PORTLAND, Ore. (AP) – Last year’s state stimulus payments during the COVID pandemic will generate an additional $ 112 million in Oregon taxes due to a quirk of state tax law and mean many people are on the path to a higher tax burden.
The Oregonian / OregonLive reports that taxes will affect 877,000 Oregonian taxpayers, roughly half of all who received government stimulus payments in 2020 and early 2021. They would only owe an average of about $ 130 apiece from the initial stimulus payments last spring. Many lower-income workers would owe $ 100 or more.
Legislators from both parties say this is unfair and lawmakers are exploring a solution that would wipe out the higher tax burden. But with the April tax return deadline approaching, it’s not clear whether there is consensus to make a change.
Last March, Congress approved stimulus checks of $ 1,200 for adults and an additional $ 500 for children, with the amount falling for wealthier taxpayers. A second round, approved in December and paid for in early 2021, paid $ 600 per adult and another $ 600 per child – again with a decline in the totals in wealthier households.
The stimulus payments were structured as tax breaks, meaning they are not subject to federal or state income tax. But Oregon is one of six states that allow taxpayers to deduct a portion of their federal tax payments from their state income taxes.
For most years, the deduction acts as a government tax break. However, when the federal government spends stimulus payments, the size of this pause decreases. A lower federal tax burden means you will have to deduct less from your state taxes.
The Legislative Revenue Office estimated in May that Oregon would collect an additional $ 103 million this year and $ 9 million next year from taxes generated by these initial stimulus payments. That’s 3.6% of the $ 3.1 billion in stimulus payments that Oregonians received last spring.
However, this tax hike will not affect everyone. Low-income Oregonians with no federal tax liability do not pay higher state taxes, and some high-income residents with high federal tax loads also stop paying.
According to US Representative Peter DeFazio, D-Springfield, Congress intended to make stimulus payments tax-free.
“It is incomprehensible to ask the working families, who have struggled the most in this crisis, to shoulder the weight of the state’s budget deficit,” DeFazio wrote last week in a letter to Governor Kate Brown and lawmakers. He asked them to exempt the Oregonians from these higher taxes.
Dick Anderson, Oregon State Senator, R-Lincoln City, plans to enact law to protect Oregonians’ stimulus checks from tax implications.