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Oregon Tax Hike Vote, Measure 66 (January 2010)

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Oregon Measure 66 appeared on the January 26, 2010 ballot in Oregon where it was approved. Approveda

The measure was placed on the ballot by the referendum process, putting HB 2649 up for public review. That bill was signed by Gov. Ted Kulongoski on July 20, 2009. HB 2649 and HB 3405 (also up for referendum bia Oregon Measure 67 (2010)) increase taxes in the state by $733 million through increasing the state’s corporate minimum tax, raising taxes on the state’s high-income individuals and raising income taxes on businesses.[1] In reaction to the news, tax activists in the state[2] geared up to use the veto referendum process in the state to try to stop the hikes.

Main article: Oregon Tax Hike Vote, Ballot Measures 66 and 67 (2010)

Ballot title

The ballot title reads as follows, as of November 17, 2009:[3][4][5]

Raises tax on household income at and above $250,000 (and $125,000 for individual filers). Reduces income taxes on unemployment benefits in 2009. Provides funds currently budgeted for education, health care, public safety, other services.
  • Yes vote: “Yes” vote raises tax on incomes above $250,000 for households, $125,000 for individual filers. Tax rate increases 1.8 percentage points on amount of taxable income between $250,000 and $500,000, 2 percentage points on amount above $500,000 for households. For individual filers, the rate increases begin at $125,000 and $250,000 respectively. Eliminates income taxes on the first $2,400 of unemployment benefits received in 2009. Raises estimated $472 million to provide funds currently budgeted for education, health care, public safety, other services.[3][4]
  • No vote: “No” vote rejects tax changes on incomes at and above $250,000 for households, $125,000 for individual filers. Rejects tax exemption for first $2,400 of unemployment benefits received in 2009. Leaves amount currently budgeted for education, health care, public safety, other services underfunded by estimated $472 million.[3][4][5]

Summary

Below is the November 17, 2009 Oregon Legislature final summary of Measure 66.[4][3]

Under current law, a marginal tax rate of 9% applies to taxable household income over $15,200 (or $7,600 for individual filers),taxpayers may deduct federal income taxes paid, unemployment compensation is taxable. Measure eliminates income taxes on first $2,400 of unemployment benefits received in 2009. For tax years 2009-2011, the measure increases tax rate 1.8 percentage points on amount of household income between $250,000 and $500,000, by 2 percentage points on amount above $500,000 (for individual filers, rate increases begin at $125,000 and $250,000, respectively). For the tax year beginning 2012, the tax rate for households with income above $250,000 (above $125,000 for single filers) will drop to 9.9%. Measure does not increase tax rate on household income below $250,000 (below $125,000 for individual filers). For households with adjusted gross income at or above $250,000 (or $125,000 for individual filers), reduces federal income tax deduction. Raises $472 million to provide funds currently budgeted for education, health care, public safety, other services. Because some state money brings in federal matching funds. Oregon will likely receive more federal money if measure passes than if it fails. Other provisions.

Text of the referendum

SECTION 1. ORS 316.037 is amended to read:
316.037. (1)(a) A tax is imposed for each taxable year on the entire taxable income of every resident of this state. The amount of the tax shall be determined in accordance with the following table:

If taxable income is: The tax is:
Not over $2,000 5% of taxable income
Over $2,000 but not over $5,000 $100 plus 7% of the excess over $2,000
Over $5,000 but not over $125,000 $310 plus 9% of the excess over $5,000
Over $125,000 but not over $250,000 $11,110 plus 10.8% of the excess over $125,000
Over $250,000 $24,610 plus 11% of the excess over $250,000
(b) For tax years beginning in each calendar year, the Department of Revenue shall adopt a table that shall apply in lieu of the table contained in paragraph (a) of this subsection, as follows:
(A) Except as provided in subparagraph (D) of this paragraph, the minimum and maximum dollar amounts for each bracket for which a tax is imposed shall be increased by the cost-of-living adjustments for the calendar year.
(B) The rate applicable to any rate bracket as adjusted under subparagraph (A) of this paragraph shall not be changed.
(C) The amounts setting forth the tax, to the extent necessary to reflect the adjustments in the rate brackets, shall be adjusted.
(D) The rate brackets applicable to taxable income in excess of $125,000 may not be adjusted.
(c) For purposes of paragraph (b) of this subsection, the cost-of-living adjustment for any calendar year is the percentage (if any) by which the monthly averaged U.S. City Average Consumer Price Index for the 12 consecutive months ending August 31 of the prior calendar year exceeds the monthly averaged index for the second quarter of the calendar year 1992.
(d) As used in the subsection, "U.S. City Average Consumer Price Index" means the U.S. City Average Consumer Price Index for All Urban Consumers (All Items) as published by the Bureau of Labor Statistics of the United States Department of Labor.
(e) If any increase determined under paragraph (b) of this subsection is not a multiple of $50, the increase shall be rounded to the next lower multiple of $50.

