Returning your money

The median taxpayer can expect to receive a credit of $420, while the average is estimated to be $850, according to the latest state revenue forecast summary.

Oregon taxpayers are in line to get a $1.9 billion kicker refund credit in the coming months.

The kicker occurs if actual state revenues exceed forecasted revenues by 2 percent or more over the two-year budget cycle. The excess, including the 2 percent trigger amount, is returned to taxpayers through a credit on their following year’s tax return, according to the Oregon Revenue Department.

The following is the summary of the Oregon Revenue Forecast presented to state lawmakers today.

The economic outlook remains bright.

Strong household incomes, boosted considerably by federal aid during the pandemic, are the underlying driver. Consumers have no shortage of firepower if they want to and feel safe enough to spend.

The key to the outlook remains translating this firepower into actual consumer spending, particularly in the hard-hit service industries. Firms today are trying to staff up as quickly as possible to meet this increasing demand. The actual number of jobs created this year will be the largest on record in Oregon. The state’s labor market is now expected to regain all of its lost jobs by next summer, or one quarter sooner than in the previous forecast.While these dynamics remain intact, the risks are weighted toward the downside.

Growth in a supply-constrained economy is challenging. Firms are struggling with supply chains and a tight labor market. Wages are rising quickly to attract and retain workers. Prices are increasing as demand continues to outstrip supply. On top of this the current delta wave of the pandemic complicates the immediate term outlook. What matters most economically are shutdowns. A modest pullback in consumer spending in a few categories will not lead to mass layoffs.

If anything, any slowing in spending today will likely turn into stronger gains in coming quarters.This cycle is different. The current recovery will be faster, more complete, and more inclusive than recent experiences coming out of the tech and housing bubbles. As some of the pandemic-specific challenges fade, the underlying economy is on solid footing due to the strength of corporate and household balance sheets.In September of odd-numbered years, the revenue forecast closes out the biennium than ended on June 30th.

At this time, the Close of Session forecast is calculated by folding any tax law changes made during the legislative session into the May 2021 outlook. This sets the bar for Oregon’s balanced budget requirement and its unique kicker law. Changes to tax law were relatively small in the 2021 session, with a net revenue impact of -$3.6 million to General Fund resources in the 2021-23 budget period.

The September forecast also reveals where revenues landed in the prior budget period. In a typical year, there are few surprises, since tax collections are relatively small during the early summer. This year was different. Due to a delayed tax filing deadline, much uncertainty remained following the May forecast. When the forecast was developed, the peak tax season had just begun.

By the end of the fiscal year, the 2021 tax season turned out to be a very big one. Collections of personal income taxes, corporate income taxes, lottery sales and the new Corporate Activity Tax all surged. Recent withholdings of personal income taxes are up 17% relative to last year. Payments during the tax season were strong as well, led by collections from high-income taxpayers. A $1.9 billion personal income tax kicker credit is slated for tax year 2021.

The median taxpayer can expect to receive a credit of $420, while the average is estimated to be $850. The strong revenue growth seen during the 2019-21 biennium put a cap on a decade of unprecedented expansion in Oregon’s General Fund revenues.

Over the past decade, General Fund revenues have almost doubled from around $12 billion per year to around $24 billion. Over the decade as a whole, kicker payments amounted to $2.6 billion, reducing cumulative General Fund resources by 2.6 percent. Last biennium, kicker payments took away half of the General Fund growth. Looking forward, the current $1.9 billion kicker reduces 2021-23 revenues as well.

Reaction

Governor Kate Brown issued the following statement today on the state’s revenue forecast:

“Today’s revenue forecast is another sign that Oregon’s economy is healthy, strong, and on the path for a rapid recovery. This is welcome news at a time that Oregonians continue to face immense challenges: from wildfire recovery to extreme drought to our worst surge of cases and hospitalizations during the COVID-19 pandemic.

“And we must never lose sight of the fact that, because of historic, structural inequities, the impacts of the pandemic and the natural disasters of the past year and a half have disproportionately impacted Black, Indigenous, Latino, Latina, Latinx, Asian, Pacific Islander, and Tribal communities the hardest.

“My priority will be to continue to address the challenges facing Oregon families, including the disparities resulting from systemic racism, with a particular focus on ensuring our hospitals and health care workers have the resources they need to continue to provide patients with life-saving care.”

Senate President Peter Courtney issued the following statement after the release of the September 2021 quarterly economic and revenue forecast:

“Oregon's economy remains strong. We have more money to invest in pandemic relief, childcare and housing. We're still in a crisis. The Legislature will help out Oregonians who've hurt the most. I look forward to doing this as fast as we can.”

Oregon House Speaker Tina Kotek issued the following statement today after the release of the latest quarterly state economic and revenue forecast:

“The stable outlook of today’s revenue forecast is welcome news coming off a legislative session where we invested strongly in programs to help Oregonians impacted by the pandemic, wildfires, the housing crisis and other challenges. We need to maintain this momentum to build a better future for everyone.

“Today is also a reminder that our economic recovery is linked to our ability to control the virus. Our hospital systems are on the verge of collapse in this moment. With 1,000 Oregonians hospitalized due to COVID-19, there is still too much suffering across the state. We will maintain our economic recovery if we all commit to protecting each other from the Delta variant.”

Oregon Senate Republicans statement

Today, the Office of Economic Analysis presented the quarterly revenue forecast. It confirmed that Oregon taxpayers will receive a $1.9 billion Kicker. The corporate Kicker will send an additional $850 million to K-12 schools. The state budget will also have an ending fund balance of $699 million.

“It’s clear that Democrats raided $15 million from the Kicker for no good reason. Unprecedented deficit stimulus spending by the federal government and Oregonians stepping up to support businesses during the Governor’s shutdowns has given the state excess money.

“The legislature now has money to invest in COVID and wildfire response and recovery and preparing for upcoming unknown expenses in the next biennium. Most importantly, our kids need to be in school full-time to get caught up after a year of learning loss. This money can help our kids recover.”

Background

The Oregon Economic Forecast provides information to planners and policy makers in state agencies and private organizations for use in their decision making processes. The Oregon Revenue Forecast opens the revenue forecasting process to public review. It is the basis for much of the budgeting in state government. The forecast reports are issued four times a year: March, June, September, and December.

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