Dems look to rich with new 'kicker' proposal

SALEM, Ore. (AP) - With a plan to reduce the size of Oregon's popular and unique "kicker" tax rebates languishing in the state Senate, Democrats in the House are turning to a strategy their party has used successfully recently: Tapping the rich.

House Democrats on Thursday released two proposals aimed at saving money from kicker checks to be used during economic downturns. One proposal would allow individual taxpayers to receive up to $500 from their kicker, with the rest going into a rainy day fund. The other proposal would cap it at $250. Both of them would require approval from voters.

Democrats say their plans would allow most people to continue getting their full kicker checks.

"If we're going to hang on to the kicker then let's hang on to it for the people who need it the most, and that's the people in lower and middle tax brackets," said Rep. Chris Garrett of Lake Oswego, one of the Democrats advocating the bill.

House Republican leader Kevin Cameron denounced the proposal as a tax increase that picks winners and losers. He said Oregonians want lawmakers to balance the budget using existing revenue.

"Instead of living within our means and raising money in the private sector ... they're going to go out and raise the taxes on the people of Oregon," Cameron said.

Democratic lawmakers voted in 2009 to raise taxes on businesses and wealthy taxpayers to help balance a struggling budget, prompting a bitter referendum campaign. Voters approved the tax hikes in Measures 66 and 67, and Democrats inside and outside Oregon have pointed to them as evidence that voters are willing to support tax hikes on the rich.

The kicker law is unique to Oregon. When actual tax collections at the end of a two-year budget cycle come in at least 2 percent higher than projections, the extra revenue is "kicked" back to taxpayers, who get a check for their share of the additional revenue.

Since voters approved the kicker in 1980, it's been triggered nine times for individuals and eight times for corporations. Lawmakers suspended business refunds twice and personal refunds once.

The most recent kicker was in 2007, when individuals got back a total of more than $1 billion after a booming economy brought in revenue 19 percent higher than projected. Two years later, the Legislature raised taxes and cut services as revenue plummeted.

The kicker law was designed as a check on government spending. But critics, including Gov. John Kitzhaber, say it prevents the state from saving during economic booms to reduce the need for cuts during emergencies.

The Democratic proposal is offered as an alternative to a Senate bill that would cut individual kickers in half while sending the rest to savings. In a bid for bipartisan support on that proposal, senators tied the kicker changes to a capital gains tax cut. The idea got a frosty reception from House leaders of both parties as Republicans opposed a kicker reduction and Democrats opposed a capital gains tax cut.

Sens. Ginny Burdick and Frank Morse, the chief proponents of a kicker overhaul, welcomed the Democratic proposal saying it's critical that someone find a politically feasible way to stabilize Oregon's budget.

"Oregon's finances aren't right," said Morse, R-Albany. "I don't care what kind of organization you are — whether you're public or private — if your finances aren't right, your product and service aren't going to be right."

Democrats proposed two approaches. House Joint Resolution 47 would allow personal kicker checks worth up to $500, or $1,000 for couples filing jointly. Corporations with less than $5 million in Oregon sales would get their full kicker checks while larger companies would not.

House Joint Resolution 48 would cap personal kicker checks at $250 for individuals and $500 for couples. All corporations would give up their entire kicker checks.

Under both proposals, the rainy day fund could only be tapped during times of economic emergency with approval from at least three-fifths of both the House and the Senate.

The state Senate this week passed a bill that would change the kicker from a check that comes in the mail shortly before Christmas to a tax deduction that is applied to the year-end tax bill. That bill, which is awaiting action from Democratic Gov. John Kitzhaber, would not affect the size of the check.

"I am delighted that they're taking leadership on this and getting this issue moving," said Burdick, D-Portland. "I think it would be a shame to get through this session and not do something about the stability of our revenue system."

Copyright 2011 The Associated Press.