(2) A tax is imposed for each taxable year upon the entire taxable income of the every part-year resident of this state. The amount of the tax shall be computed under subsection (1) of this section as if the part-year resident were a full-year resident and shall be multiplied by the ratio provided under ORS 316.117 to determine the tax on income derived from sources within this state.
(3) A tax is imposed for each taxable year on the taxable income of every full-year nonresident that is derived from sources within this state. The amount of the tax shall be determined in accordance with the table set forth in subsection (1) of this section.
SECTION 2. ORS 316.037, as amended by section 1 of this 2009 Act, is amended to read:
316.037. (1)(a) A tax is imposed for each taxable year on the entire taxable income of every resident of this state. The amount of the tax shall be determined in accordance with the following table:

If taxable income is: The tax is:
Not over $2,000 5% of taxable income
Over $2,000 but not over $5,000 $100 plus 7% of the excess over $2,000
Over $5,000 but not over $125,000 $310 plus 9% of the excess over $5,000
Over $125,000 [but not] [over $250,000] $11,110 plus [10.8%] 9.9% of the excess over $125,000
[Over $250,000 $24,610 plus 11%] [of the excess] [over $250,000]
(b) For tax years beginning in each calendar year, the Department of Revenue shall adopt a table that shall apply in lieu of the table contained in paragraph (a) of this subsection, as follows:
(A) Except as provided in subparagraph (D) of this paragraph, the minimum and maximum amounts for each bracket for which a tax is imposed shall be increased by the cost-of-living adjustment for the calendar year.
(B) The rate applicable to any rate bracket as adjusted under subparagraph (A) of this paragraph shall not be changed.
(C) The amounts setting forth the tax, to the extent necessary to reflect the adjustments in the rate brackets, shall be adjusted.
(D) The rate brackets applicable to taxable income in excess of $125,000 may not be adjusted.
(c) For purposes of paragraph (b) of this subsection, the cost-of-living adjustment for any calendar year is the percentage (if any) by which the monthly averaged U.S. City Average Consumer Price Index for the 12 consecutive months ending August 31 of the prior calendar year exceeds the monthly averaged index for the second quarter of the calendar year 1992.
(d) As used in this subsection, "U.S. City Average Consumer Price Index" means the U.S. City Average Consumer Price Index for All Urban Consumers (All Items) as published by the Bureau of Labor Statistics of the United States Department of Labor.
(e) If any increase determined under paragraph (b) of this subsection is not a multiple of $50, the increase shall be rounded to the next lower multiple of $50.

(2) A tax is imposed for each taxable year upon the entire taxable income of every part-year resident of this state. The amount of the tax shall be computed under subsection (1) of this section as if the part-year resident were a full-year resident and shall be multiplied by the ratio provided under ORS 316.117 to determine the tax on income derived from sources within this state.
(3) A tax is imposed for each taxable year on the taxable income of every full-year nonresident that is derived from sources within this state. The amount of the tax shall be determined in accordance with the table set forth in subsection (1) of this section.
SECTION 3. ORS 316.695, is amended to read:
316.695. (1) In addition to the modifications to federal taxable income contained in this chapter, there shall be added to or subtracted from federal taxable income:

