Oregon and California are neighboring states with very different tax structures. Oregon has a lower overall tax burden than California, although California’s top income tax rate is more than twice as high as Oregon’s. Which state provides the best environment for taxpayers? Let’s take a closer look.
1. Income Tax: One of the biggest differences between Oregon and California taxes is the income tax rate. Oregon has a progressive income tax with five brackets ranging from 4.75% to 9.9% for those earning over $125,000. California also has a progressive income tax, but with ten brackets ranging from 1% to 13.3% for those earning over $1 million. While Oregon’s tax rate may seem lower, Californians may have more deductions and credits available to them.
2. Sales Tax: Oregon is one of the few states in the US that does not have a sales tax, which means you won’t pay any extra fees for purchases. However, sales are subject to a use tax, which is a tax on items purchased out of state and brought into Oregon. California has a state sales tax rate of 7.25% with an additional local tax rate that varies by county or city. While you may enjoy tax-free shopping in Oregon, keep in mind that you will still pay for other expenses like gas and utilities.
3. Property Tax: Both Oregon and California have property taxes, but they differ in their assessment and collection. In Oregon, property assessments are conducted every year, and the maximum tax rate is $15 per $1,000 of assessed value. In California, property assessments are conducted every few years, and the maximum tax rate is 1% of the assessed value, with additional rates for local bonds and levies. Depending on where you live and the value of your property, your property tax bill may vary greatly in these two states.
4. Estate Tax: Another key difference between Oregon and California taxes is the estate tax. Oregon has an estate tax that applies to estates worth more than $1 million, with rates ranging from 10% to 16%. California, on the other hand, does not have an estate tax, but it does have an inheritance tax that applies to beneficiaries receiving over $150,000 from an estate. If you are planning to leave a large legacy, you may want to consider these taxes in your estate planning.
5. Business Taxes: Finally, if you plan to start a business in Oregon or California, you need to be aware of the business taxes. Both states have corporate income tax and excise taxes, but they differ in their rates and rules. Additionally, California has a gross receipts tax that applies to businesses earning over $1 million, while Oregon does not. Depending on your business type, size, and location, you may find one state more attractive than the other in terms of taxes.
Choosing between Oregon and California is no easy task, but understanding the tax implications can make the decision easier. While Oregon may have lower income taxes and no sales taxes, California may offer more deductions and no estate tax. Ultimately, your tax liability depends on a wide range of factors, including your income, property value, business type, and lifestyle. We hope this guide helps you make an informed decision and plan your finances wisely.