The Oregonian on reforming the state's tax kicker
Same time, same budget mess, next recession? The Oregon Legislature has to stop leading like this.
Here Oregon voters sit, forced for the second time in six years to choose between carving deep into their public schools and other services or raising taxes at the worst possible time. It's never been more obvious that Oregon must have a large state rainy day fund to shield the state from these kinds of budget crises.
Yet legislators are still wobbly about taking the first critical step toward building the needed savings account: crafting a common-sense reform of Oregon's kicker law in their February session and sending the constitutional amendment to the voters for approval.
How many times must Oregon go through this? In 2003 and 2004, the economy tanked, income tax revenues plunged, legislators tried to protect schools and other services by raising taxes, economically strapped voters killed the tax increases and Doonesbury had a field day mocking Oregon for failing even to give its children a full school year.
Here we go again. Oregon is flat on its back, the Legislature is trying again to squeeze blood from an economic turnip and schools and human services are on the chopping block.
If Oregon had reformed the tax kicker after the 2003-04 recession it wouldn't be in this position today. In 2007, Oregon returned more than $1 billion in unanticipated personal and corporate income taxes. If that money had been socked away in a rainy day fund, Oregonians wouldn't be deciding next month between higher taxes and shorter school years.
But time and time again, lawmakers have been loathe to call the question on the kicker, a law that is unique to Oregon and widely misunderstood. The law "kicks" money back to taxpayers when taxes paid to the state come in 2 percent or more above the level of the state forecast. The forecasts are based not on the state's needs, but on educated guesses about future tax revenues. The kicker is not "surplus" or "extra" taxes; it's revenue the state economist didn't see coming.
A bipartisan group of lawmakers has fashioned a reform plan that would ask voters to amend the state constitution to divert kicker revenues into a rainy day fund until the savings account reaches $1.5 billion, and then the kicker would revert to taxpayers. The rainy day fund would be tightly restricted to prevent lawmakers from spending the money unless the state faced a true emergency, as it does today.
We're told that many legislators see kicker reform as another tax measure, and if voters reject Measures 66 and 67 in January, then they are unlikely to refer a kicker measure to voters this year. It's disappointing that lawmakers are more than willing to send Oregonians one emergency tax measure after another while refusing to present them with the one measure that would make all the others unnecessary.
In our meetings with proponents and opponents of the January tax measures, about the only thing that both sides agree on is that Oregon needs to build a rainy day fund and that it starts with kicker reform. Business leaders, school activists, labor union representatives — all said they favor kicker reform.
But in a telephone interview last week, House Speaker Dave Hunt and Senate President Peter Courtney expressed doubt about whether they would attempt to pass kicker reform in February. The two legislative leaders said they needed to be persuaded that Oregon business is sincere in its pledge to support kicker reform at the ballot.
There's always a reason, an excuse, that it's not the "right" time to reform the kicker. It's that caution, that reluctance to call the most important public policy question in this state, that has left Oregonians with the truly lousy choice they face in January.