By State Representative Dennis Richardson,
Paying a “fair share” is the justification for most pleas for additional taxation. I have heard this demand to make rich taxpayers pay their “fair share” in debates in Oregon’s House and Senate, California’s Assembly and the U.S. Congress. Today’s newsletter considers the question, “Who is paying their “˜fair share’?” Since 93% of Oregon’s General Fund revenues come from personal and corporate income taxes, let’s analyze each and see who is paying this key source of Oregon General Fund revenue.
Personal Income Taxes. To help answer the question of who are paying Oregon’s income taxes, see the linked income tax table accessed here. The table reveals that the bottom 60% of all Oregon taxpayers contribute a combined total of less than 14% of the income taxes paid ($647 million out of $4.8 billion). The top 40% of Oregon income earners pay 86% of Oregon’s personal income tax revenue ($4.1 billion of $4.8 billion).
The extreme ends of the earnings chart reveal differences that are even more dramatic. Oregon’s lowest wage earners are not only exempt from paying taxes, the state sends them $20 million in total cash payments. More than 200,000 taxpayers (tax-receivers?) benefit from Oregon’s Earned Income Tax Credit and Working Families Child Care Credit. Conversely, at the high end of the income scale, Oregonians who are in the top 1% of income earners pay 23% ($1.1 billion) of the entire personal income tax bill.
The top 5% of Oregon income earners””those earning $200,000 per year or more””pay 41% (nearly $2 billion) of the total tax bill. Ironically, not once have I received an email from a high-taxpaying Oregonian complaining about the tens of thousands of dollars each pays in state taxes every year. On the other hand, I hear almost daily from someone who receives a state check demanding that taxes should be raised on the rich. In short, notwithstanding the fact that successful Oregonians silently pay almost all of Oregon’s personal income taxes, those who pay little repeatedly demand the Legislature to force the “rich” to pay more””it gives a broader meaning to the idea of paying their “fair share.”
Corporate Income Taxes. Since it appears wealthy Oregonians already pay their “fair share” of personal income taxes, what about making corporations pay theirs? More than 33,000 “for profit” corporations file income tax returns in Oregon. The linked table of corporate taxation can be accessed here. From the table, we see that of the $448 million in corporate income tax revenue paid, 86% was paid by less than 3% of the corporations. It is noteworthy that $157 million (35%) of the total in corporate income tax revenue was paid by only 52 corporations.
Could more taxes be generated by raising the rate that must be paid by Oregon corporations? Certainly, increasing corporate tax rates would result in increased state revenue–in the short-run. In the long-run, it would result in more corporations laying off workers and moving out of state. A study of state taxes found low-tax states grew 35% faster than high-tax states (See footnote 1). The relationship between business growth and corporate taxation among the states has been demonstrated in many reliable published studies (See footnote 2).
In short, business owners invest their time, experience and capital into commercial ventures with the intention of earning a reasonable rate of return. If that rate of return is decreased substantially by government taxation, over-regulation or interference, studies show many business owners respond by moving to low-tax and business-friendly states.
Conclusion. Based on the facts shown in the personal and corporate income tax information tables, when we next hear someone demanding we make the rich Oregon taxpayers””individuals as well as corporations””pay their “fair share,” we will know the truth. Successful individuals and businesses are not only paying their “fair share,” they are nearly paying the entire share of income taxes being paid into Oregon’s tax coffers.