Kicker can be bonanza for taxpayers, challenge for state budgeters

Many of you have heard that there is a strong likelihood that many Oregonians will be receiving a refund from the kicker.

So what is the kicker and how did we get to the place where the Oregon Department of Revenue sends money back to taxpayers?

The Oregon kicker was first passed by voters in 1980, but the first kicker rebate didn’t occur until 1985 when the calculated revenue collected by the state exceeded the forecast by 7.7 percent.

In 1999, Measure 86 was drafted and referred to the voters.

The measure, which was passed with 62 percent approval, enshrined the kicker law into the Oregon Constitution.

Interestingly, Oregon is the only state that has a kicker.

The kicker occurs if actual state revenues exceed forecasted revenues by 2 percent or more over the two-year budget cycle. Every quarter the legislative revenue office forecasts, based on employment trends, how much the state will receive from income tax paid by Oregonians.
The excess is returned to taxpayers through a credit on their following year’s tax return.

The legislature changed kicker checks to rebates in 2011 to be claimed when Oregonians file their taxes. This change saves about $1 million in administrative costs.

Kicker rebates are allocated based on the amount of taxes paid by an individual or couple. The more you pay in taxes, the higher the kicker rebate.

From a purely practical standpoint, the kicker can make budgeting very challenging.
Imagine if you are building your personal budget for a year based on your projected income.

Midway through the year you realize there’s more money coming in than you anticipated would be there at the end of the year. But instead of spending that money, you have to give it back. However, the amount you need to give back doesn’t end up being exactly the same as the extra and sometimes creates a cut somewhere in your budget towards the end of the year.

I understand: This is a simple analogy and CPAs are coming unglued right now at my very basic explanation. Remember, I’m not a CPA, I’m a state representative.

The kicker isn’t certain until the final revenue forecast numbers are in the for the biennium (two-year cycle). For this budget cycle, that will take place in August 2019.

The current forecast calls for about $555 million to go back to the taxpayers. In 2017, when the personal kicker totaled $464 million, the average refund was $227.

Even though the process is complicated and frustrating, I think, at least at this point in time, it’s a necessary one. The kicker is one of the few mechanisms in place that puts some restraint on the growth of government spending.

Let me explain: So if, in our personal budgets, we spent the extra and increased our cable package or upgraded our cell phone what happens the next year when that extra infusion of cash isn’t there?

That’s when either tax increases or budget cuts become a serious conversation in the legislature.