After Raising Taxes, Oregonians Should Reject Moves to Gut the Kicker Law

The voters have spoken and agreed with legislative leaders that the “rich” and corporations should pay more taxes through Measures 66 and 67. Now, Governor Ted Kulongoski and others are turning their attention to transferring even more money from the private sector to government coffers through what is becoming known as “kicker reform.” As an appointed taxpayer advocate on the Governor’s Task Force on Comprehensive Revenue Restructuring, I have a different view of the kicker and its effect on budget stability.

The Task Force found, and I agree, that establishing more reliable state income forecasting and more prudent budgeting are worthy goals. I do not agree, however, that the state is the best repository for ending balances under a proposed new forecasting method. That money rightfully belongs to the individuals and corporations who earned it.

The Task Force Proposal basically requires the Governor to develop a point estimate for General Fund revenue in each biennium, and then determine a range of roughly six percent above and below that point estimate. This would be an improvement over the current point-estimate-only approach, which is almost always wrong.

The problem lies in the Proposal’s requirement that only revenue above the top of the forecast range be returned to taxpayers in the form of kicker checks. This will have the practical effect of eliminating most kicker refunds that Oregonians have come to expect when state revenue exceeds estimates by more than two percent.

The Proposal also requires that revenue above the point estimate, but below the top of the forecast range, be placed in a rainy day fund of up to ten percent of the General Fund. The intent is to grow a more substantial fund that can help the state deal with recessions like the one we are in right now.

I will tell the legislature that locking this entire Proposal into the Constitution will simply make it easier for the state to avoid exercising the kind of real fiscal discipline that Oregonians should expect. The effect would be to permanently transfer billions of dollars from the private to the public sector into the foreseeable future. I also will point out that, in my opinion, it will be relatively easy for opponents to derail the effort by telling voters that it is simply an attempt to “steal our kicker.”

How to build a rainy day fund without “stealing the kicker”

In fact, the Proposal is built on a fallacy. Its supporters assume that the kicker somehow has prevented the state from building a substantial rainy day fund, when in reality there has been no legal prohibition against lawmakers budgeting for less spending than the point estimate revenue forecasts would allow.

If, for example, the revenue estimate for a biennium is $15 billion, the legislature is free to budget spending of $14 billion, and budget one billion dollars toward the rainy day fund. They never do this, not because it’s legally prohibited, but because the political pressure to spend every dime is so strong.

Under the Task Force Proposal, however, if the point estimate is $15 billion and the top of the range is $16 billion, the legislature can budget and spend $15 billion and must save the additional billion dollars. The effect is to transfer one billion dollars from the private to the public sector and effectively to grow government faster than the people have allowed it to grow under the current kicker law.

My recommendation is to accept the part of the Proposal that improves state revenue forecasting, but reject the part that, over time, would transfer billions of dollars from the private to the public sector.

If legislators wish to grow a substantial rainy day fund, they can ask voters to change the Oregon Constitution to require that they can only budget and spend up to the low end of the forecast range, and save everything else up to the point estimate until the rainy day fund has reached some predetermined level. This would leave the kicker law intact, restrain the growth of government, and grow the rainy day fund all at the same time. It would be reform that many taxpayers could enthusiastically support.


Steve Buckstein is founder and senior policy analyst at Cascade Policy Institute, Oregon’s free market public policy research center.

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Posted by at 06:00 | Posted in Measure 37 | 16 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Gordon

    We may as well just give them the whole thing, as that is the kind of state we live in.
    Why fight it?

