Oregon taxpayers might get a file $ 1.9 billion refund subsequent yr

Oregon State Capitol Building, May 18, 2021. Oregon’s unique tax law sends money back to taxpayers when income tax receipts are at least 2% above original projections over a two-year fiscal cycle.

Kristyna Wentz-Graff / OPB

Oregon officials now expect the state to send out a massive $ 1.9 billion tax refund next year after income tax revenues soared towards the end of this year’s tax season.

If the projections are correct, the refund – which comes in the form of credits for 2021 tax returns filed next year – would be the biggest kicker ever in Oregon. The state’s unique kicker tax law sends money back to taxpayers when income tax receipts are at least 2% above original projections over a two-year budget cycle.

The new forecast, presented to a joint meeting of senators and state officials on Wednesday morning, was the most noticeable change economists have made since their last high-profile forecast in May. In that report, they assumed the state would see a $ 1.4 billion kicker.

At the time, however, economists were aware that this prognosis was associated with risks. Due to tax deadlines postponed due to COVID-19, the scope of Oregon income tax filings in May was not clear.

“At this point, we were just getting into the tax season,” state economist Mark McMullen told lawmakers. “We hadn’t seen the big wave of collections yet.”

When that wave hit, McMullen told lawmakers, personal income taxes were much higher than expected. He attributed this in part to wage growth for high earners and far higher recoveries from companies whose owners levy personal income taxes rather than corporation taxes. These factors only contributed to rising tax revenues, some of which economists have attributed to federal stimulus packages and increased unemployment benefits.

“The high-income people on board see higher income increases,” said McMullen. He added that this year some business owners may have moved tax payments forward rather than delaying them, fearing federal tax increases under President Joe Biden.

Under the expected kicker, the median income taxpayer would get a $ 420 credit on this year’s state taxes. The average taxpayer with an adjusted gross income of about $ 67,500 would receive $ 850. Since the kicker is awarded as a percentage of income taxes paid, the top 20% of earners get far more: between $ 1,600 and $ 16,880.

The state last hit a record kicker amount in 2019 when the refund was last triggered when more than $ 1.5 billion was returned to taxpayers.

Regardless of the personal kicker, economists also expect the state to receive $ 847 million more in corporate taxes than originally expected. This “corporate kicker” will flow to K-12 schools.

Critics of the personal kicker say it disproportionately sends dollars back to wealthy Oregonians instead of funding services or helping people in need. Fans of the directive refer to it as an important tool in the fight against waste and bloating by the government.

In budgetary terms, the kicker means that the state will have to spend less money on upcoming budgets. But even with massive taxpayer refunds over the past decade, rising tax revenues have doubled the state’s general fund over the past decade, economists said Wednesday.

That doesn’t mean there aren’t any risks. McMullen pointed out that in the event of a recession, kicker could pose a particular risk, as the state would be burdened with paying out hundreds of millions of dollars while closing a budget gap.

This is not to be expected in the foreseeable future. Economists told lawmakers that the budget outlook appeared stable, although they said any renewed economic restrictions on business operations could cause problems due to the rising delta variant. Governor Kate Brown has not announced any such restrictions, despite having issued nationwide mask mandates in the past few days.

On Wednesday, economists revised their revenue outlook slightly upwards for the current two-year budget cycle and the two following cycles.

In statements on Wednesday, leading Democrats ignored the revised kicker number and chose instead to embrace positive economic news.

“We have more money to invest in pandemic relief, childcare and housing,” said Senate President Peter Courtney, D-Salem. “We are still in a crisis”

House spokeswoman Tina Kotek, D-Portland, called the forecast “welcome messages” that could help lawmakers remain focused on managing multiple crises. However, Kotek warned that the stable outlook is threatened by the COVID-19 surge, which is rapidly filling Oregon hospital beds.

“We will continue our recovery if we all commit to protecting each other from the Delta variant,” she said.

Republican leaders meanwhile issued statements showing a condition in disarray despite rising revenues.

“Despite a budget that has doubled in 10 years, the state today is worse off about our students’ education, property prices and the security of our communities,” said Christine Drazan, Chair of the House Minority Chair, R-Canby. “While it’s great for the state that we have an increase in tax revenue, it’s not real progress for the Oregonians.”