HB 2164 is a complex bill but one of its most important features is that is extends and increases Oregon’s tax provisions for the Earned Income Tax Credit (EITC). The EITC provides substantial relief to low income families and has been shown to be one of the most cost-effective means of raising income-challenged families’ economic prosperity. With the long Republican walkout, ostensibly to prevent Oregon from addressing climate change, there is real danger this bill will not be passed in the single day–today–remaining.
Oregon’s EITC provisions are due to expire on December 31, 2019. HB 2164 would extend that sunset to 2026. It would also increase the tax credit allowance from 8% to 9% for most families and from 11% to 12% for a filer with a dependent child under three years of the amount allowed under federal taxes. Failure to pass this measure would have severe consequences on to up to 250,000 poorer Oregonians as documented in a recent Oregon Center for Public Policy (OCPP) analysis. The OCPP report also documents that some of the most severe impacts would be in the district of Senator Herman Baertschiger, the leader of the Senate Republican walkout. In his district, over 11,000 lower income filers would suffer an average yearly tax increase of $221.
But HB 2164 has other interesting provisions, not all of which are without controversy:
- Establishes a tax credit for contributions to a higher education savings accounts (529’s) and ABLE accounts but limits the percent of the tax credit based on income. Oregonians with income of less than $30,000 would get a 100% tax credit of up to $300. As incomes rise the percentage drops, until filers with incomes greater than $250,000 would get a tax credit for 5% of the amount they put in a 529 college savings account, up to the $300 cap.
- Established a new tax credit for short line railroads for system rehabilitation projects. The credit is for 50% of costs, with annual credit limits based on the rail miles. The credit is greater (up to $3500 per mile) for smaller lines like the City of Prineville Railway and less ($1000 per mile) for large systems such as the Genessee and Wyoming system.
- Creates new provisions and modifications to various aspects of the new corporate activity tax, signed by the Governor earlier this session. For example, it reduces the tax for builders of single-family residents, allows automobile dealers to show the tax as a separate item when they sell automobiles, and clarifies language to make sure that banks pay the tax on the interest and fees they charge their customers.
- Extends current tax credit provisions for certain retirement income, volunteer providers of emergency medical services, employer provided scholarships, agricultural workforce housing construction, low income rentals, crop donations to food banks and schools, and extends special assessments for historic properties, and for the Cultural Trust until 2026.
- The $50 per taxpayer political tax credit becomes available only to individuals with income under $75,000 and to couples with income under $150,000. Meanwhile, the tax credit for donations to fund Individual Development Accounts for low income Oregonians is increased from 70% to 90%.
- Establishes a sunset for vehicles used in emissions testing, and extends tax exemptions for certain qualified machinery and equipment (ORS 307.455) and for the tax credit for sale of a mobile home park to a tenants’ association.
Did you know Oregon has each of these tax breaks?
Two of the provisions are ones we worked on this session. The 529 and ABLE accounts’ refundable tax credit idea for low income taxpayers originally would have been paid for by reductions elsewhere in the budget. An amendment instead makes it revenue neutral, as it is paid for by reducing the benefit for high income taxpayers. We changed our testimony from opposition to support with that important change. Almost all of the benefits have long gone to the top 20% of income earners. Hopefully, the new program will encourage lower income families to save for their childrens’ and grandchildrens’ futures. We also opposed the short line rail subsidy, encouraging changes that significantly reduced the subsidy to G&W, which is the world’s largest short line rail company, with lines on five continents and lines running from the top to the bottom of Oregon. There were over a dozen other new tax credit bills that we opposed, which thankfully didn’t make it into this bill or succeed as stand-alone bills this session.