The tax overhaul President Donald Trump signed last month will save Oregon taxpayers nearly $1.5 billion a year, according to a new state analysis out this week.

That works out to $840 per tax filer, substantially more than state forecasters estimated last fall, though savings will vary enormously from taxpayer to taxpayer. And a small percentage of Oregon taxpayers actually face a tax increase under the new tax code, according to the new analysis from the Legislative Revenue Office.

Oregonians' higher savings apparently result from last-minute changes Congress made in the legislation, increasing a tax break for a certain type of business income and preserving more deductions for state income taxes and local property taxes.

However, late changes in the bill also wiped out the state's projected windfall in revenue. Oregon instead faces the prospect of a $100 million hit to state coffers in 2018, though the tax changes will raise revenues over the long run, growing to an additional $203 million by 2024.

Oregon lawmakers are already considering a legislative response to the new tax code, to maintain revenue for local services and preserve some valuable federal tax breaks for Oregonians.

It's far from clear, though, whether those changes would have the desired effect and whether lawmakers will pursue them during the short legislative session that begins next month.

Chris Allanach of the Legislative Revenue Office has been studying the bill since Congress approved the final version Dec. 20. It's an extremely complicated measure, with 115 provisions, and will affect different taxpayers quite differently.

For example, the state estimates that 70 percent of tax filers here will enjoy a federal tax cut in 2018 under the new law. But it also raises federal taxes for 10 percent of Oregon tax filers and raises state taxes for 40 percent of filers.

Congress made several late changes to the bill and substantial uncertainty remains about how some provisions will affect Oregon, especially the impact of corporate profits earned overseas returning to the U.S.

How the federal tax overhaul affects Oregon

Here are preliminary findings from the Legislative Revenue Office on how the tax overhaul Congress approved last month will affect Oregon:

• The tax changes will save Oregonians an average of $1.48 billion in federal taxes annually, and $29 million in state taxes. That works out to nearly $840 for the average Oregon tax filer. However, actual savings will vary considerably -- and some people will pay more.

• Overall, 70 percent of individual Oregon tax filers will have a decrease in federal taxes. Ten percent will pay more. The remainder will have no change (many of those had no federal tax liability.)

• Forty percent of Oregonians will pay more in state taxes. Thirty percent will pay less, and 30 percent will have no change.

• Savings will vary considerably by household. Big beneficiaries include people who can reclassify some of their income as pass-through income from businesses.

• Oregon expects to lose $100 million in state revenue this year. However, over time those effects will reverse. By 2023, the tax changes will produce nearly $200 million a year in new revenue for the state.

The Tax Cuts and Jobs Act, signed Dec. 22, was the signature achievement of the Trump administration's first year in office. Highly contentious politically, it passed the House and Senate without a single vote from Democrats. Rep. Greg Walden is the only member of Oregon's congressional delegation, and its lone Republican, who voted for it.

The president and Republicans in Congress said the overhaul, which cut corporate tax rates from 35 percent to 21 percent, would put U.S. businesses on equal footing with rivals in other, low-tax countries. And they noted the bill will provide tax cuts to the vast majority of Americans, as it does for the majority of Oregonians.

Democrats and other opponents criticized the bill for reserving most of its tax breaks for large companies and wealthy individuals, and because it will add more than $1 trillion to the federal deficit over 10 years. Critics fear that could trigger spending cuts to social programs and weaken the economy over time.

PERSONAL INCOME

The bill had special resonance in Oregon, which is unusual among states for its lack of a sales tax and its relatively high income tax. Prior law allowed residents here to deduct all of their state income taxes and local property taxes from federal taxes.

Early versions of the tax overhaul would have eliminated those local deductions, an especially painful prospect for Oregonians because of the state's distinctive tax structure. Ultimately, though, the final version allowed deductions up to $10,000.

Oregon's previous state analysis of the bill's effect on Oregon preceded that change, and others that had important implications for Oregon.

In the final bill, which included lower tax rates and a higher standard deduction and higher child tax credits than originally proposed, most Oregonians come out ahead, according to Jeff Dixson, founder and chief executive of NW Financial & Tax Solutions, a Vancouver firm with offices in Clackamas and Tigard.

The complexity of the new tax code produces widely divergent results among taxpayers. Looking at a representative sample of his clients, Dixson found a married couple living in Oregon with nearly $150,000 in annual income will save more than $1,500 a year – a 4.3 percent cut in federal taxes.

A married couple living in Washington, but with one spouse working in Oregon, earning nearly $100,000 a year will pay $318 more a year in federal taxes. That's a 3.9 percent increase from last year.

Allanach, in the Legislative Revenue Office, looked at some hypothetical examples. A single Oregon tax filer making $50,000 a year would enjoy a $1,100 annual tax break under the new law – a 20.4 percent reduction. A typical family of four making $75,000 a year also would save around $1,100 a year – a 40 percent cut in federal taxes, offset by a slight increase in state taxes.

