Rep. Richardson – “Oregon’s Legislative Rainy Day Fund—Corporate Kicker Agreement”

On Wednesday, February 28, 2007, the Senate Democrat and House Democrat and Republican leadership teams announced the Legislative Rainy Day Fund””Corporate Kicker Agreement. It was an historic occasion. The Agreement not only revealed the creation of a long-awaited Rainy Day Fund, and a negotiated tax and revenue plan that will benefit small businesses, farmers and Oregon families, it also demonstrated that Oregon Legislators can work together for Oregon’s common good. The following provisions are contained in the Legislative Rainy Day Fund””Corporate Kicker Agreement. To view a brief explanation on YouTube, click here.

1. Permanent Rainy Day Fund.

The Legislative Rainy Day Fund””Corporate Kicker Agreement (the Agreement) makes good on the promise to create a permanent Rainy Day Fund. One percent (1%) of each biennial budget will be paid from the ending balance into the Rainy Day Fund beginning with the 2007-09 budget ($126 million based on December 2006 forecasted revenue of $12.602 billion).

2. Rainy Day Fund Size.

The Rainy Day Fund (RDF) will be capped at 7½% of the biennial revenue forecast. When the RDF’s 7½% is added to Oregon’s other savings account, the Education Stability Fund, which has a 5% cap, Oregon will eventually have 12½% of its biennial revenue forecast saved for economic recessions. Excess after 12½% will go to Oregon’s General Fund.

3. Rainy Day Fund Interest.

The goal is to increase the Rainy Day Fund without delay. All interest earned on the Rainy Day Fund adds to the Fund’s balance.

4. Rainy Day Fund Restricted Withdrawals.

The Rainy Day Fund cannot be accessed by the Legislature unless two events occur: (1.) the same economic downturns required to tap the Educational Stability Fund–Oregon’s other rainy day fund–apply to the RDF; and (2.) a 3/5 “super majority” vote of both Legislative houses must approve the withdrawals. Even when those two circumstances are present, no Legislature can withdraw more than 2/3 of the RDF’s balance in any biennium.

5. Corporate Kicker Will Be Refunded to Small Oregon Businesses.

The Corporate Kicker is the amount of tax dollars credited back to corporate taxpayers when corporate income tax payments are 2% higher than budgeted. When the economy grows during an economic recovery and corporate tax payments are 2% more than expected, the overpaid taxes becomes a credit for corporate taxpayers, unless the Legislature decides otherwise. Oregon’s corporate tax payments are forecasted to create a Corporate Kicker of $275 million. The defeated House Bill 2707, would have captured all the corporate income tax payments from nearly 12,000 small businesses and other low income earning “C” corporations. The bipartisan Agreement rewrites HB 2707 to protect Oregon’s small business corporations. The Agreement requires the State to refund the over-payment of income taxes to nearly 90% of Oregon’s small “C” corporations, and use the remaining kicker revenues to create Oregon’s new Rainy Day Fund. This one-time suspension of the corporate kicker for large corporations has been endorsed by Oregon Associated Industries (AOI), the Oregon Business Alliance (OBA), and other large business organizations, so long as the corporate kicker money goes into a Rainy Day Fund. These large corporations understand they will be helping Oregon prepare for the next recession. They understand the need to reinforce Oregon’s educational system, and are willing to step forward and invest in establishing a permanent Rainy Day Fund. The RDF will help ensure Oregon does not have to cut school days, lay-off teachers or terminate music, arts or sports from Oregon schools, when the next recession hits. The Corporate Kicker transfer will infuse at least $250 million dollars as Rainy Day Fund start up cash out of the 2007-09 ending balance. If the kicker generates more revenue than anticipated, the additional funds will further benefit the new Rainy Day Fund.

6. Minimum Corporate Tax Rates Realigned.

Oregon charges corporations a minimum annual tax. Since 1931 that minimum corporate tax has been $10. The Agreement will raise the corporate minimum tax for small, inactive or unprofitable “C” corporations with Oregon sales between $0-50,000 to $25. The minimum tax then increases on a graduated scale based on annual Oregon sales up to a top level of $50,000 for large corporations with annual Oregon sales exceeding $25 million. These graduated, “sales-based” annual corporate filing fees will generate $153 million for the 2007-09 biennium.

7. Small Family Farms & Businesses Protected from Forced Death Tax Liquidations.

The Agreement will help protect individuals and families with small businesses and farms by doubling Oregon’s inheritance or “death tax” threshold from $1 million to $2 million. The $2 million inheritance tax threshold will bring Oregon in line with the federal estate tax $2 million exclusion amount. Oregon families will save approximately $43 million in Oregon inheritance taxes over the next biennium as a result of this provision of the Agreement.

In summary, the terms of the Legislative Rainy Day Fund””Corporate Kicker Agreement show what can be accomplished when Oregon Legislators””Democrats and Republicans””sit down together, roll up their sleeves and work out an agreement acceptable to both the House and the Senate. In this agreement there are provisions every legislator can love and hate””which is how it is with effective negotiations. Although neither side got everything it wanted, everyone left the table with the knowledge their concerns were heard, considered and addressed. The citizens of Oregon can be proud of their Legislature. The Legislative Rainy Day Fund””Corporate Kicker Agreement demonstrates Democrats and Republicans can work together for the greater good of Oregon. Hopefully, this spirit of cooperation and mutual respect can continue as the Legislature faces crucial issues involving Measure 37 and health care. Make no mistake, the political differences between Republican and Democrat legislators are significant. Nevertheless, our constituents expect their elected representatives to come to Salem, set aside their differences and work together to solve the issues facing our great state. It may not happen every day, but in Oregon, on Wednesday, February 28, 2007, bipartisan cooperation occurred.

