Imagine if you went to your favorite fast food restaurant and ordered the cheeseburger combo with fries and a drink for $12.99 and handed the cashier a $20 bill. Suppose, instead of handing you back $7.01 in change, they added items to your order to use up the $20, figuring you needed a larger drink, some chicken nuggets, or a piece of pie for desert. You'd be puzzled, if not outraged.

Oregon's kicker law keeps state government from doing the equivalent -- except instead of a $20 bill, we're talking millions or even billions of dollars.

The 2% surplus kicker gives taxpayers an income tax credit if actual revenues for the biennium are more than 2% higher than forecast at the time the budget was adopted. When the law was first enacted, the Oregon Department of Revenue sent kicker checks to taxpayers. In 2011, the Oregon Legislature changed the law so that the kicker refund appeared as a credit on the next year's taxes. It is estimated that the distribution via check cost the taxpayers an additional $1M per kicker year.

Personal Income Kicker History
Biennium	Tax Year	Surplus in $M	Percent	Mean Distribution
1979-81	1981	-$141	None	-
1981-83	1983	-$115	None	-
1983-85	1985	$89	7.70%	$80
1985-87	1987	$221	16.60%	$190
1987-89	1989	$175	9.80%	$130
1989-91	1991	$186	Suspended	-
1991-93	1993	$60	None	-
1993-95	1994/5	$163	6.27%	$110
1995-97	1996/7	$432	14.37%	$290
1997-99	1998/9	$167	4.57%	$100
1999-01	2000/1	$254	6.02%	$160
2001-03	2002/3	-$1,249	None	-
2003-05	2004/5	-$401	None	-
2005-07	2006/7	$1,071	18.60%	$610
2007-09	2008	-$1,113	None	-
2009-11	2010	-$1,050	None	-
2011-13	2012	$124	None	-
2013-15	2014	$402	5.60%	$210
2015-17	2016	$464	5.60%	$250
2017-19	2018	$1,688	17.17%	$910
2019-21	2020	$1,898	17.34%	$990
2021-23	2022	$5,619	44.28%

The kicker law divides all General Fund money into two pots: (1) corporate taxes; and (2) personal income taxes plus all other revenues. At the end of each biennium, if the actual collections in either of these two pots are more than 2% higher than was forecast at the close of the regular session, then a refund or credit must be paid. If a kicker is triggered in a pot, then all the money in that pot in excess of the close of session forecast, including the 2%, is returned to taxpayers.

In 1990 the legislature suspended the potential $246 million kicker because of budget problems arising from the implementation of Ballot Measure 5's property tax reform.

In 2012, voters changed the kicker law so that surpluses in the corporate pot fund a K through 12 public education. Most experts agree that this has the practical effect of diverting the money into the general fund, as this money displaces what were formerly general fund allocations to education.

The amount refunded in the case of the individual taxpayers or allocated to the general fund for public education is an identical proportion of each taxpayer’s personal income tax liability for the prior year. For example, if the kicker refund is 5% and the taxpayer had a liability of $1,000, he or she would receive a refund of $50. The estimate upon which the kicker calculation is based can be increased, thereby reducing or eliminating the kicker refund/credit, on a one-time basis if an emergency is declared and approved by a 2/3 vote in each chamber of the Legislative Assembly.

Over the years, tax-hungry Democrats have been proposing to divert kicker funds away from the taxpayers who paid them. In the 2023 session, Senator Jeff Golden (D-Ashland) propsosed changing the kicker distribution from a payment proportional to the amount paid by the taxpayer to an equal distribution to all personal income taxpayers. The bill found little support and died in the Senate Committee on Finance and Revenue. This proposal echoed nearly identical proposals by Representative Phil Barnhart (D-Eugene) in 2016 and 2017

Senator James Manning, Jr. (D-Eugene) proposed an amendment to the Oregon Constitution in 2017 and 2019 which would have diverted the individual kicker into education.

The "Kicker" law can be found in the Oregon Constitution:

Article IX, Section 14. Revenue estimate; retention of excess corporate tax revenue in General Fund for public education funding; return of other excess revenue to taxpayers; legislative increase in estimate. (1) As soon as is practicable after adjournment sine die of an odd-numbered year regular session of the Legislative Assembly, the Governor shall cause an estimate to be prepared of revenues that will be received by the General Fund for the biennium beginning July 1. The estimated revenues from corporate income and excise taxes shall be separately stated from the estimated revenues from other General Fund sources.
(2) As soon as is practicable after the end of the biennium, the Governor shall cause actual collections of revenues received by the General Fund for that biennium to be determined. The revenues received from corporate income and excise taxes shall be determined separately from the revenues received from other General Fund sources.
(3) If the revenues received by the General Fund from corporate income and excise taxes during the biennium exceed the amount estimated to be received from corporate income and excise taxes for the biennium, by two percent or more, the total amount of the excess shall be retained in the General Fund and used to provide additional funding for public education, kindergarten through twelfth grade.
(4) If the revenues received from General Fund revenue sources, exclusive of those described in subsection (3) of this section, during the biennium exceed the amount estimated to be received from such sources for the biennium, by two percent or more, the total amount of the excess shall be returned to personal income taxpayers.
(5) The Legislative Assembly may enact laws:
(a) Establishing a tax credit, refund payment or other mechanism by which the excess revenues are returned to taxpayers, and establishing administrative procedures connected therewith.
(b) Allowing the excess revenues to be reduced by administrative costs associated with returning the excess revenues.
(c) Permitting a taxpayer's share of the excess revenues not to be returned to the taxpayer if the taxpayer's share is less than a de minimis amount identified by the Legislative Assembly.
(d) Permitting a taxpayer's share of excess revenues to be offset by any liability of the taxpayer for which the state is authorized to undertake collection efforts.
(6)(a) Prior to the close of a biennium for which an estimate described in subsection (1) of this section has been made, the Legislative Assembly, by a two-thirds majority vote of all members elected to each House, may enact legislation declaring an emergency and increasing the amount of the estimate prepared pursuant to subsection (1) of this section.
(b) The prohibition against declaring an emergency in an act regulating taxation or exemption in section 1a, Article IX of this Constitution, does not apply to legislation enacted pursuant to this subsection.
(7) This section does not apply:
(a) If, for a biennium or any portion of a biennium, a state tax is not imposed on or measured by the income of individuals.
(b) To revenues derived from any minimum tax imposed on corporations for the privilege of carrying on or doing business in this state that is imposed as a fixed amount and that is nonapportioned (except for changes of accounting periods).
(c) To biennia beginning before July 1, 2001. [Created through H.J.R. 17, 1999, and adopted by the people Nov. 7, 2000; Amendment proposed by S.J.R. 41, 2010, and adopted by the people Nov. 2, 2010; Amendment proposed by initiative petition filed Dec. 7, 2011, and adopted by the people Nov. 6, 2012]

Editor's note: We gratefully acknowledge documents produced by the Legislative Revenue Office and the Oregon Department of Revenue for their contributions to this article


--Staff Reports

Post Date: 2023-10-11 09:40:02

Last Update: 2023-10-11 09:44:55