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May 26, 2022

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Clark County residents employed by Oregon firms but working from home save big on taxes

By , Columbian Innovation Editor
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Jessica Jackson used to work in Oregon, but now can work at home in Vancouver, using the income tax savings to help pay for day care for her son, Colin, 4. She and her husband, David, just welcomed twins Landon and Levi.
Jessica Jackson used to work in Oregon, but now can work at home in Vancouver, using the income tax savings to help pay for day care for her son, Colin, 4. She and her husband, David, just welcomed twins Landon and Levi. (Photos by Amanda Cowan/The Columbian) Photo Gallery

Vancouver resident Jessica Jackson made the monotonous drive to her Portland workplace every workday until the pandemic hit, when she shifted to remote work.

Her shift also resulted in the ability to avoid Oregon income tax, and it’s a similar story for more than 2,700 Clark County residents who filed state tax returns in Oregon in 2019 but stopped in 2020, according to the Oregon Legislative Revenue Office. The biggest factor is likely due to the workers telecommuting, which allows them to skip paying Oregon income tax.

In 2019, Oregon received 78,662 Clark County nonresident income tax returns. In 2020, it dropped to 75,945. The numbers are preliminary and might be adjusted, and government agencies are still waiting for the 2021 returns to come in.

Chris Allanach, Oregon legislative revenue officer, said the state’s preliminary financial loss from those Clark County residents is calculated at about $23 million. That represents $400 million in income no longer earned in that state.

But where is the money going? While it’s not tracked anywhere, it’s presumably going into Clark County’s and Washington’s economy.

“They basically got a 5.5 percent raise,” said Scott Bailey, regional economist for Southwest Washington. “Their disposable income went up by that much. They’re spending it locally.”

Bailey said that some of that money will still end up in Oregon as Clark County residents drive to Oregon to shop and avoid Washington’s sales tax.

Disposable income

Jackson and every other former commuter are not only avoiding taxes, they’re also not buying as much gas or paying for other commuting costs, adding to their disposable income.

“Just in taxes alone, I save about $250 a month,” Jackson said. “That doesn’t include gas and other things. I was super excited that I got that money back.”

Jackson, a mortgage loan processor, said she spends all the income tax savings on day care for her 4-year-old.

“I can also have more family time,” she said. “It’s not all about the money.” She and her husband just welcomed twin boys to the family.

Businesses on the move

If a Vancouver resident works for a Portland-based company but works remotely, does that person have to pay Oregon income tax?

Rich Hoover, public information officer for the Oregon Department of Revenue, said the short answer is no.

“At first, I would clarify that we look to see if the company is Oregon-based (the city is not a factor),” he wrote in an email to The Columbian. “However, if (employees) did spend some time in Oregon, working for the same company, they could be subject to some Oregon income tax liability.”

But what about businesses moving from Oregon to Clark County?

While there’s no entity that tracks that, the number of businesses in Clark County has not stopped growing because of the pandemic. Businesses moving from Oregon to Clark County factor into that growth.

In the past three years, there was stronger growth of Clark County businesses with fewer than 10 employees.

In the first quarter of 2019, there were 7,570 Clark County employers with fewer than 10 employees. That grew to 7,826 employers a year later, and 8,423 in 2021’s first quarter.

For businesses with more than 10 employees, Clark County had 2,799 employers in 2019’s first quarter, 2,841 employers in 2020 and 2,758 employers in 2021’s first quarter.

“There has been a noticeable uptick in the number of private-sector employers in Clark County,” Bailey said. “The increase has come in small employers, with less than 10 employees. The number of larger employers declined early in the COVID-19 recession and had mostly but not entirely recovered by June 2021.”

Taxes withheld

Shane Boyle works at home now, but he used to make the daily commute from Vancouver to downtown Portland.

“As far as the income tax is concerned after moving to a work-from-home agreement, the HR department stated that they are still required to withhold the Oregon state income tax from our paychecks because our building we are based out of is physically in Oregon, therefore we are still employees in said state, but we can claim it on our yearly tax returns and will get it all back,” he wrote in an email to The Columbian.

“I did this last year already and did not run into issues,” he wrote. “I would say that personally for me, between parking fees, gas fill-ups for the weekly commute, and the income tax that I was paying, has to be at least $550-$600 a month I am saving now.”

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