(a) If, in computing federal income tax for a taxable year, the taxpayer deducted itemized deductions, as defined in section 63(d) of the Internal Revenue Code, the taxpayer shall add the amount of itemized deductions deducted (the itemized deductions less an amount, if any, by which the itemized deductions are reduced under section 68 of the Internal Revenue Code).
(b) If, in computing federal income tax for a taxable year, the taxpayer deducted the standard deduction, as defined in section 63(c) of the Internal Revenue Code, the taxpayer shall add the amount of the standard deduction deducted.
(c)(A) From federal taxable income there shall be subtracted the larger of (i) the taxpayer's itemized deductions of (ii) a standard deduction. Except as provided in subsection (8) of this section for purposes of this subparagraph, "standard deduction" means the sum of the basic standard deduction and the additional standard deduction.
(B) For purposes of subparagraph (A) of this paragraph, the basic standard deduction is:
(i) $3,280 in the case of joint return filers or a surviving spouse;
(ii) $1,640, in the case of an individual who is not a married individual and is not a surviving spouse;
(iii) $1,640, in the case of a married individual who files a separate return; or
(iv) $2,640, in the case of a head of household.
(C)(i) For purposes of subparagraph (A) of this paragraph for tax years beginning on or after January 1, 2003, the Department of Revenue shall annually recompute the basic standard deduction for each category of return filer listed under subparagraph (B) of this paragraph. The basic standard deduction shall be computed by dividing the monthly averaged U.S. City Average Consumer Price Index for the 12 consecutive months ending August 31 of the prior calendar year by the average U.S. City Average Consumer Price Index for the second quarter of 2002, then multiplying that quotient by the amount listed under subparagraph (B) of this paragraph for each category of return filer.
(ii) If any change in the maximum household income determined under this subparagraph is not a multiple of $5, the increase shall be rounded to the next lower multiple of $5.
(iii) As used in this subparagraph, "U.S. City Average Consumer Price Index" means the U.S. City Average Consumer Price Index for All Urban Consumers (All Items) as published by the Bureau of Labor Statistics of the United States Department of Labor.
(D) For purposes of subparagraph (A) of this paragraph, the additional standard deduction is the sum of each additional amount to which the taxpayer is entitled under subsection (7) of this section.
(E) As used in subparagraph (B) of this paragraph, "surviving spouse" and "head of household" have the meaning given those terms in section 2 of the Internal Revenue Code.
(F) In the case of the following, the standard deduction referred to in subparagraph (A) of this paragraph shall be zero:
(i) A husband or wife filing a separate return where the other spouse has claimed itemized deductions under subparagraph (A) of this paragraph;
(ii) A nonresident alien individual;
(iii) An individual making a return for a period of less than 12 months on account of a change in [his or her] the individual's annual accounting period;
(iv) An estate or trust;
(v) A common trust fund; or
(vi) A partnership.
(d) For the purposes of paragraph (c)(A) of this subsection, the taxpayer's itemized deductions are the sum of:
(A) The taxpayer's itemized deductions as defined in section 63(d) of the Internal Revenue Code (reduced, if applicable, as described under section 68 of the Internal Revenue Code) minus the deduction for Oregon income tax (reduced, if applicable, by the proportion that the reduction in federal itemized deductions resulting from section 68 of the Internal Revenue Code bears to the amount of federal itemized deductions as defined for purposes of section 68 of the Internal Revenue Code); and
(B) The amount that may be taken into account under section 213(a) of the Internal Revenue Code, not to exceed seven and one-half percent of the federal adjusted gross income of the taxpayer, if the taxpayer has attained the following age before the close of the taxable year, or, in the case of a joint return, if either taxpayer has attained the following age before the close of the taxable year:
(i) For taxable years beginning on or after January 1, 1991, and before January 1, 1993, a payer must attain 58 years of age before the close of the taxable year.
(ii) For taxable years beginning on or after January 1, 1993, and before January 1, 1995, a payer must attain 59 years of age before the close of the taxable year.
(iii) For taxable years beginning on or after January 1, 1995, and before January 1, 1997, taxpayer must attain 60 years of age before the close of the taxable year.
(iv) For taxable years beginning on or after January 1, 1997, and before January 1, 1999, taxpayer must attain 61 years of age before the close of the taxable year.
(v) For taxable years beginning on or after January 1, 1999, a taxpayer must attain 62 years of age before the close of the taxable year.

