Income Tax, Oregon vs Florida, Comparison and Analysis Income tax, as defined by thefreedictionary. com, is “A charge imposed by government on the annual gains of a person, corporation, or other taxable unit derived through work, business pursuits, investments, property dealings, and other sources determined in accordance with the Internal Revenue Code or state law. ” In layman's terms, Income tax is money taken out of someone's pay and given to the government, state, federal, or in some cases both.
Some special exceptions apply, but in the states being covered in this essay, being Florida and Oregon, those exceptions will not bother us as of right now, although we will look at them later as a point of comparison. Today we are asking ourselves why Florida has no income tax, but Oregon does. We will look over some things such as basic tax laws, other tax laws and regulations in the state regarding similar matters. We will also mozy on over to some population and citizen facts and trends, and relate them to why the government in each state has set up taxes the way they have.
In the end we will come to a conclusion on why states do what they do, and whether that is a good thing or not. Let’s first delve into the origins of income tax and the origination in the United States. One of the first income taxes was passed in late 18th century Britain. It was a very small tax at . 08% of income for those making ? 60 and up and it moved up to 10% for anyone lucky enough to make a living of over ? 200. This was the inspiration for the tax proposal during the War of 1812 to provide the government with extra income. The war ended less than a year after the tax was proposed so it was never appointed.
During the Civil War, another tax was proposed and implemented, in 1961, being 3% of incomes over 800 dollars. Later, in 1894 another tax law overcame it and was made to 2% on incomes over 4,000 dollars, meaning less than one out of ten households even paid the tax. Now let’s just say it, of course the majority of the working class dislikes income tax, or any sort of tax for that matter, especially income though, because you pick up your paycheck and right there you almost always look and see, deduction, deduction, etc. Let’s take that first part into consideration though, working class.
Working class as defined by thefreedictionary. com is “The socioeconomic class consisting of people who work for wages, especially low wages, including unskilled and semiskilled laborers and their families. ” This is generally referred to if you were to turn into political debates or discussions, on how things will affect the working class, and how the candidates will want to please the working class, blue collar Americans. Generally working class Americans work at basic or low level jobs, i. e. ones you wouldn’t need to take college or any paid training to do.
Some examples would be Cashier, Warehouse worker, Criminal Henchman... okay maybe not that last one. Anyways, if you happen to be one of these people and found your current residence in the beautiful state of Oregon, you may find a not so beautiful state level income tax on each paycheck, coming out at 9. 0%, given you are making somewhere in-between 7,750 and 125,000 dollars per year. 9 Cents to the dollar of your earned wages goes to the state government, not to mention a federal rate of 10-28% depending where you fall on that same scale.
Although that is a large percentage, we are looking solely at state income tax. Corporations have also had an income tax since 1955. Florida, comparably, has a slightly smaller number, being 0% state income tax, although federal is the same across the board. Although Florida does has corporate income tax, being 5%, instituted in 1971. Florida also had a ‘intangible property tax’ but that has been revoked since 2007. Immediately when you are presented with this information, you will think: “What is different about Oregon and Florida, and will affect decision making about state income tax? First off, let me congratulate you on your ability to think the exact same way my essay coheres to. Secondly, what is an answer? Population! Income tax is only collected on officially recorded income, so what does that have to do with individuals? Whether they work or not. Florida has a population with higher-than-average retirement rate. About 17. 3% of Florida’s 18+ million residents are retired, which is 65 years or older, which is generally considered to be the age one quits ‘working’ or employment. This is compared to Oregon with only 13. 9% of its 3. million citizens being retired. Along with that, the average age of a Floridian is around 2 and a half years older (38. 7) than that of an Oregonian (36. 3). These states, presented in percentages, may seem insignificant in difference, but presented with raw numbers, they seem much more intimidating. Florida, at 17. 3% or 18 million is estimated at being filled with 3. 11 million retirees. That’s nearly the population of Oregon. Let’s be glad not everyone in oregon is 65 or older, although it’d be quite a good investment opportunity for retirement centers.
