Introduction to Oregon Taxes
State government is largely
supported by personal income and corporate excise taxes. Local governments
and schools are largely funded by property taxes. Oregon is one of
only five states in the nation that levies no sales or use tax.
The State of Oregon does not
impose:
-
Motor vehicle excise tax
-
Business and occupations tax
-
Direct levies on intangible property such as stocks,
bonds, or securities.
State government receipts of
personal income and corporate excise taxes are contributed to the State's
General Fund budget, the growth of which is controlled by State law.
Oregon must balance expenditures with receipts and cannot operate in deficit
or maintain a surplus. State law requires the return of unanticipated
revenues to taxpayers.
Oregon has a personal income
tax usually ranking in the top 10 percent of the nation. Since Oregon does not have a sales
tax, its primarily source of revenue is the income tax. Four other
states (Alaska, Delaware, Montana, New Hampshire) also do not have a sales
tax although some Alaska cities do levy a sales tax. Over the years,
Oregon voters have rejected a sales tax nine times.
The Oregon Department of Revenue
maintains a page on their Web site called
Moving
to Oregon that is helpful to new residents of Oregon.
 The
Oregon Center for Public
Policy is a private, non-profit research organization working to provide
timely, credible, and understandable research, analysis, and information
on public policies that affect low to moderate income Oregonians, the majority
of Oregonians.
Oregon Needs Tax Reform
Just about everyone hates taxes but Oregonians seem to
dislike taxes more than the average person. Prior to voters passing Measures
66 and 67 in 2010, the last income tax increase that voters approved was
in the 1930s. They have voted nine times against a sales tax.
Oregonians may not have created the saying, "Don’t tax me. Don’t tax thee.
Tax the man behind the tree" but they have adopted it as their own.
Oregon's "kicker law," underscores Oregon’s distaste for
taxes. When times are good, the state sends kicker refunds to residents
from revenue that exceeds forecasts by state economists. This prevents
the state from saving for a "rainy day" when revenues are low like during
a recession. In December 2007, just as the country was entering a recession,
Oregon returned $1.1 billion to residents, bounty from the previous boom
year, because of the kicker law. By the spring of 2009, as Oregon’s unemployment
rate was on its way to becoming one of the highest in the nation, the Legislature
was voting to raise taxes by $727 million.
Measure 66 increases taxes on household income above $250,000
($125,000 for individual filers) − about three
percent of the state residents will be affected by this higher tax.
They also approved fees and higher taxes on corporations (Measure 67).
What many people on each side agree on is that, recession
or not, Oregon’s tax system is flawed and that passing Measures 66 and 67
is not a long-term solution. Here are the problems:
-
One of the highest income tax rates in the nation
− Oregon is usually in the top five.
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One of five states without a sales tax.
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A statewide cap on property taxes limits how much
local governments can raise rates each year.
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Oregon's "kicker law."
In heavily forested Oregon counties such as
Jackson County, there is another wrinkle. Property taxes were historically
low here in part because the counties received payments from the federal
government for timber production on federal lands. Yet timber production
has declined substantially, and subsequent federal subsidies have not compensated
for the decline. That aid, too, is set to phase out.
Tax Burden: How Oregon Compares
Oregon Legislative
Revenue Office Tax Report When all charges are considered,
including federal taxes and fees, Oregon's share was $7,663 per person
in 2008. That ranks 33 out of 50 states.
Cut out federal taxes and Oregonians paid an average of $3,313 per
person in total taxes, which puts us all the way down to 42nd. Part of
the reason for the drop was the $1 billion-plus in state "kicker"
rebates that occurred in 2007. Without that, Oregon still would have
placed 30th.
Oregon has some of the nation's highest personal income taxes, ranking
it seventh in total income taxes and fifth as a percentage of personal
income. But when all other sources are added in, the state's ranking
plummets. Much of that drop is due to the lack of a sales tax, but also
to relatively low business and corporate taxes.
That's a big change from the 1990s, when the state consistently ranked
in the upper tiers for overall tax burden. Since then, property tax
limits and tax hikes in other states have allowed Oregon to fall into
the lower third.
You can download the report
by click
here.
Tax Foundation
A table from the Tax Foundation's Special Report No.163 published in August
2008, shows the state and local tax burden for each state
− Oregon ranked 26th. To view the table,
click here.
Visitors should also read the full Tax Foundation report.
It contains a great deal of important information about the table and an
explanation of how the calculations were made. You can view it by
going to:
http://www.taxfoundation.org/files/sr163pdf
Federation of Tax Administrators
For 2008, Oregon tax is $1,913 per capita (rank of 43th). At a rate
of 5.5% of personal income, the state ranks 44th. The Federation of
Tax Administrators uses numbers from the U.S. Bureau of the Census and Bureau
of Economic Analysis.