Sincerely,
Dennis Richardson
State Representative

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Posted by at 07:00 | Posted in Measure 37 | 14 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Jerry

    Sorry Dennis – this is a joke. Take from the rich – give to the poor – same old same old. You think you have accomplished something. All you have done is remind us all that you politicians are lazy, ignorant, greedy, selfish, power mad, and completely wrong when it comes to taxes.
    If you spent half as much energy looking for savings you could create the rainy day fund with that money. And, believe me, there are savings to be had in this budget!!
    You should be ashamed – not proud.
    It takes no talent or intelligence to take money from people.

  • John Fairplay

    So much for being a fiscal conservative. I hope you’ll include the phrase “brokered $250 million tax increase” in your next voters pamphlet statement, assuming you’re venal enough to actually stand for election to something again. If you do, we’ll be working against you.

  • Keen Observer

    So how many conservatives does this leave out of few who began the session?

    3-4 maybe?

    Shame on you Dennis

  • Steven Plunk

    This is simply a betrayal.

    What will happen to a business like my own (trucking) that has high sales numbers but a very low profit margin? How much will my filing fee go up? How much will my weight mile tax go up later in the session? What will the proposed sales tax cost me?

    Republicans can expect to pay a price for this. It is poorly thought out and is not the proper way to legislate. Last minute compromises will always fall victim to the law of unintended consequences.

    Words fail me. I feel sick.

  • Lazyboy

    I agree with Dennis on many things, but this I do not. A kicker is a kicker is a kicker. Don’t touch it.

  • Tim Trickey

    How come when Republicanas and Democrats get together and “roll up their sleeves”, they both end up with their hands in my pocket?

    Show some flipping guts! Every cycle we talk a big game, and then just end up giving the Democrats what they want. How bi-partisan is that?

    The theft of the corporate kicker just reaffirms what many of us political observers have been saying for years. “The longer an elected official holds office, the worse they get.”

    Now we have to listen to our one-time strident conservative voice claiming that this outright betrayal of Oregon business is somehow a “victory”? Shame on you Dennis Richardson, and the rest of you Republican bums who let the Democrats bully you into violating the law.

    Apparently I am out of touch with reality; because I still hold onto that antiquated notion that conservatives “don’t raise taxes”. And stealing the corporate kicker is exactly that. I care how you “sell” it to us, it is still our money that the government has decided to keep.

    Apparently our Republicans who voted for this bill don’t share that principled belief, and as such, I am once again reminded how important term limits are.

  • eagle eye

    I’m glad they reached this agreement. It’s nuts for the state not to have a substantial reserve fund, it should be a lot bigger than this, but it’s a good start.

    The negativity reflected in this website shows why Oregon conservatives are catalyzing nothing, going nowhere.

    It’s a good compromise, as good a deal as the Republicans are going to get given their ever-weakening position in Oregon.

  • Chris

    I am a proud Republican and I support this compromise. This state needs a Rainy Fund. I will not go into the benefits of such a fund, they are well documented.

    First of all, the Kicker is bad Keynesian economics. It is a New Deal bury jars of money in a coal mine type of economic policy. Rebates have consistently shown that they do not benefit the economy.

    Secondly, Democrats in this state are not going to let go of any of the State’s additional revenue to put towards the Rainy Day fund. The Left has there eyes on all of the extra greenbacks floating around and are shopping for luxury items. Nobody is even talking about filling in the $200 million shortfall the state is about to face from the Fed eliminating the Timber money subsidy.

    What does bother me is the leftover kicker money going to the general fund. This money should be sent back.

    We need a Rainy Day Fund and, unfortunately, this is the only way we can get it.

  • Anonymous

    LOL

    Donner Party, calling the Donner party, your table is ready.

  • Jerry

    Those of you who support this madness are simply ignorant of the facts. Oregon has plenty of money ALREADY and does not need any rainy day fund whatsoever. If they did not spend every dime they collected we could already have a rainy day fund. I have a bridge I would like to sell you crazies.
    If you really think they need more money why don’t you send them some of yours?
    Oh, that’s right, I forgot, it can’t be YOUR money…it has to be ours.
    Sorry.
    I am very pleased to note that most posting here were in complete disagreement with this sham.
    If just one of you wackos would actually write a check to the rainy day fund and send it in I would be much more willing to listen to your tax and spend ranting.

    • Captain_Anon

      Jerry,

      It’s entirely possible that reasonable people can come to different conclusions.

  • believe it or not

    Anonymous, what are you smokin? Sheesh. Do your homework. In the 60+ years I’ve lived in Oregon the state has slid down hill because of the last 15 years of self destructive infighting. That is the reason Oregon has one of the lowest credit ratings in the nation. The absence of a rainy-day fund, a $10 minimum corporate tax unchanged since 1931, one of the highest capital gains taxes in the country and the brainless corporate and individual “kickers” are just part of the problem. An imbalanced revenue stream relying too heavily on the income tax paid disproportionately by individual households is the crux of the problem. Even “R” Representative Sal Esquivel has figured it out. Remember the Ways and Means committee is focused on tax reform, not revenue increase.

  • Jerry

    Wait a minute. I just figured it out. We need a sales tax. That would solve everything!

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