Oregon Taxes: Time for a Change, or Not

April is income tax time and Oregon business decision-makers say it is time to change Oregon’s tax system.

Oregon’s current tax structure relies primarily on revenues from income taxes to fund state programs. When unemployment increases, state revenues drop, causing budget shortfalls. With this in mind:

  • 69 percent of Oregon decision-makers say it is time to overhaul the state’s tax system; and
  • Another 18 percent say change is needed but not now.

One proposed solution is shifting a portion of the tax burden from the current income tax dependent system to a joint income/sales tax system. Oregon is one of five states with no statewide sales tax. (Alaska, Delaware, Montana, New Hampshire are the other four.)

When asked their opinion, Oregon decision-makers are equally divided about a statewide sales tax on goods sold, other than food and medicine, as a means to help stabilize the state’s revenues, 44 percent favor, 42 percent oppose and 14 percent are undecided about a proposal.

Support for a sales tax appears to increase as decision makers learn more about a proposal. Decision makers are more likely to favor a sales tax proposal knowing:

  • The state’s income tax rate will be reduced (66 percent favor);
  • The legislature will look for places to cut spending (60 percent favor); and
  • The sales tax will create more stable funding for the state (57 percent favor).

But the elephant in the room remains: sales taxes are unpopular in Oregon. State voters have rejected proposals to create a sales tax nine times. The most recent proposal, Measure 1 in 1993, was defeated by voters 24 percent in favor to 72 percent against, a three-to-one margin.

Tax time can be a frustrating period. Emotions run high. People want change. Yet, until a system can be found that runs closer to the old adage, “don’t tax me, tax the man behind the tree,” don’t count on significant changes to Oregon’s income tax based tax system anytime soon.

Research results based on an online survey of 708 Oregon Business magazine subscribers conducted in December 2010 by CFM Research.