With the new rates approved
by the Legislature in 2009, Oregon now ties with Hawaii for the nation’s
highest income tax rates.
Retirement Living Information
Center The
Retirement Living
Information Center Web site has information about taxes in all of the
states. The site provides access to an array of resource materials,
including reports on great places to retire, tax information on each state,
monthly reports on new retirement communities, an online newsletter, books
and online publications, a guide to state aging agencies, access to information
about special assistive products and services, and links to online stores.
Their Web page entitled, "Effective State and Local Tax Burdens by State
and Rank Projected for 2007" states the following:
-
Tax Burden Rank - 37th
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Tax Burden as a Percentage of Income - 10%
-
Tax Burden per Capita - $3,747
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Income per Capita - $37,356
Measure 66/HB 2649 Oregon voters decided
in late January, 2010, to raise taxes on high income citizens by a margin
of 54.3 percent to 45.8 percent. Measure 66 directly challenges HB 2649
which was signed by the governor. Groups opposing the implementation
of HB 2649 obtained enough signatures on a petition to refer the measure
to the voters. The results triggered waves of relief from educators and
legislative leaders, who were facing an estimated $727 million shortfall
in the current two-year budget if the measures failed.
Measure 66 raises tax on household income at and above
$250,000 (and $125,000 for individual filers). It also reduces income taxes
on unemployment benefits in 2009. It provides funds currently budgeted
for education, health care, public safety, other services.
City of Portland Taxes
The
Tax Foundation
released a report in the summer of 2010 on taxes for metropolitan areas.
They rank Portland 106 (out of 107 areas) for state, county, and local tax
rates in cities with population of 200,000 ranked by total rate as of July
1, 2010.
The combined sales tax rate
varied from zero to 10 percent in the 107 U.S. cities with a population
above 200,000. Those cities account for around 62 million residents or one-fifth
of the U.S. population.
Birmingham and Montgomery,
Alabama, have the dubious honor of levying the highest combined sales tax
rate, 10%; Anchorage, Alaska, and Portland, Oregon, are the only large cities
that levy a zero sales tax at all levels of state and local government.
The county level rates vary
from 5% in New Orleans and Baton Rouge, Louisiana, to 0% in 28 of the 107
cities. The city-level tax has about the same rate of fluctuation, from
5.266% in St. Louis, Missouri, to 0% in 57 of the 107 cities.
Oregon State Income Tax
The Oregon Department of Revenue
has a page called "Common Questions" which explains Oregon income taxes.
Here is the link:
Common
Questions About Oregon Income Taxes.
Tax Forms and Instructions
All forms can be downloaded as blank, fillable forms, and can be completed
online.
Forms and Instructions.
Medical Expenses
Seniors 65 or older by the end of a tax year can deduct all their medical
expenses in Oregon. The federal return only allows a deduction for
expenses that exceed 7.5 percent of income.
Oregon Corporate Taxes and Business
Climate
The latest
Tax Foundation report
on
state tax rates was released in late March of 2010. Oregon ranks No.
14 in business climate, according to the nonpartisan research center. The
Foundation measures business climate based on five burdens
− the corporate tax, individual tax, sales tax,
property tax and unemployment tax.
Oregon's per capita state & local tax collections from corporate income
is low. It ranked No. 35 in 2007 at $155 per person. The national average
was $202.
Individuals, however, take it in the pants in Oregon. It had the seventh-highest
per capita state individual income tax collections at $1,320.
The Council
on State Taxation, which includes multistate and national corporations,
reported in April 2010 that Oregon provided the best “value” to businesses
from the taxes they paid during 2009. Oregon’s state and local business
taxes tied with North Carolina and Delaware for the country’s lowest last
year, according to the group. The state taxation council based its study
on 2009 tax receipts. The “value” is based on Federal Reserve Bank of Chicago
economists’ calculations as to how much state money goes for education and
other services. Such measures determine how much state spending benefits
businesses.
Measure 67/HB 3405 Oregon voters bucked decades
of anti-tax and anti-Salem sentiment in late January, 2010, raising taxes
on corporations (along with the wealthy via Measure 66). The tax measures
passed easily by 53.5 percent to 46.5 percent ratio. Measure 67 sets higher
minimum taxes on corporations and increases the tax rate on upper-level
profits. The measure directly challenges HB 3405 which was signed by the
governor in 2009. Business groups obtained sufficient signatures to
put the measure on a special ballot so Oregon voters would decide the fate
of HB 3405. It changes the 78-year-old $10 corporate minimum tax to a sliding
scale starting at $150 in taxes and based on sales.
Business groups opposed Measure 67 but they were outspent
by unions for teachers and public employees − they
outspent business groups by two million dollars.