(2)(a) There shall be subtracted from federal taxable income any portion of the distribution of a pension, profit-sharing, stock bonus or other retirement plan, representing that portion of contributions which were taxed by the State of Oregon but not taxed by the federal government laws in effect for tax years beginning prior to January 1, 1969, or for any subsequent year in which laws in effect for tax years beginning prior to January 1, 1969, or for any subsequent year in which the amount that was contributed to the plan under the Internal Revenue Code was greater than the amount allowed under this chapter.

(b) Interest or other earnings on any excess contributions of a pension, profit-sharing, stock bonus or other retirement plan not permitted to be deducted under paragraph (a) of this subsection shall not be added to federal taxable income in the year earned by the plan and shall not be subtracted from federal taxable income in the year received by the taxpayer.

(3)(a) Except as provided in [paragraph (b) of this subsection and] subsection (4) of this section, there shall be added to federal taxable income the mount of any federal income taxes in excess of [$5,500] the amount provided in paragraphs (b) to (d) of this subsection, accrued by the taxpayer during the taxable year as described in ORS 316.685, less the amount of any refund of federal taxes previously accrued for which tax benefit was received.

(b) The limits applicable to this subsection are:
(A) $5,500, if the federal adjusted gross income of the taxpayer for the tax year is less than $125,000, or, if reported on a joint return, less than $250,000.
(B) $4,400, if the federal adjusted gross income of the taxpayer for the tax year is $125,000 or more and less than $130,000, or, if reported on a joint return, $250,00 or more and less than $260,000.
(C) $3,300, if the federal adjusted gross income of the taxpayer for the tax year is $130,000 or more and less than $135,000, or, if reported on a joint return, $250,000 or more and less than $260,000.
(D) $2,200, if the federal adjusted gross income of the taxpayer for the tax year is $135,000 or more and less than $140,000, or, if reported on a joint return, $270,000 or more and less than $280,000.
(E) $1,100, if the reported adjusted gross income of the taxpayer for the tax year is $140,000 or more and less tahn $145,000, or, if reported on a joint return, $280,000 or more and less than $290,000.
(c) If the federal adjusted gross income of the taxpayer is $145,000 or more for the tax year, or, if reported on a joint return, $290,000 or more, the limit is zero and the taxpayer is not allowed a subtraction for federal income taxes under ORS 316.680 (1) for the tax year.
[(b)](d) In the case of a husband and wife filing separate tax returns, the amount added shall be in the amount of any federal income taxes in excess of [$2,750] the amount provided for individual taxpayers under paragraphs (a) to (c) of this subsection, less the amount of any refund of federal taxes previously accrued for which a tax benefit was received.
(e) For the purposes of this subsection, the limits applicable to a joint return shall apply to a head of household or a surviving spouse, as defined in section 2(a) and (b) of the Internal Revenue Code.
[(c)(A)](f)(A) For a calendar year beginning on or after January 1, 2008, the Department of Revenue shall make a cost-of-living adjustment to the federal income tax threshold [amount] amounts described in paragraphs [(a) and] (b) and (d) of this subsection.
(B) The cost-of-living adjustment for a calendar year is the percentage by which the monthly averaged U.S. City Average Consumer Price Index for the 12 consecutive months ending August 31 of the prior calendar year exceeds the monthly averaged index for the period beginning September 1, 2005 and ending August 31, 2006.
(C) As used in this paragraph, "U.S. City Average Consumer Price Index" means the U.S. City Average Consumer Price Index for All Urban Consumers (All Items) as published by the Bureau of Labor Statistics of the United States Department of Labor.
(D) If any adjustment determined under subparagraph (B) of this paragraph is not a multiple of $50, the adjustment shall be rounded to the next lower multiple of $50.
(E) The adjustment shall apply to all tax years beginning in the calendar year for which the adjustment is made.

(4)(a) In addition to the adjustments required by ORS 316.130, a full-year nonresident individual shall add to taxable income a proportion of any accrued federal income taxes as computed under ORS 316.685 in excess of [$5,500] the amount provided in subsection (3) of this section in the proportion provided in ORS 316.117.

(b) In the case of a husband and wife filing separate tax returns, the amount added under this subsection shall be computed in a manner consistent with the computation of the amount to be added in the case of a husband and wife filing separate returns under subsection (3) of this section. The method of computation shall be determined by the Department of Revenue by rule.

