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by Sen. Doug Whitsett
The income tax kicker is Oregon’s only spending limitation
Oregon’s March economic and revenue forecast [2] was released last week. The forecast predicts that the state will receive enough revenue, during the remainder of this budget cycle, to trigger the personal income tax “kicker.”
The “kicker” is a refund of excess income taxes paid by Oregon taxpayers. State economists estimate the refund will total $349 million, about $350 for each Oregon family of four.
“Kicker” refunds will no longer be mailed to taxpayers in the form of a refund check. The refund process was changed by the passage of House Bill 3543 [3] during the 2011 session.
The refund would now take the form of a tax credit, applied to the 2016 income tax return. This change was allegedly made to save the state the cost of creating and mailing the refund checks to Oregon taxpayers. It also allows the state to have the use of the money for several more months before refunding it to its rightful owners.
The personal income tax “kicker” is found in Oregon’s Constitution [4]. That constitutional amendment was adopted by the people through the passage of Measure 86 [5] in the 2000 general election.
Its primarily purpose is to function as a state government spending limit. It serves to prevent the state government from spending excess money, collected FROM the taxpayers, by refunding it TO the taxpayers.
At the end of each Legislative Assembly, the state issues an official revenue forecast that predicts how much money the state will receive in income taxes during the next two years. The next state budgets are generally built around that forecast.
The Constitutional Amendment requires that whenever actual state income tax revenue exceeds the amount of the official forecast, by two percent or more, the entire amount of revenue collected in excess of the forecasted amount must be refunded to the people.
The most recent “end of session” forecast predicted that the state would collect about $1.5 billion more income tax revenue than ever before in Oregon history.
Oregon’s economy has improved since that prediction, at least in some areas of the state. The March forecast now predicts that the state will collect about $1.8 billion more than ever before.
The “kicker” refund will act as a spending limitation, exactly as it was intended to perform. It will reduce that excess revenue to “only” the $1.5 billion that was predicted at the end of session.
The refund will return about $350 million to the private economy, where it can be invested to help enhance the free market expansion of our economy.
But not all legislators are celebrating the triggering of the income tax “kicker.” Some believe that the state can put all of that money to better use than the working families who actually paid the taxes.
No less than six bills have been introduced that would either eliminate the personal income tax kicker or “repurpose” the refund. Each bill would result in the retention of the money for use by state government.
The corporate income tax kicker was successfully “repurposed” by the passage of Measure 85 [6], a constitutional amendment of the people, in the November 2012 general election. The “alleged” reason was to channel all of that money into K-12 education. In reality, the amendment simply rechanneled the money into the state General Fund to be spent on educating our children. Absolutely nothing prevents the Legislature from reducing K-12 General Fund appropriations for education an equal amount, because General Fund money can be spent for ANY purpose.
Many politicians believe that it is “political suicide” to introduce legislation that directly changes the income tax “kicker” refunds. For that reason, their efforts to abolish the income tax refund are exclusively focused on introducing resolutions to refer ballot measure to the people to decide.
Legislators then write ballot titles, summaries and explanations that are carefully crafted to encourage the people to forgo their tax refunds for the “greater public good.” In the past, they have also included clauses that expressly prohibit review of the language by either the Attorney General or the Oregon Supreme Court.
Please remember: the income tax kicker is Oregon’s only spending limitation. Its removal will allow your state government to spend every dime of your income tax money that it can collect.
The bills pertaining to the “kicker” are as follows:
Senate Joint Resolution 2 [7] refers to the citizens for the next regular general election, in November 2016, an amendment to the state Constitution to transfer the personal “kicker” to the state’s K-12 school fund.
House Joint Resolution 6 [8] establishes a Stability Fund with revenues from capital gains and estate taxes. It also requires that an amount equal to one percent of the General Fund appropriations for the biennium be transferred from the Stability Fund to the Rainy Day Fund, with the remainder to be transferred to the State School Fund. It transfers all moneys in the Stability Fund to the Rainy Day Fund if General Fund revenues exceed forecasts by two percent or more, which is the condition that triggers the “kicker” credit going to taxpayers. HJR 6 reduces the amount of transfer to the Rainy Day Fund and transfers the remaining moneys in the Stability Fund to the General Fund if the revenue forecast projects revenues at least two percent below estimates.
HJR 7 [9] contains many of the same provisions as HJR 6, but refers this amendment to citizens for the November 2016 general election.
HJR 8 [10] is also a referral, and proposes an amendment to repeal the provisions in the state Constitution pertaining to individual income “kickers.”
HJR 18 [11] is yet another referral and would amend the Constitution to limit “kicker” rebates to $500 per taxpayer and transferring the corporate kicker in order to establish the Oregon Fund.
Finally, HJR 19 [12] would direct the Department of Revenue to calculate the average revenue received over the two previous years from personal income and corporate excise taxpayers, state the amount received during the current biennium and transfer the excess, if it’s over the calculated average, to the Oregon Rainy Day Fund. This would also require a Constitutional amendment and a vote of the people in the November 2016 election.
A public hearing has already been held on SJR 2, but it is still very early in the legislative process. Fortunately, the legislative website, www.oregonlegislature.gov [13], contains a wealth of information about all of the bills, committees and much more. It even allows the opportunity to view committee meetings live, in real time, from literally anywhere in the world.
Our Constitutional republic is contingent upon citizen participation. I would strongly urge you all to take part in this legislative session to let your voices be heard in Salem.
Senator Doug Whitsett [14] is the Republican state senator representing Senate District 28 – Klamath Falls