The overwhelming majority of Oregon businesses don’t pay
income taxes to the state. Even the bulk of larger “C corporations” pay
just $10 alternative minimum tax, until that tax was raised in 2009 (HB
3405). It’s not that they’re all losing money; most are taking advantage
of write offs and other tax breaks. Portland General Electric, in the days
when it was owned by Enron, sometimes paid the $10 minimum tax, despite
getting a guaranteed rate of profit from state utility regulators.
Among the 33,593 C corporations, which tend to be larger
businesses, state economists estimate that 60 percent would pay a $150 minimum
tax under Measure 67, up from the former $10. Most of the rest of the C
Corporations would pay a new minimum tax based on 0.1 percent of in-state
sales of more than $500,000. That tax was capped at $100,000.
About 5 percent of C corporations will pay a higher corporate
income tax, taxed at a 7.9 percent rate instead of the former 6.6 percent
rate. That increase ends after three years, except for companies with more
than $10 million in profits.
Council on State Taxation Oregon raised 30
percent of its state taxes from business in 2008, considerably less than
the national average of nearly 40 percent, according to the Council on State
Taxation, a nonprofit corporate trade association. Only four states derived
a lower share of their taxes from business.
Forbes Magazine Rank Oregon Sixth Best in Nation in
2010
Oregon ranks sixth best in the nation as a place for business and careers,
according to Forbes Magazine,
which raised the state's rank despite new taxes from ballot measures 66
and 67. Oregon's position in the annual ranking climbed from 10th a year
ago. Forbes ranked Oregon's labor supply fourth in the nation and its growth
prospects 12th.
Utah topped the rankings, followed by Virginia, North Carolina, Colorado
and Washington. Maine placed last.
Ernst & Young Total Effective Tax Rate Accounting
experts Ernst & Young calculate
"total effective tax rate" by taking into account property, receipt and
sales and income taxes, cite Oregon's as second-lowest in the U.S., at 3.8%;
Washington's is 5.8%. Delaware's total effective tax rate is the
nation's lowest, at 3.5%, and Alaska's the highest, at 11.6%.
Portland's Tax Advantage over Washington Greater Portland companies
have another tax advantage on either side of the Columbia. Oregon has no
sales tax, which can be a boon for companies making big equipment purchases.
And Washington has no state income tax, a selling point for prospective
employees.
More Tax Fact
-
Oregon's corporate income tax rate of 6.6% is 16th-lowest
in the nation. California's rate of 8.8% ranks it seventh-highest.
-
Oregon collects $120 per capita in corporate taxes,
while California hauls in $286
Live in Washington State and Work in Oregon
Washington State does NOT have
an income tax. But if you live in the state of Washington and work
in Oregon, all income for services performed in Oregon is taxed by Oregon.
The same is true if you live in Oregon and work in Washington - you will
pay Oregon taxes on the income you earned in Washington. Read
more at the
Oregon Department of Revenue about this topic.
The Amtrak Act prohibits states
from imposing an income tax on nonresidents who are employees of motor vehicle
carriers and who perform duties in two or more states. See the explanation
at the Oregon Department of Revenue Web site:
Amtrak Act.
Retirees - What Income is Taxed in Oregon
Oregon taxes that part of the
annuity from federal government retires for service after October 1991.
Retires can visit the
Oregon Department of Revenue Web site to calculate what you would pay.
Oregon does not tax Social
Security, Veteran Administration benefits, or Railroad Retirement Board
benefits.
Property Taxes
 The
property tax in Oregon is used for the support of local taxing districts
such as public schools, cities, and counties.
The property tax applies to
privately owned real estate such as land, homes, farms, stores, factories,
warehouses and commercial offices. Personal property held for the
use and enjoyment of individuals is exempt from taxation. However,
personal property such as machinery, equipment and supplies used to produce
income, or with the potential of producing income, is subject to taxation.
Assessed taxable values are 100 percent of true market value.
History of Property Tax Measures
-
1990 - Measure 5: This measure limited tax rates
to $15 per $1,000 of market value. Still in effect when assessed, or
taxable, values are close to market values.
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1996 - Measure 47: A key provision took assessed
values for each property back to 1995, cut that figure by ten percent,
then allowed taxable values to rise by three percent a year going forward.
Allowed exceptions for tax levies approved in a November general election
in even-numbered years or by half of registered voters at other times.
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1997 - Measure 50: Clean-up measure drafted
by the Legislature that clarified and implemented Measure 47.
Exempted urban renewal taxes and Portland's police and fire pension
and disability levy from the cuts.
Visit the
Oregon Property Taxes page for detailed
property tax information.
Gas/Diesel Taxes
 Gas
and diesel
is taxed at the rate of 30 cents per gallon in Oregon. By
comparison, the gas tax in Washington state is 37.5 cents per gallon,
and 46.6 cents per gallon in California (the nation’s highest). In addition,
Multnomah county (where Portland is located) has a .03 cents per gallon
tax and Washington county has a .01 cent per gallon tax. Oregon gas tax ranks in the
top 10 states. Only service station attendants can pump gas in Oregon.
