On the morning of May 17, two reserved state economists assumed seats in a quiet Capitol hearing room and systematically dissected Oregon’s budget.
Mark McMullen and Josh Lehner, the economists in question, had previously speculated, with a degree of uncertainty, two years prior that Oregon’s income taxes would normalize after an unforeseen pandemic-induced surge.
However, their prediction proved inaccurate, resulting in significant repercussions.
During their testimony to lawmakers, McMullen and Lehner disclosed that Oregon would need to reimburse taxpayers with over $5.5 billion through the state’s “kicker” refund, substantially curtailing the state’s financial capacity to address various critical issues.
The kicker is an established Oregon practice triggered when personal income taxes and other non-corporate revenue sources exceed state economists’ predictions by at least 2% during the formulation of a two-year budget by legislators.
In such instances, the surplus is returned to taxpayers.
Enacted in 1979 as a rudimentary measure to control state expenditure, the law has never before necessitated a refund of the magnitude approaching the anticipated $5.6 billion in the coming spring.
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Renewed Interest in Oregon Capitol Amidst Substantial Refund
The substantial sum has sparked a renewed set of inquiries within the Oregon Capitol and beyond.
Democrats are increasingly citing the refund as the reason for their inability to address a growing array of crises, including housing, homelessness, public defense, and mental health.
However, despite their influence over state governance, they lack the authority to reallocate the funds.
The state’s largest labor union is critiquing economists for their consistent underestimation of income tax revenue, resulting in a significant outflow of $10.2 billion from state coffers over the last decade.
Data suggests that Oregon’s revenue forecasts are less precise compared to those of most other states.
Quietly and tentatively, some interest groups are contemplating an effort to modify the widely popular kicker, potentially enabling more funds to be retained in state coffers when economists miscalculate.
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