Oregon economists give 50-50 odds of residents seeing a kicker tax credit

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Oregon economists in their June forecast predicted a 50-50 chance the state’s residents will receive a kicker tax credit in 2026 as revenues are coming in at a slow and steady pace.

The state has a trigger mechanism that returns money to taxpayers every two years through a so-called kicker rebate if personal income taxes come in at least 2% higher than initial forecasts.

Collections on April personal income tax payments are coming in slightly higher than expected, according to the quarterly Oregon Economic and Revenue Forecast.

“When combined with an improved economic outlook for personal income and increased forecasts for both estate taxes and interest earnings, non-corporate General Fund revenues are expected to end the current 2023-25 biennium 2.5% above the close of session forecast,” economists wrote in the quarterly Oregon Economic and Revenue Forecast.

Lawmakers have “made meaningful progress on issues of top concern for Oregonians and have worked to move our economy in the right direction,” Oregon Gov. Tina Kotek said.

Oregon Governor’s Office

If the forecast holds, economists said, the state will be dispersing a kicker credit of $582 million for the 2025-27 biennium.

“However, there is still the April 2025 tax season yet to come, leaving the future kicker credit a 50-50 proposition at this point,” economists said.

The strength in the labor and equity markets is supporting healthy personal income tax collections, but corporate tax collections, while strong have stalled in recent months, they said.

But the primary downside facing the forecast is the uncertain future of the nationwide economic expansion, economists said. “If high interest rates, federal policy woes or economic weakness among trading partners derail the U.S. economy, the expected growth in Oregon’s tax collections will not come to pass,” the economists said.

The state’s Democrats and Republicans, unsurprisingly, came down with opposite takes on the forecast.

Oregon Speaker Julie Fahey, D-West Eugene, said the revenue forecast indicates the state’s economy is “stable and growing,” while Senate Republican Leader Daniel Bonham, R-The Dalles, said the state should limit spending amid stagnant growth, high inflation and rising costs.

Oregon Gov. Tina Kotek, a Democrat, called the state’s economy “stable and productive,” adding that lawmakers have “made meaningful progress on issues of top concern for Oregonians and have worked to move our economy in the right direction.”

Kotek emphasized housing, safe schools and behavioral health services as key areas for the state as it looks toward the regular session in 2025, where it will craft a new two-year budget. This year was an interim budget year for the state, which has a biennial budget process.

“In recent sessions we’ve made key investments in housing and wrap-around services, childcare and early learning, mental health care and addiction treatment, and job creation opportunities,” Fahey said.

The revenue forecast issued today indicates the “state will have the funding we need to continue paying for the critical ongoing programs that Oregonians rely on, thanks to prudent budgeting and strong leadership,” Fahey said.

 ”It’s also encouraging to see steady productivity and solid labor market gains, as well as job growth in the semiconductor industry, both in the near- and long-term, due to jobs-boosting bills like the CHIPS Act,” Fahey said.

The CHIPS Act passed by Congress in 2022 allocated $52 billion to U.S. Companies that manufacture computer chips. Oregon lawmakers approved Senate Bill 4 and the governor signed off on $200 million of funding in 2023 to expand or build new semiconductor facilities in the state, and in the hope of tapping matching funds from the federal law.

Republicans said the quarterly revenue forecast indicates that “despite big surpluses, significant economic challenges are ahead due to stagnant growth and high inflation.”

The economic forecast, and the potential for a kicker, indicates the state “has continued to take more than enough of our hard-earned tax dollars,” Bonham said.

In a time of high inflation and pressure on household budgets, he said the Legislature “must learn to live within its means.” He added the Republican caucus will continue to advocate for budgetary restraint to ensure the long-term viability of essential services.

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