Growth buoys state coffers, drives taxpayer give-back
A forecast from Oregon's state economist predicts strong economic growth and low unemployment will drive roughly $752 million more to state coffers than 2017 estimates predicted, triggering automatic kickbacks to taxpayers and schools.
The taxpayer give-back, called the kicker, is an automatic provision that causes Oregon taxpayers to get a credit when forecasts are revised upward by more than two percent, effectively transferring some of the money back to residents.
If the forecast proves correct a total of about $555 million will go to taxpayers as credits on their 2019 taxes. A similar provision will funnel the remaining $152 million to school budgets.
"We're continuing to see healthy economic growth, and those gains are expected to continue," said Josh Lehner, senior economist at the the Oregon Office of Economic Analysis. "That translates into additional revenue and additional resources for the state."
The forecast, released Wednesday, is the latest of several to be revised upward as markets around the country continue growing. A key 2017 forecast, released at the end of the 2017 legislative session, predicted the state would raise about $19.6 billion over the 2017-2019 biennium; Wednesday's predicted about $20.3 billion.
Concerns noted in the forecast, which examined regional indicators more broadly, included housing affordability, a tightening labor pool, and the potential for impacts from changes in international trade policy. China, the target of recent tariffs from the Trump administration, is the state's top export destination, putting the state at outsize risk for effects from escalated tariffs.
Legislative leaders, in Salem for the state's regular legislative work days, responded variously, with Republicans broadly criticizing state tax levels and spending, and Democrats urging funding for education, infrastructure, and other programs.
Along with the change over 2017 figures, the report also registered an even more dramatic increase of $813 million over the last three months alone, since the state's most recent forecast. But Lehner cautioned that using those figures could be misleading, as they account for a series of changes at the federal and state level which caused the forecasts to first show a large loss, then a large gain.
Provisions in President Donald Trump's 2017 Tax Cuts and Jobs Act added new deductions to the federal tax code which, because Oregon uses federal figures to calculate residents' state tax bills, caused state tax collection forecasts to drop by hundreds of millions of dollars. But Oregon legislators in February responded by passing Senate Bills 1528 and 1529, which blocked the federal changes from spilling over into Oregon's calculations: relative to the dip caused by the Trump plan, the legislative action caused forecasts to rise again at the end of the legislative session.
The taxpayer give-back this year will be the second in a row. The credits are possible every other year, when the state's two-year budgeting cycle wraps up. The previous cycle, which finished in 2017, gave taxpayers back 5.6 percent of their previous year's tax bill.
Because this year's surplus is predicted to be larger, this year's kickback will likely be larger as well, Lehner said. Residents will be offered the kicker when they file their taxes in 2020.