A Plan To Close Tax Loopholes

Earlier this week, legislators in the Oregon House released a plan to raise $275 million by closing big tax loopholes for big corporations and the rich.

The plan is built into the legislative budget, which means that if the bill fails, it’ll mean $275 million less for Oregon’s K-12 classrooms, senior health care, and basic services.

The plan, contained in House Bill 2456, has four basic components. Here’s your handy dandy rundown:


Click to enlarge

Part 1: Phase out Oregon deductions for households with more than $250,000 in yearly income. (Or $125,000 per year for individuals.) This would create an overall cap on the tax deductions that these households can take on their taxes. It’s simple, fair, and protects middle-class families.

This impacts the top 1% almost exclusively. The rich would still pay a lower effective tax rate than the poor, but the gap would close slightly.

(This idea has such broad appeal that even Mitt Romney supported a version of it last year.)

Raises: $169 million.

Part 2. Eliminate the personal exemption credit for households with more than $250,000 in yearly income. (Or $125,000 per year for individuals.)

The personal exemption credit is a flat $183 credit that everyone gets. But, really, do the wealthiest households need it? Eliminating this credit for the top taxpayers would raise: $38 million.

Closing Corporate Tax Loopholes

Part 1. Lifting the cap on the corporate minimum tax for corporations with more than $100 million in annual sales.

This requires a little explanation: When lawmakers drafted the law that became Measure 67 (increasing the $10 corporate minimum for the first time since 1931), they capped the minimum tax at $100,000 for corporations with more than $100 million in sales. Why? Who knows, but the law as it stands means that the very largest corporations have a lower effective tax rate than small businesses.

That makes no sense from a political or policy standpoint. Lifting the cap and applying a 0.1% minimum tax on all revenue above $100 million would raise: $50 million.

Part 2. Cracking down on offshore tax havens. Basically, if a corporation is sheltering profits in an offshore tax haven as a way of evading Oregon taxes, those profits would be taxed at Oregon’s rate. It’s patterned after something Montana did years ago. As Alina pointed out yesterday, the societal costs of off-shore tax havens are staggering.

Raises: $18 million

4 Responses to “A Plan To Close Tax Loopholes”

  1. Larry McDonald

    This seems so minimal only someone who’s determined to crush the hopes and opportunities of the lower 47% could object… and, of course, there will be some.

  2. Donna Cohen

    In December, in the Oregonian, it said, in regard to Tina Kotek: “she hopes the Legislature focuses on tax breaks and deductions that take billions of dollars out of the state’s revenue stream. One item she’s looking at is the tax deduction for mortgage interest….”I think that’s a very solid tax credit in support of the middle class,” Kotek says. “But do you need a mortgage deduction on second homes? Do you look at mortgage deductions based on certain income levels? That’s a conversation we should be having.”

    I agree we need to have a discussion about this – and many other tax expenditures [and, let’s at least have sunsets for them!] However, I do NOT agree that this expenditure is a “solid tax credit in support of the middle class”. You can find data from the Tax Policy Center on the distributional benefits of the Mortgage Interest Deduction http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3852&topic2ID=40&topic3ID=41&DocTypeID=1

    The proportion of the benefit which will apply, in 2015, to AFTER-TAX incomes of:

    Greater than $100,000 is about 70%
    Greater than $200,000 is about 31%

    The median per capita pre-tax income in Oregon is about $29,000.
    The median household pre-tax income in Oregon is about $50,000
    [ http://quickfacts.census.gov/qfd/states/41000.html ]

    Homeowners who do not itemize get no benefit. Renters get no benefit. On the federal level alone, we spend [after all, that is what a tax eXPENDiture is, and getting rid of them is not a tax increase, as some would have us believe] about $100 billion a year.

    The money spent on the mortgage interest deduction can be better utilized in any number of ways, or not spent at all, by the government [state and federal]. There are many other options – most of which are fairer – that have been proposed in lieu of the current arrangement, by both sides of the aisle. The myth that the mortgage interest deduction serves the middle class most is just that, a myth.

    Overall message: tax expenditures on the federal and state level for _individuals_ exceed $1 trillion/yr, most of which benefits upper income folks. Yes, we need to deal with corporate expenditures, too, but individual expenditures are also part of the problem. And, we all need to learn how they really work.

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