Proposed by referendum petition to be voted on at the Special Election, January 26, 2010.
Raises tax on household income at and above $250,000 (and $125,000 for individual filers). Reduces income taxes on unemployment benefits in 2009. Provides funds currently budgeted for education, health care, public safety, other services
Result of "yes" vote
"Yes" vote raises taxes on income at and above $250,000 for households, $125,000 for individual filers. Tax rate increases 1.8 percentage points on amount of taxable income between $250,000 and $500,000, 2 percentage points on amount above $500,000 for households. For individual filers, the rate increases begin at $125,000 and $250,000 respectively. Eliminates income taxes on the first $2,400 of unemployment benefits received in 2009. Raises estimated $472 million to provide funds currently budgeted for education, health care, public safety, other services.
Result of "no" vote
"No" vote rejects tax changes on income at and above $250,000 for households, $125,000 for individual filers. Rejects tax exemption for first $2,400 of unemployment benefits received in 2009. Leaves amount currently budgeted for education, health care, public safety, other services underfunded by estimated $472 million.
Under current law, a marginal tax rate of 9% applies to taxable household income over $15,200 (or $7,600 for individual filers), taxpayers may deduct federal income taxes paid, and unemployment compensation is taxable. Measure eliminates income taxes on first $2,400 of unemployment benefits received in 2009. For tax years 2009-2011, the measure increases tax rate 1.8 percentage points on amount of household income between $250,000 and $500,000, by 2 percentage points on amount above $500,000 (for individual filers, rate increases begin at $125,000 and $250,000, respectively). For the tax year beginning 2012, the tax rate for households with income above $250,000 (above $125,000 for single filers) will drop to 9.9%. Measure does not increase tax rate on household income below $250,000 (below $125,000 for individual filers). For households with adjusted gross income at or above $250,000 (or $125,000 for individual filers), reduces federal income tax deduction. Raises $472 million to provide funds currently budgeted for education, health care, public safety, other services. Because some state money brings in federal matching funds, Oregon will likely receive more federal money if measure passes than if it fails. Other provisions.
Estimate of financial impact
This measure increases General Fund revenues for the state budget between $217 million and $242 million per year for fiscal years 2010, 2011, and 2012. The measure increases revenues by approximately $180 million per year thereafter, depending upon growth in personal income and federal tax liability.
Revenue from this measure is included in the 2009-11 state budget. Failure of the measure will reduce revenues expected to be available for expenditures in the 2009-11 state budget by $472 million. This could result in reduced state-shared revenues to schools and local governments. Failure of the measure also may result in a reduction of federal funds that are used to pay for some state services.
Failure of the measure may limit the state's ability to borrow money. It also may have a negative impact on the state's credit rating which could increase the cost of future borrowing by the state and local governments.
Explanation of Estimate of Financial Impact
The measure raises revenue in two ways. The measure adds two new income tax rate brackets for single taxpayers who have more than $125,000 of taxable income ($250,000 for joint filers). The measure also phases out the federal income tax deduction for taxpayers who have more than $125,000 of adjusted gross income ($250,000 for joint filers).
Roughly 3% of personal income tax filers (38,000 to 60,000 returns) will see higher taxes due to the new tax rates and/or the federal tax subtraction phase out. Following are average increases for those affected in the first year and in 2013 when the changes are permanent.
|Adjusted Gross Income||Average Change In Income Tax for Single Filers||Average Change in Income Tax for Joint Filers|
|Less Than $125,000||$0||$0||$0||$0|
|$125,000 - $249,999||$620||$544||$0||$0|
|$250,000 - $499,999||$2,996||$1,825||$1,165||$863|
|$500,000 and Over||$16,229||$8,591||$15,515||$8,344|
The measure also exempts the first $2,400 of unemployment benefits for tax year 2009 only. Approximately 15% of filers (270,000 returns) will see lower taxes due to the exclusion of the first $2,400 of unemployment benefits. The average reduction is roughly $120.
Oregon personal income taxes are about 85% of the state General Fund. In the current two-year state budget (2009-11), this fund is used to pay for:
- Education - including elementary schools, high schools, community colleges, and state universities: $6.8 billion (51%);
- Services for children, the elderly, and the disabled - including medical insurance: $3.5 billion (27%);
- Public Safety - including prisons, courts and local jails: $2.4 billion (18%);
- Other programs - including business regulation, natural resource management and state administration: $0.5 billion (4%).
The current budget anticipates $472 million from this measure. If the measure fails, expected resources will be reduced by this amount - about 3.5% of General Fund resources. State law requires a balanced budget. Future legislatures may decide how this reduction will affect spending. Options include spending cuts, use of reserves, raising revenue, or any combination.
Many state and local government programs are jointly funded with "matching" money from the federal government. Federal funds will be reduced if state spending for these programs is cut.
The state of Oregon borrows money by issuing bonds. Oregon's credit rating affects the cost of borrowing. A good credit rating lowers borrowing costs. One of the factors that affects Oregon's credit rating is the amount of state revenues available to pay for essential services. If the measure fails, Oregon's credit rating could be adversely affected.
Secretary of State Kate Brown
State Treasurer Ben Westlund
Scott L. Harra, Director, Department of Administrative Services
Elizabeth Harchenko, Director, Department of Revenue
Debra Guzman, Local Government Representative
(The estimate of financial impact and explanation was provided by the above committee pursuant to ORS 250.127.)