Ballot Measure 41 changes how state income taxes are calculated. Currently, Oregon taxpayers may take a personal exemption tax credit ($154 for 2005) for each exemption allowed under federal tax law. Typically a taxpayer may take a credit for him or herself, a spouse and each dependent. A tax credit is a dollar-for-dollar reduction in the amount of taxes owed. This tax credit is adjusted for the cost of living each year.
This Measure gives Oregon taxpayers the option of taking a tax deduction equal to the amount deducted on federal taxes. In contrast to a tax credit, a tax deduction is an amount that is subtracted from gross income to determine the amount of income that is subject to tax, or "taxable income." Currently, federal law allows taxpayers to take a deduction ($3,200 in 2005) for each personal exemption allowed under federal law. Typical exemptions are for the taxpayer, the spouse and dependents. The federal personal income exemption is adjusted for the cost of living each year.
This Measure permits a taxpayer to claim either the new deduction created in this Measure or the existing personal exemption credit, if the existing credit would result in a lower tax for the taxpayer.
Existing federal law sets forth many exemptions from federal income tax that are unrelated to the deduction for personal exemptions. This Measure provides that the new state deduction shall not be less than the total amount of the deduction allowed for all exemptions on the taxpayer federal tax return but does not contain a definition of all exemptions.
This Measure is a statutory measure, not a Constitutional amendment. This Measure states that a repeal, delay in implementation or decrease in the amount of the deduction allowed would be subject to existing provisions of the Oregon Constitution requiring a supermajority vote for tax increases and prohibiting a bill regulating taxation or exemption from taking effect immediately following enactment through a declaration of an emergency.
This Measure will reduce general fund revenue for a variety of state funded programs. The impact of the measure on state revenue will be greater each successive year because the federal deduction is indexed for inflation. The Measure would reduce tax revenue for 2006, and it may have an impact on current budgets. A change in revenue may also have an impact on the 2007 personal kicker.
Committee Members: / Appointed by:
Kevin Mannix / Chief Petitioners
R. Russell Walker / Chief Petitioners
Margaret Olney / Secretary of State
Laurie Wimmer-Whelan / Secretary of State
Bill Richardson / Members of the Committee
(This committee was appointed to provide an impartial explanation of the ballot measure pursuant to ORS 251.215.)