It’s official: Oregonians will see the largest-ever “kicker” tax refund next year.
With all tax receipts for the just-ended biennium counted, state economists say more than $1.57 billion will flow back to personal income taxpayers in 2020, when they file their 2019 taxes. That compares to a "kicker" refund of a little more than $1.4 billion projected in May, when officials last forecast overall revenues.
The final tally, delivered to lawmakers in a hearing Wednesday morning, continued a consistent trend over the last two years, as state tax revenues consistently outpaced economists' expectations.
When all was said and done, money flowing into the state’s general and lottery funds came in $2.6 billion above what officials expected in 2017, at the outset of the biennium. That’s created a situation where Oregon reserve funds are at an all time high — more than $3.7 billion — even as economists warn of an economic slowdown on the horizon.
But Oregon’s unique refund policy also means the state can’t use all of the unexpected money. Under state law, a “kicker” is triggered whenever actual personal income tax receipts come in at least 2% higher than initial projections. In such cases, any money collected above initial forecasts flows back to taxpayers in the form of tax credits.
In 2017-19, tax receipts came in more than 9% above projections, meaning the largest refund, by dollar amount, ever issued. As a percentage of tax liability, next year’s kicker will be the third-largest in Oregon history.
In actual numbers, the top 1% of taxpayers can expect refunds of $15,214, while the median refund will be $346. The average payout to all taxpayers is expected to be $739.
The unprecedented revenues have roots in a number of factors, including federal tax changes that led businesses to put off paying taxes until this year, ratcheting up corporate tax receipts by around 50%. Economists say those impacts are likely short term.
“Even without a recession, we’re expecting that it’s going to be hard to match the revenue we saw in the last biennium,” state economist Mark McMullen told lawmakers on the House and Senate revenue committees.
Another factor that could dampen the size of future kickers: A new corporate activities tax that lawmakers passed this year. That tax is expected to raise roughly $1 billion a year to pay for schools. But because it also could raise prices for consumers, lawmakers reduced personal income tax rates.
McMullen explained this shift will reduce income tax money flowing into the general fund, even though overall revenues won’t be impacted. And that means fewer possible dollars flowing back in the form of kicker payments.
“Thank you for that facet of the law,” McMullen told legislators.
State economists have missed the mark on state revenue projections in each of the last three bienniums, triggering a kicker. In the 2011-13 budget cycle, they hit the “sweet spot” where revenues came in above projections but not by enough to trigger a refund.
Lawmakers, who appeared in good spirits when hearing of the record revenues, alluded to that fact on Wednesday.
“My takeaway, in spite of the future and the possible headwinds, is that Oregon’s economy is really strong,” state Sen. Mark Hass, D-Beaverton, told economists. “You missed the sweet spot by about a billion and a half, but you had some obstacles out there.”