Anyways, with nearly 2 in 10 people being retired, and therefore not bringing in income, Florida is already sounding like one smart cookie of a state. Let’s further it buy bringing up some other facts. Florida has an unemployment rate of 11. 5%, or around 2. 1 million people. Between the unemployed and retirees, Florida has over 5. 2 million of its 18 million not bringing in any wages, and therefore not giving the state any income tax. Although Florida has more retired people, the average wage of an Oregonian, being 35,500 dollars, is lower than Florida, at 39,000 dollars.
Over 2. 5 million people in Florida are also on food stamps, which is a state funded program that allows unfortunate people and families to purchase food to prepare. This is another good sign Florida isn’t instating an income tax because the taxes collected would surely be directly sent back through programs such as these. This brings forward another point, Florida has a sales tax, or a tax which is imposed on purchasable and rentable goods and physical property, as well as special services.
Medications requiring a prescription are also not taxed. Tax is only made on retail sales, for example if you bought something at a store, then sold it to a neighbor, you would not collect sales tax and send it to the government. If you were however, to purchase an item, then sell it back to a retailer, they would sell it and charge sales tax for a second time. Pawn shops and Used car dealerships are great examples a multiple taxed item. The general rate is 6%. As with many states, Florida also has Sales Tax Holidays.
What this means is during certain times of the year, particular items are priced with discounted tax or no tax at all, although the latter is more rare. Such holidays and items would include things similar to school supplies in the days before school starts. With so many people on food stamps, it would be smart to have a sales tax when food stamps are used to purchase food, because usually basic foods such as milk, bread and other groceries aren’t taxed or are taxed less because they are considered ‘necessities’ compared to prepared food such as McDonalds or food repared at a restaurant. If they had sales tax, not to mention they were being paid for by food stamps, the government would be ‘recycling’ money, or basically handing it to the person, which they would then spend and be taxed on, and that is ineffective compared to just taxing goods where people would spend their own income and the government would collect on that rather. This is different than say Oregon, who has no sales tax, except in special cases, such as Ashland which charges 5% prepared food tax. This works for Oregon because they have a instituted income tax, and no sales tax.
This way, as long as you make wages, Oregon doesn’t care how you spend them, because they have already collected your money! Collective tax revenue forwards these arguments. All forms of taxes resulted in a gross revenue of 5. 76% of a person's income from Oregon. Florida had 5. 03%. Although Florida is lower, given the fact that the population is much larger, much more money was made. Again referencing the income of a Floridian being around 3,500 more dollars, with the added fact of a larger population group, the money could be considered evened out. 5. 03% of a Floridians income would amount to about 1,960 dollars, where Oregon's 5. 6% amounts to 2,072 Dollars. So while being different by . 7%, which is a big difference when you’re talking about the millions of people and even more money, the total difference only being around 100 dollars total tax revenue per capita is pretty significant considering the stats we’ve been shown. With this, we briefly observe labor laws. Until 2004, Florida had no minimum wage law. This means it would have been very hard to implement an income tax. Also could be considered unjust, given the fact that the government could decide how much you must pay of your earned wages whilst not making mandatory to earn a minimum wage of any sort.
Once the law was established, however, it was also done so with a notice that it would be adjusted annually based on inflation. Potentially we could see an income tax initiated in the Sunshine State, but it is unlikely with the current working taxes as they are. Next we can look at a bit of history with the states and taxes. Oregon instituted its first tax in 1844, being a property tax. In 1929, Oregon implemented an income tax, for two main reasons, to spread taxes more equally over residents, and to give some relief to those paying heavy property taxes. On average, Oregon receives over 70% of its tax revenue from income tax.
Property tax is still around, and makes about the same amount of money as income tax, but around half of it is given to school systems and public education. Corporate income tax often makes small fractions of what regular does, being in the low hundred millions, compared to a couple billion in income tax. Florida, on the other hand, does not have income tax, rather sales tax as we have talked about. In 1949, Florida implemented its first sales tax. It had a base rate of 3%. This lasted until 1968, when it was bumped up to 4%. This rate remained until 1982, when it was increased again to 5%.
