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  • 26 May 2015

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Taxpayers' kicker funds come as tax rebate, not checks

The kicker funds will be a tax rebate, not a check.Oregon taxpayers can now expect a tax rebate that is projected at $473 million.

It would be the first such rebate in eight years, following a record $1.1 billion payout in late 2007, just before the official start of the most recent economic downturn.

But unlike in the past two decades, the money will not come in the form of checks mailed to taxpayers in the fall. Instead, as a result of a change lawmakers made in 2011, the money will be credited against 2015 income taxes, returns for which are due in April 2016.

Known as a “kicker,” the money results when actual tax collections exceed budget projections for the state’s two-year cycle by 2 percent or more. Under the 1979 law, the entire amount above the projection — not just the excess above 2 percent — is returned.

The exact amount will not be known until the state’s next quarterly economic and revenue forecast, which is scheduled Aug. 26, about two months after the close of the 2013-15 budget cycle.

But state economist Mark McMullen offered lawmakers some estimates as to how a kicker would affect taxpayers, based on 2013 tax liability.

Oregonians with median adjusted gross incomes of between $30,000 and $35,000 — half the state’s taxpayers earning more than that range, and half of them less — would get a projected credit of $144 against their 2015 returns filed in 2016.

For an average taxpayer with adjusted gross income of $53,900, the credit is projected at $284.

Higher-income taxpayers will get more.

The pending kicker is estimated by Paul Warner, the Legislature’s chief tax analyst, at roughly 6.5 percent of tax liability before the personal credit is taken.

The most recent kicker was for $1.1 billion in fall 2007. That represented 18.6 percent of tax liability.

Although the kicker law was passed in 1979, the first rebate occurred after the 1983-85 budget cycle. A decade later, in 1995, the Legislature decided that kicker rebates should come in the form of checks. There were four consecutive cycles with rebates through 2001, when $250 million was returned on the eve of another downturn.

Processing and mailing checks, however, cost about $1 million.

Voters put the kicker into the Oregon Constitution in 2000. Lawmakers can vote to keep the money, but under the 2000 change, two-thirds majorities are required to do so – and that provision has never been invoked.

Although the 1979 law also provides for limits on corporate income tax collections, businesses no longer get rebates. Voters changed the Oregon Constitution in 2012 to redirect any excess amounts to the state school fund.

The latest forecast projects that $61.3 million in excess corporate tax collections from the current cycle will go to schools in the next cycle.

As soon as McMullen started explaining the kicker projection to lawmakers on the House and Senate revenue committees, a group of students started chanting, “No kicker, no cuts, no ifs, ands or buts.”

Oregon State Police escorted them out of the hearing room, and 10 of them were arrested later as they continued chanting in a hallway and declined to disperse.


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