Tax Deductibility Initiative Qualifies for Oregon Ballot

June 30, 2008

In November, Oregon voters will vote on Initiative 3, which would allow taxpayers full deduction of federal income taxes on Oregon state income tax returns. Currently, the deduction is limited to about $5,500. Petitioners gathered some 82,000 signatures to qualify the initiative for the ballot.

Before 1974, Oregon taxpayers could fully deduct federal income taxes on their state taxes, but that year a $3,000 limit was instituted (which would be about $13,000 in 2008 dollars). In 1980, the amount was increased to $7,000 ($18,000 in 2008 dollars), but reduced to $3,000 in 1987, and increased to $5,000 in 2000 with annual inflation adjustments. Also in 2000, voters rejected a measure 45% to 55% that also would have made federal income taxes fully deductible. (See today’s Daily Tax Report article by Tom Alkire for this history.)

The Legislative Revenue Office says that the measure would reduce state general fund revenue by 13 percent, or about $550 million. Read the text of the initiative here (PDF).

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A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.