(5) Subsections [(3)(b)] (3)(d) and (4)(b) of this section shall not apply to married individuals living apart as defined in section 7703(b) of the Internal Revenue Code.
(6)(a) For tax years beginning on or after January 1, 1981, and prior to January 1, 1983, income or loss taken into account in determining federal taxable income by a shareholder of an S corporation pursuant to sections 1373 to 1375 of the Internal Revenue Code shall be adjusted for purposes of determining Oregon taxable income, to the extent that as income or loss of the S corporation, they were required to be adjusted under the provisions of ORS chapter 317.

(b) For tax years beginning on or after January 1, 1983, items of income, loss or deduction taken into account in determining federal taxable income by a shareholder of an S corporation pursuant to sections 1366 to 1368 of the Internal Revenue Code shall be adjusted for purposes of determining Oregon taxable income, to the extent that as items of income, loss or deduction of the shareholder the items are required to be adjusted under the provisions of this chapter.
(c) The tax years referred to in paragraphs (a) and (b) of this subsection are those of the S corporation.
(d) As used in paragraph (a) of this subsection, an S corporation refers to an electing small business corporation.

(7)(a) The taxpayer shall be entitled to an additional amount, as referred to in subsection (1)(c)(A) and (D) of this section, of $1,000:

(A) For [himself or herself] the taxpayer if [he or she] the taxpayer has attained age 65 before the close of [his or her] the taxpayer's taxable year; and
(B) For the spouse of the taxpayer if the spouse is blind as of the close of the taxable year and an additional exemption is allowable to the taxpayer for such spouse for federal income tax purposes under section 151(b) of the Internal Revenue Code. For purposes of this subparagraph, if the spouse dies during the taxable year, the determination of whether such spouse is blind shall be made immediately prior to death.
(c) In the case of an individual who is not married and is not a surviving spouse, paragraphs (a) and (b) of this subsection shall be applied by substituting "$1,200" for "$1,000."
(d) For purposes of this subsection, an individual is blind only if [his or her] the individual's central visual acuity does not exceed 20/200 in the better eye with correcting lenses, or if [his or her] the individual's visual acuity is greater than 20/200 but is accompanied by a limitation in the fields of vision such that the widest diameter of the visual field subtends an angle no greater than 20 degrees.

(8) In the case of individual with respect to whom a deduction under section 151 of the Internal Revenue Code is allowable for federal income tax purposes to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, the basic standard deduction (referred) to in subsection (1)(c)(B) of this section) applicable to such individual for such individual's taxable year shall equal the lesser of:

(a) The amount allowed to the individual under section 63(c)(5) of the Internal Revenue Code for federal income tax purposes for the tax year for which the deduction is being claimed; or
(b) The amount determined under subsection (1)(c)(B) of this section.

SECTION 4. Section 5 of this 2009 Act is added to and made a part of ORS chapter 316.
SECTION 5. There shall be subtracted from federal taxable income for Oregon tax purposes the differences between the amount allowable as a deduction under section 85 of the Internal Revenue Code as applicable to the tax year of the taxpayer and the amount allowable as a deduction under section 85 of the Internal Revenue Code as amended and in effect on December 31, 2008, and as applicable to tax years beginning on or after January 1, 2008, and before January 1, 2009.
SECTION 6. The amendments to ORS 316.037 by section 1 of this 2009 Act apply to tax years beginning on or after January 1, 2009.
SECTION 7. (1) The amendments to ORS 316.037 by section 1 of this 2009 Act apply to tax years beginning on or after January 1, 2009, and before January 1, 2012.
(2) The amendments to ORS 316.037 by section 2 of this 2009 Act apply to tax years beginning on or after January 1, 2012.
SECTION 8. The Department of Revenue shall waive any penalty or interest that would otherwise apply to taxes due if the penalty or interest is based on underpayment or underreporting that results solely from the amendments to ORS 316.037 and 316.695 by sections 1 and 3 of this 2009 Act.
SECTION 9. Sections 5 and 8 of this 2009 Act apply to tax years beginning on or after January 1, 2009, and before January 1, 2010.
SECTION 10. This 2009 Act takes effect on the 91st day after the date on which the regular session of the Seventy-fifth Legislative Assembly adjours sine die.

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