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Kicking the can down the road

Just as Oregon Democrats look forward to a supermajority in the Senate and continued control in the House, state economists suggest Oregon's economy may rebound enough to trigger "kicker" rebates to taxpayers next year. Majority Democrats not only should show restraint in spending the state's resurgent revenue, they should make a case to voters for repealing the ridiculous kicker formula once and for all, and bank the money in a rainy day fund instead.

We are under no illusions that voters will be eager to let the state hang on to what many wrongly believe is "extra" money. Oregonians have plenty of reasons to distrust state government after the debacle of Cover Oregon cost the state treasury $300 million.

But here's the thing: The kicker, if it happens, could amount to $300 million to $500 million, according to forecasters. It's short-sighted in the extreme for the state not to do what most fiscally responsible people do: Tuck some money away in the good times, knowing that at some point there will be harder times.

Oregon's unique-in-the-nation kicker system says that, when state tax revenue exceeds the official projection by more than 2 percent, the entire amount above the forecast is returned to income tax filers based on their tax liability. Voters like that system so much that they voted to put it in the Oregon Constitution, which means it would take another public vote to remove it.

The taxpayers who get kicker checks aren't being paid back for "extra" taxes they paid. Their taxes have not increased one penny. The "extra" money exists because the economy is doing better, meaning more people are working and paying income taxes.

Oregon's lopsided reliance on the income tax means the state budget soars and plunges like a rollercoaster depending on how many people are working. In tough times, there isn't enough money to maintain existing operations such as school funding and state police, and in good times there is more than enough.  

Lawmakers adopt the state budget based on the forecast. If more money comes in than economists expect, the sane thing to do would be to put the surplus in a rainy day fund, where it could be used to balance the budget the next time the economy took a downturn.

But that's not how we do it in Oregon. The voters are afraid lawmakers will spend the surplus by padding budgets and adding programs, only to ask for tax increases when the revenue stream slows down again. The voters can't entirely be blamed for that, because they've seen it happen before.

We've seen the kicker before, too. In 2007, the last time the kicker kicked, the state sent more than $1 billion back to taxpayers. That money would have made the ensuing recession years much easier to weather, but it went to taxpayers instead, at an average of about $300 per person — nice to see in your mailbox, but hardly a life-changing windfall.

Gov. John Kitzhaber has been working with business and labor groups on a major overhaul of the state's tax system. That's been talked about for years with nothing to show for it, and the odds are against a different outcome this time, especially with the governor weakened by a tough re-election campaign.

Tax reform is an especially hard sell when the economy is improving and revenues are on the upswing. All the more reason for lawmakers to show taxpayers they can budget with restraint, and make a case for putting the state tax system on a more sustainable path.