Oregon is No. 9 least affected by federal tax reform
April 2018's Tax Day deadline whooshes by, as the new administration's federal policy has lowered the corporate income tax from 35 to 21 percent this year. The new policy is projected to increase overall after-tax income in every quintile of taxpayers — at least at first — but even that differs by household income and state of residence. So, what does it mean for Oregonians?
Personal finance website WalletHub released a report on 2018's States Most Affected by Tax Reform that studied the new tax code recently signed into law by President Trump — and Oregon ranks ninth least affected, at number 43.
WalletHub compared the 50 states and the District of Columbia based on state-specific average tax changes for low-, middle- and high-income families to determine which states will get the best tax breaks going forward.
In order to identify the states that would be most affected by the tax code according to one's family income group, WalletHub generated estimates of the state-specific average tax change at three income levels — low ($25,000), medium ($50,000) and high ($150,000) — in each of the 50 U.S. states and the District of Columbia. It used data from the Institute of Taxation & Economic Policy's 2018 report, which publishes estimates of average tax change at seven points in the state-specific income distribution levels.
"As we were interested in comparing average tax changes for families at the same income level across states, we fit a regression model to estimate the relationship between income and the average tax change for each state and the District of Columbia," said the study in its methodology. In combination with this report, WalletHub also released its Tax Fairness Survey, which takes stock of taxpayers' attitudes toward the new tax code and how they expect it will influence their lives.
The study found that on average, tax change in Oregon benefited low-income families 45th, middle-income families 28th, and high-income families 39th, with a score of 1 benefitting the most (Alaska).
States with low-income families benefiting the most from the new tax reform include D.C., Arizona, Nebraska, Texas and California. States with low-income families benefiting the least include Alabama, Pennsylvania, Montana, Wyoming and Vermont.
States whose middle-income families benefit the most include Alaska, Nevada, New Mexico, Delaware and California. States whose middle-income families benefited the least include Maine, Maryland, Connecticut, West Virginia and Arizona.
As for high-income families, states benefiting the most include Alabama, Tennessee, Wyoming, Arkansas and Ohio, and the least include Mississippi, California, New Jersey, New York and Arizona.
The study found red states are benefiting the most from the tax code change over blue states.
Learn more about the study here.
By Jules Rogers
Reporter, The Business Tribune
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