LA GRANDE — Oregon’s tax system, while fairer than that of most states, weighs more heavily on low-income families and individuals than anyone else.

That’s the conclusion of the Institute on Taxation and Economic Policy, which publishes an annual study that compares all 50 states and the District of Columbia and ranks them based on the effective tax burden they impose on different groups, measured as the share of overall income required to pay state and local taxes. In Oregon, that includes income tax, property tax, excise tax and, in some communities, local sales tax.

The question is: What should be done about it?

“Even though the U.S. calls its system a ‘progressive’ tax system, because the rates are higher for higher-income individuals, it is not when measuring it by proportion of income spent,” said Scott McConnell, interim dean of the College of Business at Eastern Oregon University and associate professor of economics. “It really depends on what is important to you, rates or proportion of income.”

And Oregon’s tax structure can be viewed in a similar light.

According to the Institute on Taxation and Economic Policy’s Tax Inequality Index, Oregon has the 42nd most regressive state and local tax system in the country.

McConnell pointed out that Oregon’s tax structure is less regressive than most, noting that only eight states and the District of Columbia have more progressive systems. Still, the study found, the tax burden falls more heavily on the working poor than on middle-class or wealthy Oregonians.

The institute’s report found that, on average, state and local taxes take up about 12% of the income of Oregon’s lowest-earning tax filers. This is compared to 9.7% of the income of the middle fifth, and 10.4% of the income of the richest 1%.

“Right now, as the report points out, we have a regressive tax system, a system where the lowest-earning one in five Oregonians, those really struggling the most to meet their basic needs, pay a greater share of their income in taxes in the state and local level than do anyone else,” Daniel Hauser, deputy director of the Oregon Center for Public Policy, said.

Hauser said this is not an argument to get rid of taxes, saying taxes are necessary to fund the services Oregonians rely on.

“We just need to make sure that the overall distribution of those taxes lands on those with the most — the highest-earning, wealthiest Oregonians — not the very poorest Oregonians, which is what the report found,” he said.

On the other hand, McConnell warned, making the state’s tax system too progressive could have unintended consequences for the economy.

“With most other states having even more regressive tax systems in place, if Oregon becomes too burdensome, you risk losing investment capital to other states,” he said.

Hauser said there are different options to shift Oregon toward a more progressive system. One is a “millionaires tax,” a surtax that would be imposed on people who make more than $1 million in a single year.

“But that would allow us to have more revenue to invest in things like expanding Oregon’s Earned Income Tax Credit,” he said. “Oregon’s Earned Income Tax Credit is a really powerful tool to put money in the pockets of working families through our tax code. It’s one of the most progressive elements of Oregon’s tax system.”

A millionaires tax, Hauser added, would be one “really effective way to make our system more progressive” and invest in families in greater need of support.

An opportunity to make the case for a readjusted tax code would be to show the public how they would benefit from it, McConnell said.

“In general, people do not want to pay more taxes when they do not see improvements to their own quality of life,” he said. “So school bonds or street repairs are generally more successful than just general fund increases.”

Hauser said one angle the report wasn’t able to get into was economic inequities between urban and rural areas in the state and inequities between different racial and ethnic groups and how they’re affected by the tax system.

“They’re often harder to analyze, particularly in terms of race and ethnicity, because as it is right now, you don’t indicate your race on your tax form,” Hauser said.

He said in the last legislative session, a bill was passed that will make Oregon the first state in the nation to provide an optional question where people can list their racial or ethnic identity.

“We’ll be able to know in the coming years — yes, it’s regressive, that’s what this report shows, but what we’ll also be able to learn is how is it faring in terms of worsening or maybe even improving racial equity across Oregon,” Hauser said. “But it is important to really get into those other facets of distribution, too.”