January 7, 2010
Repeal of Oregon Tax Increases Would Improve State Business Tax Climate
January 26 Referendum to Repeal Income, Corporate Tax Increases Would Improve Oregon's Business Tax Climate Ranking from 14th to 8th
Washington, DC, January 7, 2010 -- If Oregon voters decide to reject income and corporate tax increases passed by the legislature in 2009, the state would move back into the top 10 in the Tax Foundation's 2010 State Business Tax Climate Index, according to a new Tax Foundation report.
The January 26 referendum would repeal Measure 66, which includes two new individual income tax brackets (with rates at 10.8 percent and 11 percent), and Measure 67, which replaces the state's previous flat corporate income tax with a bracketed system and a top rate of 7.9 percent.
"One of the major stories from our State Business Tax Climate Index this year was that Oregon fell out of the top 10 due to tax increases passed by the legislature in 2009," said Tax Foundation Staff Economist Kail Padgitt, Ph.D., who co-authored the new report with Tax Counsel and Director of State Projects Joseph Henchman. "Oregon had consistently ranked among the 10 best states for tax climate, but it fell from 8th to 14th when the governor signed the legislature's tax hikes into law. The people will now vote to accept or refuse those tax hikes."
Tax Foundation Fiscal Fact No. 206, "Oregon Referendum Could Reinstate Higher Income Tax Rates," is available online at http://www.taxfoundation.org/publications/show/25680.html. The Tax Foundation's 2010 State Business Tax Climate Index is available online at http://www.taxfoundation.org/research/show/22658.html.
If Measure 66 passes, the new top individual income tax rate of 11 percent, combined with local income taxes, would give Oregon the highest income tax rate in the nation (Hawaii is the only other state with an 11 percent top rate, but does not have local income taxes). If the measures pass, the new, higher rates would go into effect retroactively to January 1, 2009; if the measures fail, the tax increases are cancelled.
If both measures are upheld by voters, Oregon's State Business Tax Climate Index ranking would remain where it is at 14th. If the individual income tax is rejected but the corporate income tax is enacted, the state's ranking would improve to 9th. If the individual income tax is enacted but the corporate income tax is rejected, the state's ranking would improve one spot to 13th.
"Oregon legislators have attempted to dump the majority of its new tax burden onto a small group of high-income Oregonians," Henchman said. "If these individuals move out of state or choose to work less, both the state budget and the state economy will suffer. Both Oregonians -- who are waiting to file their 2009 tax returns until after the referendum -- and observers nationwide from states facing similar budget situations will be carefully watching the results on January 26."
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
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Tax Foundation Fiscal Fact No. 206¸ "Oregon Referendum Could Reinstate Higher Income Tax Rates," is available online at http://www.taxfoundation.org/publications/show/25680.html. To schedule an interview, please contact Tax Foundation Manager of Media Relations Natasha Altamirano at (202) 464-5102 or naltamirano@taxfoundation.org.