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If a friend told you they planned to send a lavish gift to a rich cousin, even though your friend is strapped for cash and the roof of their house is leaking, you probably would try to talk them out of it.
Our state, however, is pulling a similar move. Due to actions by Congress, Oregon’s finances have soured. Even so, the state is about to spend a lot of money on the tax rebate known as the “kicker.” Wealthy Oregonians will get a big chunk of it.
The kicker has long divided Oregonians. Many see it as reckless; others appreciate the extra cash.
But one thing most Oregonians can agree on is that sending huge kicker rebates to the rich makes no sense — not when so many other families are struggling to make ends meet. That’s why the Oregon Legislature should propose to voters a reform that cuts out the kicker for the rich and uses the savings to improve the lives of average Oregonians.
It’s important to understand what triggers the kicker: the difficulty of accurately predicting the future. The Oregon Constitution requires the state to send unanticipated tax revenue back to taxpayers if revenue comes in 2 percent or more above what state economists forecast two years prior. Forecasting is hard. It requires anticipating the health of the economy two years out, and extrapolating from that how much Oregonians will pay in taxes.
Without a crystal ball that sees the future, state economists often get it wrong. Indeed, the kicker has kicked during every one of the past six budget cycles.
The forecasting task is made all the more difficult by the requirement that state economists pick a precise number for how much revenue will come in, rather than a range of probable outcomes. So one potential improvement would be for the Legislature to base the kicker on a range, rather than a specific revenue figure — an approach more consistent with practical reality.
Without such a modification, the kicker will continue kicking regardless of the budgetary needs of the state or underlying economic conditions. It’s worth remembering that kickers have arrived at the worst possible time: on the eve of or during every one of the last five recessions.
Even without a recession, Oregon is already in a difficult fiscal situation due to a reckless Congress. The budget bill passed in July by congressional Republicans makes deep cuts to Medicaid and the Supplemental Nutrition Assistance Program, or SNAP, to help pay for massive tax cuts mainly benefiting the rich. Some of the price will be paid by those who will lose health care and food assistance, while some will be paid by the states as they get saddled with a greater share of the cost of Medicaid and SNAP.
Adding to the state’s financial woes, Oregon is losing nearly $900 million in the current budget period due to Oregon’s taxes automatically being connected to the federal tax code. Because Congress just passed a slew of tax breaks that mostly benefit the rich and corporations, Oregon is replicating those same tax breaks.
The actions of Congress have left Oregon strapped for cash, while dealing a heavy blow to the economic wellbeing of many Oregonians. The damage will play out in the years to come.
In light of all of this, the last thing Oregon should be doing is sending big tax rebates to the rich. But that’s what’s in store. The upcoming kicker will total about $1.4 billion. Of that, some $640 million will go to the richest 5 percent of Oregonians, those who are already doing just fine.
The picture gets even more extreme in the case of the richest 1 percent who, on average, make more than a million dollars a year. The average kicker for this group will be more than $15,000. Meanwhile, the lowest-paid Oregonians — those struggling the most — will get a measly $27 on average.
It’s time to turn the page on this misguided policy that sends huge rebates to the rich even as so many hardworking families struggle to afford the basics, and even as the state may find itself short of resources to fund schools and other essential services.
While it’s too late to change the upcoming rebate, lawmakers should refer to voters a constitutional amendment to reform the kicker. The proposal would end the tax rebates for the rich and steer those dollars toward a better use. How about putting that money in a fund to fight hunger or wildfires? Or how about reforming the kicker so that everyone gets the same amount, rather than giving the rich massive rebates and crumbs to the poor?
While we can debate the best way to spend that money to improve the lives of Oregonians, one thing is clear: We can’t afford big tax rebates for the rich.
