SALEM — Under Oregon’s current tax codes, the federal Economic Impact Payments (stimulus money) received by Oregon residents last year counts as taxable income, but Sen. Dick Anderson (R-5th District) is drafting legislation that would stop the state from collecting.
“The sole purpose of federal stimulus checks was to give people help when they needed it the most,” Anderson said in a Tuesday press release. “There is no justification for the state to be taking some off the top. Helping people get back on their feet means helping them keep more money in their pockets.”
An estimated 870,000 Oregonians would be sending part of their federal stimulus checks to the state government because of a reduced federal tax subtraction on state returns. Because federal subtractions are phased out at higher income levels and not applicable for low-income earners with no federal tax liability, middle-class families are hit hardest by the loophole, according to the release.
As an example, an average family of four would have received about $3,400 in stimulus payments in 2020 and at Oregon’s 8.75 percent income tax rate would need to pay $298 in taxes on that amount. A legislative revenue report from the state estimates this would bring in over $118 million, offsetting the state’s $301 million revenue loss from 2019 to 2021.
“Struggling working families need our help, not for the government to be taking more money from them during these challenging times,” Anderson said in the release. “It’s an issue of fairness. Should the state be taking money that was intended to help people? I don’t think so, and most of my constituents from the coast don’t think so either.”
Per state law, the earliest any bills that affect state finances can go into effect is 91 days after the end of the legislative session. Thus, filers may opt to amend this year’s tax filing or apply for a tax credit on next year’s taxes. Other provisions included in the legislation would also exempt any future stimulus checks from state taxes. The bill is currently being drafted with legislative counsel, and a bill number will follow.
“Three hundred dollars can make a big difference for families who are struggling to afford groceries, child care or making rent,” Anderson said in the release. “While we will be dealing with the impacts of the economic devastation the pandemic has brought for years, this is a good first step. I look forward to finding more ways to help our small businesses and working families recover.”