And as of February first, 1988, the tax base rate has been 6% of total sale. Farm equipment, however, has held another rate, being 2% from 1963-68, and then being put up to 3% from 1968 to 2001, when it was decreased to 2. 5%, but four years later in 2005 it was decreased to 0% and stands that way today. Florida also has different tax rates based on counties surcharge tax, for things such as living costs, tourists development, and local administration costs. These differ in time ranges, rates, and longevity. So, is it necessarily a good or bad thing for these different states to have separate tax systems and rates in place?
Well the answer is, there is no real answer. Different systems work for different people and places, and surely there are always optimizations that could be made, but in reality there is not and will likely never be a ‘perfect’ tax system. Money needs to come from somewhere and taxes are a way to do it, but like I said earlier most people don’t enjoy seeing a tax rise, even though it could rationally be deemed necessary. Oregon works with its income tax because it was implemented to counter high property taxes, and sales tax was never made because these two tax systems were already in existence and serving the state well.
Income tax again brings in over 70% or the annual tax revenue for the state of Oregon. Florida finds different success given a different population spread giving them more advantages earning taxes from everyone who spends money compared to everyone who earns money. Given the fact that Florida is often a hot spot for tourists or even international travelers, sales tax proves effective because it earns money from people even just visiting from other states, whereas the extra products sold would result in no additional income otherwise.
This makes sense for Florida compared to Oregon, because Oregon would not really considered a tourism state that states like Florida or California may be seen as. Also we take into consideration professional sports teams. Oregon has the Portland Trailblazers, NBA, the Portland Timbers, MLS, and that’s about it. Florida however have a multitude of teams, being the NFL trio of Miami Dolphins, Jacksonville Jaguars, and the Tampa Bay Buccaneers, the NBA teams consisting of the Orlando Magic and Miami Heat, the MLB with Miami Marlins and Tampa Bay Rays, and lastly NHL Hockey teams being Florida Panthers and the Tampa Bay Lightning.
Given the fact Florida has 9 major league sports teams, you can imagine the sales in tickets, hotels, restaurants, merchandise, and other sports related events. One game sporting 20,000+ attendees depending on the venue can generate millions overnight in the economy in and around the sporting venue. Granted both Portland teams can do the same but even assuming each franchise can bring in that type of money, Florida is up 9-to-2 and has a sales tax that can apply to many, many things being purchased around game time.
In conclusion, although you cannot say which state is necessarily ‘better’ in regard to taxes and tax systems, you can easily see that each state has the system it best sees fit to support the government and economy. "Department of Revenue: Newsroom History & Statistics about Oregon Taxes. " Department of Revenue: Newsroom History & Statistics about Oregon Taxes. Web. 08 June 2012. <http://www. oregon. gov/dor/NEWS/Pages/feature. aspx>. "Florida Department of Revenue. " Welcome to the Web Site. Web. 08 June 2012. <http://dor. myflorida. com/dor/>. History of State and Local Taxes. " Revenuelaw. state. fl. us. Fl. gov. Web. 7 June 2012. <https://revenuelaw. state. fl. us/LawLibraryDocuments/2012/06/OTH-110528_History%20of%20sales%20tax,%206-01-12. pdf>. "Florida Department of Revenue. " FL Dept Rev. 02 Jan. 2007. Web. 05 June 2012. <http://dor. myflorida. com/dor/tips/tip07c02-01. html> Sapia, Jason, and Joseph Henchman. "Local Income Taxes: City- and County-Level Income and Wage Taxes Continue to Wane. " Tax Foundation. Taxfoundation. org, 31 Aug. 2011. Web. 05 June 2012. <http://taxfoundation. rg/article/local-income-taxes-city-and-county-level-income-and-wage-taxes-continue-wane> "Income Tax. " TheFreeDictionary. com. Web. 07 June 2012. <http://legal-dictionary. thefreedictionary. com/Income Tax> "State Individual Income Tax Rates, 2000-2012. " Tax Foundation. Web. 07 June 2012. <http://taxfoundation. org/article/state-individual-income-tax-rates-2000-2012>. "2012 State Tax Rates & Exemptions. " Oregon Income Tax Rates and Tax Brackets, 2011-2012. Web. 07 June 2012. <http://www. tax-rates. org/oregon/income-tax>.