    • Oakridge 9/12 Tea Party

      Gordon, That’s one of the biggest problems with this state, people don’t stand up and fight for what they believe in. All Government needs to control their spending and stop taking from the citizens to fulfill their wasteful spending habits. They’re like parents that continually spoil children rotten, giving into wants instead of what is necessary. Like the city of Oakridge applying for an $800,000.00 Grant for a new Library when the one existing is in good shape, they’d just like to have a new one. Or a $400,000.00 Grant, for a ride center for seasonal Bicycle events and a $400,000.00 block Grant to bury power lines and put in new sidewalks that don’t need to be replaced along with new garbage cans and benches to sit on just because they want to make it more attractive. And don’t let me forget going into debt for $1,000,000.00 new public works building they built just because they wanted to instead of the perfectly good one they already had. It made since to the city Administrator, and he convinced the council to go ahead and build a new one before selling the existing one. Government DOESN’T know what a priority is, much less have priorities in order from small city government all the way to DC.
      I think replacing all seats in congress with good old fashion Socker moms is a good idea, at least they know how to budget money by priority.

  • Anonymous

    Resistence may be futile. We’re at the mercy of the bureaucrats who are following the California model.

    But it’s for our own good.

    V, D or some other progressive will be along to explain how it’s for our own good and good for Oregon.

  • Bright Side

    Its my money, not theirs!

  • Rupert in Springfield

    Oh are these clowns back with their boo hooing about a rainy day fund?

    Look, we just raised taxes to pay for nothing but waste – raises in the middle of a recession and the BETC tax credit. If that’s how responsible government is with its money when we have the worst unemployment in the country then it hardly makes sense to think they would be more sensible with more money.

    Yes, I know its not the worst unemployment, its like the second worst, sometimes we soar to third worst. Happy now Mr. “Teacher, you forgot to assign us homework for the weekend”?

    Besides which. Did it ever occur to anyone that a rainy day fund sure sounds great, but the fact is, we have a heck of a lot of rainy days in Oregon.

    You think these idiots who hand out raises during a recession aren’t going to be able to declare just about anything an emergency and spend those funds?

    Oh yeah? Really? You think so?

    Then lets talk about our special session of the legislature. That’s supposed to be just for emergencies right? Last I heard the boobs in Salem were debating whether or not to have plastic bags. Yep yep yep yep, that’s a real emergency.

    I can guarantee that if the state keeps the kicker, they will waste that money quicker than you can say “diversity consultant”.

    *WARNING* – USE OF THE TERM “SOME” OR “A LOT” SHOULD NOT BE TAKEN AS SAYING “ALL” OR “EVERY”. INSTANCES OF THE SPECIFIC SHOULD NOT BE TAKEN AS STATEMENTS ABOUT THE GENERAL. WORDS MEAN THINGS.

    • Anonymous

      Rupert, if it were written into the Constitution that the “Rainy Day Fund” could not be spent on salary increases and the like, if its terms of use were strictly laid out, would you ever in a million years support a repeal of “the kicker”?

      • Steve Plunk

        The Oregon constitution also calls for the legislature to meet biennially, not every year. Yet even with that constitutional limitation we find find our legislature meeting today. This is another example of why we distrust our government and how the government class holds itself unaccountable. There is no legislative emergency and this session was preplanned so that excuse will not hold. We cannot trust government any longer to watch after citizen interests over their own. That includes the kicker and any rainy day fund.

        • Anonymous

          I agree that the Oregon legislature is less than trustworthy (to say nothing of the Federal government). I posed the question not to be contrary, but rather in an effort to focus the argument/question at issue.

          I’m really up in the air at this point in time on this particular issue. Lack of confidence in the legislature aside, I’m still struggling to decide what the best policy, moving forward, would be.

          • Steve Plunk

            I appreciate your concern as a citizen. Many of us on the right actually feel the same way even though we are demonized as nothing but cruel and greedy. Fiscal responsibility allows a society to take care of it’s less fortunate. If we end up broke those people will be much worse off than if 66 & 67 had not passed.

            The nature of a representative democracy will always reward the free spenders while those who preach responsibility will find themselves out of work. With a built in bias to spend ever more and tax ever more citizens need to create a mechanism that offsets that bias. Spending caps could work, highly restricted rainy day funds might help, and even the kicker keeps a lid on some spending. I see no reason to do away with any tools we have to restore fiscal sanity. I also see many reason to get that spending cap into place as soon as possible.

