By Taxpayers Association of Oregon
Oregon’s May Economic Forecast, CliffsNotes Edition.
Against all expectations a year ago, Oregon’s economic outlook, and as a result, or tax payments are setting records.
- Corporate taxes are setting records – assisted by the new CAT tax.
- Record-setting video lottery sales proves consumers are not hesitant, that pent-up demand is real. Now up 2.4% above pre-pandemic expectations. Setting records in the past few weeks by 20 to 30 percent above records.
Bottom line: It’s a bullish economy that is full speed ahead.
Projected 2019-21Kickers: “The Mother of All Kickers.”
- Personal kicker $1.4 billion. Projections estimate $330 average Kicker Income Tax Refund.
- Corporate kicker $664 million (dedicated to K-12)
Revenue Projection Risks:
- Potential Biden administration tax increases creates uncertainty. And, in anticipation of increased taxes, many investors are looking to take gains sooner than later.
- Due to the extension on returns, the May forecast isn’t as complete as it has been in prior sessions.
- Pent-up demand will “unleashed” as economy continues to reopen. This is the major contributor to a “bullish” economic outlook. Labor intensive job growth will be strong as a result.
State economists recommendation for state budget writer’s: “savings going forward are a must.”
Reasons for Concern:
- While incomes are 20% higher than the beginning of the pandemic, bars and restaurants continue to struggle.
- In aggregate, there isn’t much of a disproportionate impact between men and women, but there is a large impact between moms and dads.
- What labor constraints could choke off growth. which is odd [since Oregon’s] unemployment rates are low, even considering the pandemic. But, there is a bottle neck in employment due to demand.
- 45,000 Oregonians aren’t looking for work. The average worker is getting 100% wage replacement based on current unemployment benefits, possibly contributing to slow return to work.
- Tight labor markets are going to be the norm in Oregon. The aging workforce will be a problem going forward. 25,000 people a year in the labor force is projected to retire on an annual basis.
- There is a potential for inflation, clearly more to come. CPI has taken a spike as we haven’t’ seen in a decade. Economic ramp up is so fast, pricing pressure has been massive. But eventually, supply will catch up. To what extent does this become consistent, or runaway inflation? The consensus is that long term inflation is a long way off.