If Oregon's tax policy was a person, heavy medication would be in order. Talk about mood swings. There are good days: No sales tax! State budget surplus! Dark days: inadequate schools, ailing health care coverage, skimpy rainy-day fund. But the unhealthiest behavior is Oregon's "kicker" provision. In the Oregon Department of Revenue's dry prose: The Oregon Constitution requires that, when there is at least a 2 percent difference between the final revenue forecast for the biennium and the actual end of the biennium revenue, the surplus be returned to individual income taxpayers.
Oh, it sounds good at first: This unusual law (written 28 years ago, inserted in the state constitution in 2000) is mailing refunds in the next few weeks. The bottom line is a whopper: $1.1 billion kicked back to taxpayers. Most of us get checks between $100 and $1,000.
It may be hard to get juiced up about a kicker if your kid is treading water in an under-funded public school; family medical care is courtesy of the emergency room because no one has insurance; the potholes on your street could swallow a Kia; and that job-retraining program you'll need later this year has gone broke. You know, all those things that states pay for out of tax revenue.
Whenever a kicker year comes around, there's grousing about its short-sighted nature, some of it cogent, like that put forth by the Oregon Center for Public Policy. But this year's especially large pot of money is drawing more noise from the peanut gallery. We've caught on that the kicker is an equal-opportunity thing: The super-wealthy get money back, too, and the heft of their kickers gives pause. As Oregonian writer Dave Hogan notes in a recent update:For starters, 5,000 taxpayers will receive a refund check for more than $10,000 each, according to new figures from the Oregon Department of Revenue. That means they each had at least $600,000 in taxable income last year and paid more than $50,000 in state income taxes. If that's not enough for you, the top 20 income taxpayers will get kicker checks averaging about $786,000 apiece. Why so huge? They paid more than $4 million in state taxes on average. When Blue Oregon writer Chuck Sheketoff drew attention to the Oregonian story and re-posted the kicker-payout chart, some smart comments and suggestions quickly followed. Deep-sixing the kicker isn't necessary, but why not amend the constitution to cap the kicker, so that everyone still gets a refund in boom years but the handful of huge payments end? Or put half the kicker pot in a rainy day fund? (The Legislature did sock away corporate kicker monies, so we know it can be done.)
One of the best comments came from "Jenni," who uses her household budgeting logic to point out the central weakness in the kicker:Say we had $40,000 income in 2007 and it looks like we'll have $36,000 in 2008. I make up a budget based on that, making cuts where necessary. I also make a budget for 2009. I include modest increases in our income, since my husband is guaranteed a minimum level of raise during the year. But still, we're not at the $40,000 we'd had previously, so we're still continuing some cuts. But in February, [we get raises] so now instead of $36,000, I have $50,000 to spend. I haven't been overpaid. I just made a budget based on estimated numbers for the future that ended up being incorrect. Now I re-adjust my budget, restoring cuts I'd originally made. We should do the same with the state budget. If we're going to continue the kicker, there should be a clause that says that the unanticipated funds (which is what they are – not an overpayment) can be used to restore budget cuts first before funds are sent out in kicker checks.
Jenni's comment made me wonder about another possibility: What if the kicker had to be spent in Oregon? Yes, I can almost hear the lawyers' fees piling up to make such a provision legal, but tax forms already give residents the option of signing over their kicker to a state school fund or other agencies, so perhaps it isn't so farfetched. Instead of waving goodbye to whatever portion of that billion bucks that leaves the state, we could pass it around here until the dollar bills just plain wear out.