            I will gladly exchange the kicker for a spending cap and rainy fund but I wonder if we could get it accomplished with the one topic rule for constitutional amendments. Breaking it up would be a disaster as parts could pass while others did not. Common sense says it’s all one topic but the history of the state Supreme Court makes me wonder.

      • Rupert in Springfield

        No. The reason why is that the purpose of retaining the kicker is to have an emergency fund. Thus whatever was in the constitution would have to allow spending under an emergency.

        Given that we are having a special session to discuss things like banning plastic bags and what sort of material baby bottles should be made out of it is clear that emergency in the legislatures mind has a far different meaning than it does in mine.

        Thus emergency is an all encompassing term. Given that, it is clear to me that almost anything could be passed under the emergency provision. As an example, COLA raises would be written in stone in the budget, at some point during a recession, tax receipts would fall, the budget could not be met, dip into the rainy day fund, voila everyone gets a COLA raise.

        If the state wants a rainy day fund they can cut from current budgets and form the fund from the leftovers. They can do that tommorow if they want. That’s basic Keynesian economics, cut the budget in good times to save for spending in bad times. So, the next time the economy is good, the state should cut and establish the rainy day fund.

        I’m not against the rainy day fund at all. I think its a great idea. However I think the sacrifice to establish it should be on the states part, through cutting budgets, rather than on my part, through having my taxes de facto raised by eliminating the kicker. Ive already sacrificed under measure 67. Ive sacrificed with my property value going down and my property taxes going up. I’m done sacrificing to pay for solar tax credits and fat pay raises, sorry.

        I am sure the less adept verbally will say refusal to want to sacrifice any more is “whining”. If someone has a more cogent argument as to why I should pay any more Id be willing to listen to it. However pleas for more money, when I already pay 50% of my income in taxes, as a business owner who makes under six figures, tend to sound fairly dull to me.

        • Anonymous

          No need to apologize, Rupert, fair and reasonable points all. I think without M66 and M67 I might feel differently, but all things being equal I have to say enough is enough. Now is not the time to be discussing further reforms to the tax code.

        • valley p

          Rupert….you really need to consult with a good tax accountant.Maybe this is the source of your entire problem.

  • Steve Plunk

    The fundamental change I have seen over the years is the movement away from government serving the citizens to citizens serving the government. As Bright Side said “It’s my money, not theirs”. That kicker refund is not a gift from the state but our own money to begin with.

    Government needs the consent of the governed to work properly yet government these days operates often without the consent or approval of it’s citizens. From city halls to the state capitol we see government employees charged with figuring out how to get more money from us. We also have government employees who want new laws, bigger agencies, and larger budgets without first determining if that’s what the people want. What most disturbs me is the emergence of a new class of citizen, the government class. A class that holds itself out as “public servants” while raiding our treasuries for every last dime. A class that believes it knows better than the regular citizens when it comes to taxation and governing.

    The kicker was put into place because of a general distrust of government and that distrust is more valid today than it was then. No matter how much they have they will try and spend more creating just one more in the long line of fiscal crisis we see today. It’s like giving spare change to a junkie.

  • Ron

    If a repeal of the kicker (s) is referred to the voters in November, it will pass. Multnomah and Lane Counties with the financial support of the public employees will provide all the muscle needed.

    That’s not my opinion. Measures 66 & 67 passed for exactly these reasons

    • Ron

      Correction to my post above….

      ……….with the financial support of the public employee unions……

  • Mmcconoughey

    Killing the kicker, or at least delivering a mortal wound, has become a fixed obsession with some legislators, such as Rep. Burdick. But a closer look shows that the kicker has only reduced state retained income tax revenue by about three percent since inception. The proposed kicker strangulation would fail to solve all the problems that have been laid on the kicker’s doorstep.

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