Which state has fairest tax structure: Oregon, Washington or California? Survey says ...
EUGENE, Ore. - Do you think Oregon's tax system is fair?
What about our neighbors to the north in Washington? Or to the south in California?
The Institute on Taxation and Economic Policy released its 6th state-by-state study on tax structure, titled "Who Pays?"
"When tax systems rely on the lowest-income earners to pay the greatest proportion of their income in state and local taxes, gaps between the most affluent and the rest of us continue to grow," the organization said. "The ITEP Tax Inequality Index measures the effects of each state’s tax system on income inequality by assessing the comparative impact a state’s tax system has on the post-tax incomes of taxpayers at different income levels. Essentially, it answers the following question: Are incomes more equal, or less equal, after state taxes than before taxes?"
The state with the least equitable tax structure, according to ITEP?
"Washington has the most unfair state and local tax system in the country," according to the report. "Incomes are more unequal in Washington after state and local taxes are collected than before."
The study found that Washington's lowest earners pay 17.8 percent of their income in state and local taxes, compared with 3 percent for the highest earners.
By comparison, in neighboring Oregon the lowest earners pay 10.1 percent of their income in state and local taxes, compared with 8.1 percent for the wealthiest earners.
That puts Oregon at No. 41 out of 51 states and the District of Columbia.
But the study notes Oregon's tax structure is still regressive: People who make more money pay a smaller percentage of their income in state taxes than higher income households.
The study says the "Regressive Features" of Oregon taxes include:
- Provides a limited income tax deduction for federal income taxes paid
- Allows lower personal income tax rates for pass-through business income
- Fails to provide a property tax “circuit breaker” credit for low-income homeowners
The study also identifies "Progressive Features" of Oregon taxes:
- Graduated personal income tax structure
- Provides a refundable Earned Income Tax Credit (EITC)
- Provides a refundable property tax “circuit breaker” credit for renters via the personal income tax
- Provides refundable dependent care tax credit
- No statewide sales tax
- Requires the use of combined reporting for the corporate income tax
- Levies a state estate tax
The state with the fairest tax structure? California. The top 1 percent of income earners there pay 12.4 percent of their household income in state taxes, compared to 10.5 percent for the lowest 20 percent.