Oregon has a tax problem that most residents don’t think about until it’s too late: a $1 million estate tax exemption, the lowest of any state in the country. A recent Portland Business Journal report on Governor Tina Kotek’s Prosperity Council reopened the debate, and it’s one every Oregon business owner and family should understand before the next legislative session.
The stakes are real. Raise the exemption, and Oregon’s general fund could lose more than $400 million. Leave it alone, and more retirees, business owners, and multigenerational family enterprises keep packing up for states with friendlier rules (Portland Business Journal). Here’s what’s actually happening, and what it means for your estate plan.
Why Oregon’s $1 Million Threshold Is a Problem
Oregon set its estate tax exemption at $1 million back in 2001, and it has never been adjusted for inflation since (Collier Law; Northwind Law). A million dollars doesn’t buy what it used to. Today, a modest Portland home, a small business, a retirement portfolio, or a family farm can push an estate over that line without anyone feeling “wealthy.”
That combination of a fixed threshold and rising asset values quietly pulls more middle-class families into the tax every year. In fact, in 2023, four out of five Oregon estate tax returns filed were for estates valued under $2.5 million, not sprawling fortunes (Willamette Week).
Once an estate crosses $1 million, Oregon taxes it on a graduated scale from 10% up to 16% for amounts above $9.5 million, with no adjustment for inflation and no portability between spouses (Tax Foundation). Compare that to Washington, which raised its exemption to $3 million effective July 1, 2026, with rates from 10% to 20% (Caress Law). Oregon isn’t just behind the rest of the country. It’s behind its next-door neighbor.
| Oregon | Washington | Federal | |
|---|---|---|---|
| Exemption | $1,000,000 (fixed since 2001) | $3,000,000 (as of 7/1/2026) | $15,000,000 |
| Top rate | 16% | 20% | 40% |
| Indexed for inflation | No | Historically yes, currently flat | Yes |
| Spousal portability | No | No | Yes |
What the Prosperity Council Is Recommending
Governor Kotek’s Prosperity Council, a business advisory group tasked with recommending economic growth policy, called out the estate tax directly in its 2026 report. The council described Oregon’s estate tax as the most aggressive of the 13 jurisdictions that still levy one, and recommended reform “to align more closely with West Coast states in order to reduce the out-migration of Oregon-based business owners, investors and multigenerational family enterprises” (Oregon Journalism Project).
Specifically, the council pointed to raising the threshold to somewhere between $3 million and $5 million, closer to Washington’s level, while also adding deductions targeted at small and family-owned businesses (Statesman Journal). The goal isn’t to eliminate the tax. It’s to stop it from catching ordinary family businesses and retirees who never intended to be “estate tax payers” in the first place.
Why Reform Keeps Stalling
This isn’t the first attempt. Senate Bill 1511 would have raised Oregon’s threshold from $1 million to a $2.5 million deduction, phased in gradually, while raising rates on the largest estates. It passed the Senate 22-5 in February 2026, but failed to advance further and died on March 6, 2026 (SWPDX Law; Oregon Legislature).
The sticking point is money. The Portland Business Journal’s coverage frames the trade-off plainly: proponents argue a higher exemption would save family businesses millions, while opponents point to a general fund hit of more than $400 million (Portland Business Journal). Critics have also argued the relief would flow mostly to the wealthiest estates, framing it as a tax cut for the top 5% (City Observatory).
That fiscal tension is exactly why estate tax reform has failed multiple times in recent years, even with bipartisan interest in raising the threshold.
The Cost of Standing Still
While lawmakers debate, Oregon keeps losing people and money. Research from the Common Sense Institute found that if the $1 million threshold stays fixed, Oregon could lose 125,000 residents by 2035, along with 59,000 jobs, $6.3 billion in GDP, and $10.5 billion in sales (Willamette Week).
The same research found that states with an estate or inheritance tax are missing an average of 8,732 residents aged 65 and older compared to states without one (Common Sense Institute). Nationally, Oregon already ranks 34th in net migration, losing residents primarily to Washington, Texas, Arizona, Florida, and Idaho (Tax Foundation).
For family-owned farms, ranches, and small businesses, the risk isn’t abstract. Without careful planning, an estate tax bill can force heirs to sell land, equipment, or the business itself just to cover the tax due (Oregon Ag Trust).
What Business Owners and Families Should Do Right Now
Legislative reform may take another session or two to land. You don’t have to wait to protect your estate. A few strategies worth discussing with your advisor today:
- Use the natural resource exclusion if you qualify. Oregon already allows up to $15 million of farm, forestry, or fishing property to be excluded from the estate tax, provided a family member has materially participated in the business for at least five years (Schwabe Williamson).
- Plan around the lack of spousal portability. Unlike the federal exemption, Oregon’s $1 million threshold cannot be shared between spouses, so proper trust structuring for each spouse’s exemption matters more here than almost anywhere else (Trailhead Planners).
- Revisit business succession plans annually. If your business value has grown since your last estate plan was drafted, you may be closer to the $1 million line than you think.
- Model both outcomes. Work with your advisor to understand your exposure under current law and under a raised exemption, so you’re ready either way the legislature moves.
The Bottom Line
Oregon’s estate tax exemption hasn’t moved in over two decades, but home values, business valuations, and retirement portfolios certainly have. The Prosperity Council’s recommendation puts real momentum behind reform, but the same $400 million question that sank Senate Bill 1511 will shape whatever comes next in 2027.
Whether the exemption stays at $1 million or eventually rises to match Washington’s $3 million, the families and business owners who plan ahead of the law are the ones who come out ahead. If you’re unsure how exposed your estate or business is under Oregon’s current rules, that’s exactly the conversation to have with your CPA or advisory team before the next legislative session, not after.
Anthem Strategists helps Oregon business owners and families navigate estate and succession planning through legislative uncertainty. If you’d like a review of where your estate stands today, reach out to our team.
