Tobias Read says Oregon has one of the highest capital gains taxes in the nation

Capital gains taxes have quickly become a hot topic at the state Capitol. Of course, there’s been a buzz surrounding them ever since the gubernatorial campaign in 2010 when now-Gov. John Kitzhaber and his Republican opponent sparred over just how much to adjust the state’s rate.

Now, the jockeying has been left to lawmakers who have crafted at least three bills amending the tax to various degrees. At a recent hearing on the bills, Rep. Tobias Read, who favors something of a moderate approach, noted that having a capital gains tax that can, at the highest bracket, reach 11 percent is a barrier for some.

"Having a rate that puts us near the top or at the top of the list makes it more difficult for us as a state to get to the rest of the discussion about the other great things that are in Oregon," he said.

This is something we’d heard before -- that Oregon’s rate was one of, if not the, highest in the nation. But when he said it, it occurred to us, we’d never actually checked to see if that were the case. So we set off to correct that oversight.

To start, we contacted Chris Allanach, a senior economist with the House Revenue Committee (the committee where Tobias made his remarks). Allanach said that to the best of his knowledge, Read was onto something -- not only is it among the highest rates, he said, but "as far as I can tell, it is (the highest)."

(He did caution that this was set to change pretty soon here. When voters approved Measures 66 and 67, they voted to decrease the top income tax rate from 11 percent to 9.9 percent. That means, as of Jan. 1, 2012, the maximum capital gains tax rate will also be 9.9 percent.)

Allanach cited his source as the Federation of Tax Administrators. We went to that site and looked up a comparative table of state income tax brackets. Indeed, it showed that as of Jan. 1, 2011, Oregon was tied with Hawaii for the highest rate at the upper bracket -- 11 percent.

Generally speaking, a state’s capital gains tax rate is only as high as its highest income tax rate. In fact, states often keep it lower than that as an incentive of sorts, Allanach said. That seemed reasonable, but we wanted to make sure that there wasn’t a state out there that might have an unconventional tax rate.

So, we dialed up Ronald Alt, senior research associate with the Federation of Tax Administrators, and asked if he knew of any states that went higher with their capital gains than they do with their income tax. It turns out one does: Massachusetts.

Massachusetts makes a distinction between short term (those held for less than a year) and long term corporate gains. For the former, the state charges a rate of 12 percent.

Where does all that leave us?

Well, Read was right -- we’re among the highest in the nation. If you don’t count Massachusetts’ system, we tie for the No. 1 spot. Even when 2012 rolls around and the rate drops to 9.9 percent, Oregon will still rank as one of the highest -- second only to Hawaii (and, in some cases, Massachusetts). We rate this claim True.

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Fox News reported California Gov. Gavin Newsom “will withhold” California’s federal income tax.