---
kind: section
source_pdf: oregon-prosperity-council-report-june-2026.pdf
fingerprint: 8ac9aef8ca1b
page_range: [16, 17]
breadcrumb: ["Full Report", "Chapter 2: Taxes", "Background & Problem Statement"]
source_links:
  pdf: "https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=16"
  raw_pages:
    - "../../../.extracted/pages/page-0016.txt"
    - "../../../.extracted/pages/page-0017.txt"
---

# Background & Problem Statement

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## TL;DR  *(generated · confidence: high)*

Oregon's tax structure creates competitive disadvantages for business and households. Middle-income earners face higher effective tax rates than in Washington and California, and complexity around layered local taxes burdens small and medium-sized businesses. Combined with housing affordability challenges, this erodes household disposable income and constrains the state's ability to fund services and long-term growth.

**Key points** *(each cites a PDF page)*:

- Single filer earning $40,000 faces effective tax rate of 20.4% in Oregon vs. 18.4% in Washington and 19.9% in California ([p. 17](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=17))
- Household earning $80,000 faces effective tax rate of 17.6% in Oregon vs. 16.0% in Washington and 17.0% in California ([p. 17](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=17))
- Small and medium-sized businesses particularly affected by compliance complexity and layered local tax burdens including income, business, property, and special-purpose taxes ([p. 17](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=17))
- Oregon places higher burden on middle-income households than all neighboring states ([p. 17](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=17))
- Current state tax structure limits ability to balance budgets, sustain essential public services, and invest in long-term economic growth ([p. 17](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=17))
- Higher tax burdens combined with housing affordability challenges reduce household disposable income and economic mobility ([p. 17](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=17))

Amounts: 20.4% · 18.4% · 19.9% · 17.6% · 16.0% · 17.0% · $40,000 · $80,000

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> **Source:** PDF [pp. 16-17](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=16) · raw: [16](../../../.extracted/pages/page-0016.txt) · [17](../../../.extracted/pages/page-0017.txt)

Breadcrumb: Full Report > Chapter 2: Taxes > Background & Problem Statement

---
CHAPTER TWO
Taxes
F O C U S : Business Climate

FOCUS
Business Climate
Taxes
Background and Problem Statement
Oregon’s tax structure must be competitive to attract, retain, and support high-wage job growth. It is one driver,
among several, that are critical in creating an environment where workers and employers can thrive and where the
economy can prosper. Small and medium-sized businesses are particularly affected by compliance complexity and
layered local tax burdens, including income, business, property, and special-purpose taxes, which together create
uncertainty and increase the cost of investment. The current state tax structure places a higher burden on middle-
income households than all of our neighboring states. This structure underpins the state’s lack of competitiveness
and limits its ability to balance budgets, sustain essential public services, and invest in long-term economic growth.
Under current state and local tax structures, including income and sales taxes but excluding property taxes, a single
1
filer earning $40,000 in Oregon faces an effective tax rate of 20.4%, compared to 18.4% in Washington and 19.9%
in California. Similarly, a household earning $80,000 has an effective tax rate of 17.6% in Oregon, compared to
2
16.0% in Washington and 17.0% in California. These differences demonstrate that Oregon’s comparatively higher
tax burden is not limited to high-income earners; it affects households across the income spectrum. Even seemingly
small differences in effective tax rates can translate into meaningful annual costs for Oregon residents. When
combined with Oregon’s housing affordability challenges and other rising costs of living, these higher tax burdens
can further reduce disposable income and make it more difficult for households to achieve economic security and
upward mobility. See Appendix F for additional information.
EFFECTIVE TAX RATE: Single filer earning $40,000
% % %
20.4 18.4 19.9
OREGON WASHINGTON CALIFORNIA

---

Parent: [Chapter 2: Taxes](./INDEX.md) · PDF: [pp. 16-17](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=16)