The $1.4 billion refund projected to flow back to Oregon taxpayers next year would be chopped for some of the state’s highest earners, under a proposal Gov. Kate Brown unveiled Thursday.
In an idea Brown acknowledged will be a “tough sell” in the Capitol, she pitched capping “kicker” payments at $1,000 per tax filer.
Unique to Oregon, the kicker refunds payments from personal income tax filers when revenues come in at least 2% higher than estimated for a given budget cycle. A kicker has been triggered the last two bienniums, but the refund currently expected to flow back to taxpayers next year is historic.
Brown’s plan would trim refunds for around 331,000 filers who make more than $55,000 per year, with 93% of those reporting incomes of at least $96,000.
Refunds slated to go to taxpayers with lower incomes would be unaffected. Median refunds anticipated under the current kicker are $338, though top earners could see nearly $14,000 coming their way if the Legislature takes no action.
The proposed cap would result in state coffers retaining roughly $500 million of the projected kicker, Brown said, money that would go to rural housing, rural broadband and easing the burden of ballooning pension payments on school districts.
“I think it’s fiscally responsible and it makes common sense,” Brown said. “I anticipate you’ll see ongoing conversations about this proposal over the next couple of days.”
The proposal marks at least the third idea formally floated this year for repurposing some of the $1.4 billion kicker, which would be the largest in state history.
In an earlier proposal, Brown had floated capping the kicker at $100 per taxpayer and diverting the remainder to help schools withstand increased payments to the state’s Public Employees Retirement System, or PERS. That idea, part of a package that lawmakers ultimately scrapped in favor of another plan, came before the size of the anticipated kicker refund was clear.
House Speaker Tina Kotek, D-Portland, has also suggested cutting the kicker roughly in half and dedicating money the state retains to a number of transportation-oriented causes, such as electric vehicles and bridge repairs. Her proposal met a tepid response from the Democratic governor, who has said PERS should be a recipient of any diverted funds.
Kotek could not immediately be reached for comment on the governor’s proposal Thursday. According to his spokeswoman, Senate President Peter Courtney, D-Salem, said only “give me 20 votes” when asked if he supported the proposal.
Any effort to divert kicker money needs to clear a high bar, requiring two-thirds of lawmakers to agree. That’s a greater threshold than the Democratic supermajorities in each chamber, meaning Brown or Kotek would need to find Republican buy-in for their plans.
“After meeting with Senate Republicans and House Republicans and talking to members, I think certainly we have these opportunities to make these one-time investments in rural Oregon that will really ensure that their communities can continue to thrive,” Brown said.
She stopped short of saying there was any enthusiasm for the idea.
“I think that this is still a very tough row to hoe, but I wanted Oregonians to see what this would look like if we had the resources to make investments,” Brown said. “I put this proposal out to stimulate conversation.”
Republicans have been adamant that kicker money should not be diverted, citing record tax revenues and a new tax on businesses that will generate $1 billion a year for schools.
“Any attempt by Democrats to take their hard-earned kicker away from working Oregonians and squander it all on growing government or rewarding their campaign donors will be met with strong opposition by House Republicans,” House Minority Leader Carl Wilson, R-Grants Pass, said recently.
The governor didn’t offer many details on where diverted money would go. While she did mention putting $29 million toward establishing broadband networks in rural areas, she did not have rural housing projects specifically in mind. Nor could Brown say what impact the $250 million she’d put toward the PERS system would have on school districts. Her past proposals have aimed to freeze payment increases that those districts are expecting in coming years.