Oregon Sales Tax vs. Income Tax: Which is Better?
Which type of tax is the best?
Throughout the course of the COVID-19 pandemic, many people decided to relocate to more tax friendly states. According to CNBC, New York and California, states with high income taxes, have seen a mass exodus of citizens seeking to claim residency in states with less tax, such as Florida and Nevada. Both of those states have one thing in common: they are sales-tax-only states.
Oregon is one of five states in the U.S. that does not have a sales tax. Instead, the way the legislature brings in revenues is through high-income and property taxes. While property taxes are fairly undisputed, it’s income and sales taxes that have the most variation from state to state.
The main arguments for an income tax are that it helps redistribute wealth to poorer demographics. Jesuit history teacher Malia Bernards states that the income tax has a progressive curve, which allows governments to tax people
“The best benefit for an income tax is that the people that are making the money potentially are the ones paying the taxes,” Bernards said.
Proponents argue that a flat rate sales tax does not consider socioeconomic levels when taxing citizens.
On the other hand, those who argue for a sales tax say that it encourages more economic growth by allowing people to save their money from being taxed and increasing incomes all around. Sales tax proponents also claim that although the tax is a flat rate for all income levels, it does tax progressively because higher income earners will most likely spend more money on taxable goods.
Bernards believes that the sales tax method is a better system.
“I actually think it’s a fairer tax because people that have more disposable income are the ones paying the taxes,” Bernards said. “People are making the choice to spend that income or save that income. It puts more of the tax burden on people that have more disposable income and less on those that do not have as much disposable income.”
Bernards also mentioned that having an income tax only hurts the state’s economy, while a sales tax places more of the lifting on visitors.
“The biggest drawback I see…is that we lose out on all of the [sales] from people that visit [Oregon],” Bernards said. “We’re just taxing our own residents which ultimately just hurts our economy because we’re not bringing in money from anybody else.”
Junior Ethan McBride believes sales taxes help people save their money for necessities and ensures that only excess spending is taxed.
“You can increase the sales tax [for luxury goods] while decreasing it for stuff like food,” McBride said. “It helps people to spend on stuff that’s more beneficial while also incentivizing to spend on things that are more practical.”
Junior and ASB cabinet member elect Tyler Fitts believes a sales tax would be better due to how it places less of the tax load on its own citizens.
“I think that states should use sales taxes because they raise money for the state in every sale,” Fitts said.
Fitts alludes to the fact that sales taxes are paid by every shopper, whether they are a state citizen or not, which allows the tax burden to be shifted onto out-of-state visitors more than in-state residents.
Why hasn’t a sales tax been enacted yet? According to Bernards, the Oregon legislature has proposed sales tax bills, but it has been voted down every time due to the fact that the tax would be an additional tax on top of the two existing taxes.
“Having an income tax really precludes us from having a sales tax,” Bernards said. “All the legislation that has been proposed is just an additional sales tax on top of what already exists. If legislation were proposed that legitimately got rid of the income tax, then I think we would see a big shift.”
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