Oregon taxpayers are poised to experience an extraordinary financial windfall as the state prepares to issue a record-breaking “kicker” refund totaling a staggering $5.61 billion in the coming year. This substantial refund marks an unparalleled milestone, far surpassing any previous return under Oregon’s distinctive law.
The groundbreaking announcement was confirmed by state economists during the latest quarterly state revenue forecast, which was presented to lawmakers on Wednesday. With tax receipts for the 2021-23 budget cycle now solidified, the colossal amount earmarked for return to taxpayers next year is set in stone.
The magnitude of this refund is so substantial that it prompted State Representative Nancy Nathanson, a Eugene Democrat and chair of the House Revenue Committee, to remark, “This one isn’t just bigger [than the previous record kicker]. It’s multiple or a few times bigger.”
Originating in 1979, Oregon’s “kicker” law was conceived as a mechanism to regulate state spending. The law triggers a refund whenever actual revenues from personal income taxes and other non-corporate sources exceed the forecasted amount used in developing a two-year state budget by at least 2%. Rather than receiving a check, taxpayers are given all excess cash back in the form of a credit on any taxes paid in the prior year.
Last year, a record-setting $1.9 billion was returned to taxpayers. However, the current refund is poised to eclipse that amount by nearly threefold, driven by unforeseen after-tax receipts that defied economists’ projections.
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Oregon’s “Kicker” Refund
The Office of Economic Analysis in the state revealed that while the median Oregon taxpayer—with an income ranging between $35,000 and $40,000—can expect an estimated refund of $980, higher-income earners are anticipated to receive even larger sums.
In particular, the top 1% of earners, who bear a greater tax burden due to Oregon’s progressive income tax system, could potentially see a credit exceeding $44,000.Mark McMullen, the state economist, attributed the considerable disparity between income groups to the tax liability discrepancies in 2022.
McMullen indicated that taxpayers could expect to be refunded approximately 45% of the personal income taxes paid in 2022, though this percentage is subject to certification in October.
The practice of “kicker” payments has become a recurring phenomenon in Oregon. In the 22 bienniums since the law’s enactment, the refund has been triggered on 13 occasions, including each of the last five bienniums.
The magnitude of next year’s “kicker” refund can, in part, be attributed to the unexpected economic consequences of the pandemic. Economists initially projected a longer-lasting impact on Oregon’s economy and tax revenues.
However, a swift resurgence in income taxes and other funding sources, especially as high-income earners opted to settle taxes stemming from investment income, led to a substantial deviation from the estimates upon which the 2021-23 state budget was constructed.
Interestingly, Oregon is also slated to witness a corporate “kicker,” which is triggered when business taxes exceed anticipated levels. However, in contrast to the individual taxpayer refund, this corporate kicker will allocate $1.8 billion to K-12 education, signifying a distinct approach in utilizing the funds to benefit the state’s educational sector.
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Source: OPB
