Here's the kicker ... again

Oregon's tax refund law could put a dent in the state's recovery from the recession

Legislators got a dose of good news last week when they heard the quarterly report about state government revenue. The report offered additional evidence that Oregon's economic recovery is gathering steam.

But the news came with an asterisk that long has bedeviled Oregon state finances.

Mark McMullen, the state economist, told legislators that the combined effect of the state's economic recovery and the tax increase approved in the fall's special session has brought the state about halfway to the point where a so-called "kicker" refund would be invoked.

You recall the kicker: It's a refund given to taxpayers when the state takes in 2 percent more revenue than projected when the state budget was passed. For this two-year budget period, the trigger will be invoked at about $300 million.

The tax increases authorized by the special session will contribute $100 million toward the $300 million; that tax money mostly is scheduled to go to K-12 education. The recovering Oregon economy is estimated to add an additional $46 million in state revenue.

When you add it all up, it means we're about halfway to the point where taxpayers could collect kicker refunds in 2015, even if the tax money already has been allocated and spent.

Democratic State Sen. Ginny Burdick said it was troubling that the state faces the prospect of a kicker "just as we're getting some level of stability in our education system." But she also said she thought there was time for the Legislature to make adjustments.

The problem is, as Burdick herself knows just about better than anyone else, that legislators are leery about tackling any kind of badly needed reform to the kicker, which has contributed significantly to the state's cycle of boom-and-bust budgeting. Burdick and her former colleague, Republican Sen. Frank Morse, have spent a decade trying to pound some sense into this crazy system — and haven't made much progress.

In fact, the kicker system even makes it harder for the state to set aside adequate rainy-day funds for that inevitable moment when the economic rally runs out of steam.

The general idea behind the kicker, to put some brakes on the tendency of government to spend every dime it can, is sound. But there are much better ways to accomplish that goal. Gov. John Kitzhaber reportedly is working on ideas to reform Oregon's taxation system. Let's hope kicker reform is on his short list.

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