Proposed by initiative petition to be voted on at the General Election, November 4, 2008.
Creates an unlimited deduction for federal income taxes on individual taxpayers' Oregon income-tax returns
Result of "yes" vote
"Yes" vote creates an unlimited deduction for federal income taxes on Oregon income-tax returns filed by individual taxpayers; reduces revenue available for state expenditures.
Result of "no" vote
"No" vote retains current law, which allows limited deduction for federal income taxes on individual taxpayers' Oregon income-tax returns (limit generally is $5500).
Under current law, personal income taxpayers may deduct a limited amount of federal income taxes when calculating their Oregon taxable income (limit generally is $5500; limit is adjusted yearly for cost-of-living starting in 2008). This measure creates an unlimited deduction for federal income taxes on individual taxpayers' Oregon returns beginning in 2010. Provides "no Oregon taxpayer shall be required to pay to the state, a local government, or other taxing district, an income tax of any kind on money paid to the federal government as federal income taxes." Deduction applies only to federal income taxes paid on income taxed in Oregon; does not apply to corporate excise/income taxes. Reduces revenue available for state expenditures; provides no replacement funding. Other provisions.
Estimate of financial impact
This measure will reduce state budget revenues by approximately $360 million in the first year, $1.0 billion in the second year, and $1.2 billion per year after that, depending upon growth in personal income and federal tax liability.
The measure may result in a reduction of state-shared revenues to schools and local governments. The measure may result in a reduction of federal revenue sharing to state government.
Oregon personal income taxes go into the state General Fund. Those taxes are about 89 percent of the General Fund. In the current two-year budget (2007-09), the General Fund was used to pay for:
$318 million of the General Fund spending in these categories pays principal and interest on bonds and other debt for the building of prisons, public buildings, and other public facilities. Over a six-year period, the measure would reduce bond capacity by $130 million per year, or 21 percent, to pay for future infrastructure construction needs of the State.
The State budgets for a two-year period. The measure would reduce expected general fund resources by $1.3 billion (nearly 9 percent) in the next two-year budget period (2009-2011). For the 2011-2013 period, the projected revenue reduction of $2.4 billion will be nearly 14 percent of expected general fund resources. Future legislatures will decide how this revenue reduction will affect spending.
Many state and local government programs are jointly funded with money from the federal government. State funding cuts as a result of this measure could also reduce federal funding. For example, if the Legislature chooses to reduce services to children, the elderly or disabled (including medical), for every one dollar of state funds reduced, two dollars of federal "matching" funds would also be cut.
About 500,000 Oregon taxpayers will be directly affected by this measure. The other 1.3 million taxpayers can subtract all of their federal taxes under current limits and will see no change in their Oregon taxes from this measure.
Secretary of State Bill Bradbury
State Treasurer Randall Edwards
Scott Harra, Director, Dept. of Administrative Services
Elizabeth Harchenko, Director, Dept. 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.)