Visit the Oregon
Department of Transportation Web site to learn more.
Oregon usually tops the nation
in overall gas prices. No one know exactly why Oregon's gas prices
are so high. See the latest information on gasoline prices from the
American Automobile Association.
Beer, Wine, and Cigarette Taxes
Oregon Beer Tax
The Oregon tax of $2.60 per 31-gallon barrel (8 cents a gallon) is the 46th
lowest in the nation and which hasn't been raised since 1977. That's
less than a penny for a 12-ounce beer. It in the bottom 20 percent
in the nation and one-third of the national average which is 18.5 cents.
Washington state's beer tax is 26 cents a gallon and California taxes beer
at the rate of 20 cents a gallon. Microbreweries (producers of less
than 3.1 million gallons per year) account for 10 percent of the beer consumed
in Oregon - the highest percentage in the nation.
Oregon Wine Tax
At 67 cents a gallon (13.4 cents for a fifth of wine), it ranks in the middle
among states - the national average is 60 cents a gallon. It has not
changed since 1983.
Oregon Spirits Tax
In Oregon, the government directly controls the sales of distilled spirits.
Revenue is generated from various taxes, fees and net liquor profits.
Oregon Cigarette Tax
At 1.18 cents a pack, it ranks number 18 among states. Washington
state taxes cigarettes at $2.02 a pack and it is number three.
In 2007, about 524,000 Oregonians − nearly one
in five adults - smoke. Smoking was more common in Oregon than nationwide
until 1998, but has become less common since.
Source:
Federation of Tax Administrators
Automobile Registration
 Residents
are required to
register their vehicle as soon as they establish residency. The fee
is $77 for one year for a passenger car registration. License plates are
$23 a year.
Multnomah County has assessed a fee in addition to your state
registration fee to fund construction of a new Sellwood Bridge. Vehicles
in Multnomah County with registration expiring on or after September 1,
2010 will be assessed an additional fee of $19 per year or $38 for a
two-year renewal. There are state Driver and Motor Vehicle Services
branch offices throughout the metropolitan area.
Vehicles in the metropolitan area are also required to
pass an exhaust emissions test before licenses will be granted. The fee
is $37 for two years. Vehicle emission test centers are located
throughout the metropolitan area.
A VIN (physical examination of your vehicle to determine whether the vehicle
identification number matches those on the title or primary ownership document)
inspection is also required for out-of-state vehicles being titled in Oregon.
Oregon Driver's License
Oregon Driver's License A driver license must be obtained
as soon as residency in the state has been established. With a valid, unexpired
license from another state and a good driving record, only the written and
vision tests are required.
Oregon lawmakers in early 2008
blocked illegal immigrants from getting driver's licenses, transforming
some of the nation's most lenient licensing rules into the state's harshest
sanctions against undocumented workers.
Here are the new rules:
-
Either show or Social Security card or Department
of Motor personnel will verify your Social Security number on their
computers while you wait.
-
You must show proof of identity with one of these
documents: U.S. birth certificate, driver's license either from
Oregon or another state, U.S. passport, or U.S. military ID. Foreign
birth certificates and consular ID cards -- popular with many illegal
immigrants -- no longer are accepted as proof of identification.
-
The bill gives the state explicit authority to check
a driver's legal status. It also grants DMV discretion to issue temporary
licenses to some people.
People who were never issued
a Social Security number must sign a statement saying so and must offer
up other identification such as a U.S. passport. If you don't have a Social
Security number and you are a legal immigrant or visitor, you will need
one of these documents: Immigrant visa, ID document issued by U. S.
Department of homeland Security, or a U.S. foreign passport.
License Costs
Fees will increase to help pay for the changes, estimated to cost about
$2 million this budget period and $1.8 million in 2009-11. A original
regular Class C driver's license costs $60, renewal $40, new ID card $44.50,
renewal of the card $40.50. A license is valid for eight years except
for temporary visitors which is is shorter.
Oregon College Saving Program
In January of 2001 Oregonians
may begin to invest in the Oregon College Savings Plan. This state-sponsored
plan meets the federal qualifications for special tax status as a Qualified
Tuition Savings Program (QTSP).
Oregon residents can deduct
up to $2,000 per year from their Oregon taxable income ($1,000 if married
and filing separately). Contributions made until April 15th qualify for
a deduction for the previous year.
Oregon law also provides a
four-year "carry forward" state tax deduction up to $8,000 (or $4,000 for
a married account owner filing separately). For example, if an account owner
who is married and filing jointly contributes $10,000, he or she may take
a $2,000 state tax deduction that year and for each of the following four
years.
For more information or to
enroll see
Oregon College Savings or call 1-86-OR-Savings (866-772-8464).
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