A number of interrelated factors determine how much individual Oregon tax filers will pay in state taxes under the new law. One important one, according to Allanach, is that Oregonians who receive a big cut in their federal taxes will have less federal tax to deduct from their state income taxes. That's why state taxes may go up modestly despite a sharp cut in federal taxes.

Many workers will see a change in their paychecks starting next month, when employers start using new tax withholding tables from the IRS. But because the law is complex, Dixson said many will have to wait until they run the numbers after 2018 to understand exactly what the new tax code meant for them.

"You really don't know how this is going to impact you until you run your tax return," Dixson said. "From what we've seen so far, it really is going to benefit more people in a positive way."

Initial estimates last fall suggested Oregon might see an additional $150 million in state revenue this year because of ways the changes in the federal tax code would trickle down to Oregon. However, Allanach said subsequent changes to the bill altered the calculation – and turned the legislation's net effect on the state from a gain to a loss.

Chief among them, according to Allanach, was a change in how the bill treats personal income that taxpayers "pass through" from businesses. Initially, the bill lowered tax rates for such income. But instead of lowering rates, the final bill created a tax deduction for that income.

The tax can benefit a variety of business owners and contractors, ranging from real estate investors to physicians, freelance software developers and electricians who work independently.

That deduction lowers the taxable income for both federal filings and Oregon's state filings. And that made the pass-through tax break much more valuable for those taxpayers who can take advantage of it.

That's not everyone. The tax bill seeks to limit the kinds of income eligible for the tax break, and according to Allanach the value of the deduction goes down after $157,000 in income for doctors, lawyers and others in certain specialized professions.

That makes the new tax law more valuable to those who can classify at least a portion of their earnings as pass-through income. That could favor well-off business owners, but it may help others, too.

"(If) you've got a plumber who's a sole proprietor," Allanach said, "I don't see any reason why they wouldn't get it."

BUSINESS INCOME

Additionally, the new law treats certain business expenses differently. For Oregon, the most important provision deals with an obscure topic known as "bonus depreciation." That allows businesses to deduct the entire cost of certain property immediately, rather than over a period of years.

Businesses are likely to take advantage of the immediate tax benefit, and Allanach calculates that will produce a $76 million hit to state revenues this year, and a $77 million hit in subsequent years.

But the bill reduces the size of immediate deductions in future years – and businesses will have already taken the full deduction on some property that they would otherwise have deducted over a period of years.

So what had been a net loss for state revenue will ultimately turn into a net gain.

Beginning in 2020, Allanach forecasts the new tax law will produce a net annual gain in state revenue. It's a modest change at first, but will grow to $203 million more a year by 2024. That's a relatively small portion of the state's general fund spending, which is currently around $10 billion a year.

It's not clear how Oregon law applies to international business income repatriated by multinational corporations under provisions in the bill designed to bring profits stashed overseas back to the U.S, according to Allanach. That could apply to any large corporation doing business in Oregon with a tax liability here – but not limited to companies based here.

One important question, he said, is how Oregon will treat a provision in the new law on dividends corporations receive from other companies in which they hold ownership stakes.

"There's not universal agreement about how it would play out in Oregon law," Allanach said. The resolution of such issues could change assumptions about the bill's impact, but he said it's too soon to characterize their impact.

"It could be significant, but I'm not at the point where I'm ready to put a dollar amount on it," he said.

LEGISLATIVE ACTION?

Despite the late changes in the bill, the $10,000 cap on state and local tax deductions means some Oregonians will save less than taxpayers in other states – and some will pay more. Lawmakers in New York, California and other states in similar circumstances are considering workarounds.

The tax law did not limit the deductibility of most charitable contributions. So some states said they are contemplating changes to give taxpayers the option of making a charitable contribution to their state governments, and allowing them to deduct that contribution from their income tax bill.

At a House revenue committee hearing in Salem this week, lawmakers said they had received questions from constituents about whether Oregon might try something similar – and if it would be possible in the upcoming short session.

Committee Chairman Rep. Phil Barnhart, D-Eugene, indicated he would like to explore the possibility although he said it's not clear whether the federal government would accept the workaround.

"Getting to a place where we're willing to let taxpayers take a risk is really not all that difficult," Barnhart said.

Rep. Knute Buehler, the leading Republican candidate for governor, noted that the proposed workaround amounts to "a tax decrease for high-income individuals." That, Buehler said, runs counter to standard liberal arguments that the wealthy should bear more of the tax burden.

Barnhart acknowledged the apparent contradiction, but said Oregon should fight for an underlying principle: That the federal government should not tax people on taxes they've already paid to state and local governments.

"Is this something the states want to accept without kicking about it?" Barnhart asked.

Neither he nor his colleagues have yet proposed specific legislation to preserve the state and local tax deductions.

-- Mike Rogoway; twitter: @rogoway; 503-294-7699