Oregonians likely to get another kicker rebate in 2024
Oregonians, who are set to receive a collective $1.9 billion in kicker tax credits this year, may get another $1 billion off their income taxes in 2024, state economists said Wednesday.
That early estimate, which is certain to change before its finalized in late 2023, is based on personal and corporate taxes pouring into the state’s coffers in significantly higher amounts than economists projected just months ago, state economist Mark McMullen told lawmakers.
Oregon is the only state in the country that, when times are good, sends nearly every dime of personal income taxes that exceed the official prediction back to income taxpayers rather than stockpile the money for bad times or spend it on pressing one-time needs.
“The bottom line is that we see some significant increases in resources yet again,” said McMullen.
Namely, state economists are now predicting lawmakers will have an additional $800 million available for the current budget cycle than was forecast just three months ago.
The higher revenues are fueled by higher wages, as employers scramble to attract and retain workers, McMullen said. That translates into additional tax revenue for the state.
“Even though it helps revenue, inflation is clearly not costless,” said McMullen, who said many Oregonians are spending their extra income on necessities such as housing and food.
And there are warning signs on the horizon.
“Inflationary booms traditionally don’t end well,” said McMullen. “A lot of analysts believe that we may see another year of overheating growth, and then the bottom drops out, as monetary policy-makers try to get on top of that -- and do so too little and too late.”
Lawmakers are able to spend much of the windfall in the current two-year budget but will then have to balance the 2023-25 budget without the predicted $1 billion the state will refund to taxpayers.
It means that for now, elected officials are happy to embrace the additional revenues flowing into the state’s coffers.
“Wow…That is a lot of money,” said Senate President Peter Courtney, D-Salem. “We can build big projects across the state. We can get the homeless off the street. We can do year-round schools. And we can better recruit, train and evaluate police.”
Senate Republicans also floated some ideas for the money: $60 million for Oregon State Police to help local law enforcement to combat illegal marijuana grows, and $50 million to fund forest thinning operations.
But the Senate Republican leader, Tim Knopp of Bend, cautioned against spending all of the extra cash.
“We need to reserve more funds for the next downturn,” said Knopp. “We also need to look seriously at giving Oregonians a tax break. The government has buckets of money, but inflation is pinching the pockets of working Oregonians.”
In the House, Republican leader Vikki Breese-Iverson of Prineville also noted the effect of inflation on Oregon households.
“More money for the state is not the same thing as good news for Oregonians,” said Breese-Iverson. “People are struggling to make ends meet while the state is swimming in tax revenue.”
House Majority Leader Julie Fahey of Eugene said one of the driving factors behind inflation is the cost of housing, and she said the revenue should be targeted at addressing the state’s housing shortage.
“Today’s revenue forecast will allow us to invest in the critical programs and services Oregonians need to drive down the cost of living and address our state’s homelessness crisis,” said Fahey. “(House Democrats) support investing in a coordinated response to homelessness by partnering with local cities and counties across Oregon. We’ll also look to fund programs like Project Turnkey, an innovative model that buys and turns hotels, motels and other buildings into shelter and supportive housing units.”
For her part, Gov. Kate Brown echoed the sentiments of her fellow Democrats, and used the forecast as another opportunity to put in a plug for some of her legislative priorities.
“While I am pleased to see growth in wages for Oregonians, there is more work we need to do to grow, develop, and support our workforce,” Brown said. “Now is the time to make critical investments in housing, child care, workers, and businesses to help jumpstart growth and keep our economy moving.”
Brown said she’d also like to see investments in public safety, including “evidence-based community violence prevention and intervention.”
With the release of the revenue forecast Wednesday, the work of the legislature’s budget-writers comes into sharper focus for the remaining four weeks of the 2022 session. While some emergency spending can be approved when lawmakers aren’t in session, decisions about most new spending commitments iwill need to happen between now and March 7, when lawmakers must adjourn.