Information in this column was obtained from state of Oregon, Oregon Center for Public Policy, Center on Budget Policy and Priorities, and the U.S. Statistical Abstract.