Kicker Coming? Oregon Tax Revenues Might Exceed Estimates
Oregon’s surging tax collections show no signs of abating — and that means you’re probably going to get some money back. Again.
The state’s latest revenue forecast, released Wednesday, shows personal income tax revenues for the 2017-19 fiscal biennium stand to come in $555 million above initial forecasts. That’s more than enough to trigger Oregon’s unique “kicker” provision, which doles money back to taxpayers when taxes come in at more than 2 percent above estimates.
The document does not guarantee a kicker will be triggered once all tax receipts for the biennium are accounted for next year, but strongly suggests that will be the case. If so, refunds will reach taxpayers in the form of credits on their tax bill, as opposed to checks in the mail.
The new forecast shows a far brighter picture than an estimate released in March.
Between personal income taxes and corporate taxes, the forecast suggests revenues in the current biennium coming in at $833 million higher than the earlier prediction.
One big chunk of that difference has recently inspired partisan bickering in Salem.
Last month, Gov. Kate Brown signed Senate Bill 1528, which blocked a tax cut for some Oregon businesses. The change meant an estimated $245 million would reach state coffers this biennium — money not accounted for in the March forecast. It also infuriated Republicans and caused friction when Brown called a special session earlier this week to pass a far smaller tax break.
Other reasons for the sunnier outlook:
Refunds paid to taxpayers are $150 million lower than anticipated.
Advanced payments for estimated taxes owed are up sharply as a result of federal tax reforms passed by Congress last year. “Taxpayers rushed to take advantage of expiring breaks,” the forecast says.
Paying out a kicker has become something of a tradition in Oregon, as tax revenues continually outpace state economist’s projections. In 2015, the state announced a $402 million kicker. In 2017, it was $464 million. Taxpayers might be in for a far larger refund next year.
The new forecast also suggests Oregon might be on pace to have a record amount of budgetary reserves on hand — nearly $1.8 billion between the state’s Rainy Day Fund, Education Stability Fund and other unspent money.
“Such levels of reserve balances are bigger than Oregon has ever been able to accumulate, at least in the state’s recent history,” the document says. But that comes with a caution: “Such reserves would barely be sufficient to withstand a typical recession’s impact on state revenues …”
As they do for each quarterly forecast, legislative leaders rushed out releases staking positions on the news. All heralded the document as a sign that Oregon’s economy continues to thrive — but they also hinted at a conflict looming in the 2019 legislative session.
Lawmakers are currently conducting a study of education issues around the state with hopes of making the case to find more money for schools during next year's session. Senate President Peter Courtney, D-Salem, released a statement suggesting the current boom times were no reason to let up on that.
“We can insulate our children from the next downturn,” Courtney said. “We can do something for schools that we haven’t been able to do in more than two decades. We can create a dedicated, permanent funding source for K-12.”
House Majority Leader Jennifer Williamson, D-Portland, concurred, writing: “We are fortunate to be on the good side of Oregon’s boom and bust system today, but without structural reform, the good times will not last forever.”
Senate Minority Leader Jackie Winters, R-Salem, sought to head off that talk in her own press release: “Revenue continues to climb, and as predicted, the kicker is going to kick. It remains clear that Oregon does not have a revenue problem, Oregon has a spending problem."
Meanwhile, House Minority Leader Mike McLane, R-Powell Butte, took the opportunity to point out that the kicker would look less likely if Brown hadn’t signed SB 1528, and thus blocked $245 million in business tax cuts.
“In their haste to pass SB 1528 earlier this year, Governor Brown and legislative Democrats apparently failed to recognize that by requiring small business to pay $245 million more in state income taxes, their actions could trigger the income tax kicker,” McLane wrote. “That scenario now appears more likely than not. If current projections hold, Oregonians are in line to receive $555 million of their money back from their state government. The irony escapes no one.”
The kicker is based on a budget forecast issued at the close of the 2017 legislative session, well before either federal tax changes or SB 1528 became issues.
Copyright 2018 Oregon Public Broadcasting