Oregon taxpayers will see record kicker credits on their 2023 returns as a result of $5.6 billion in excess tax collections during the recent two-year budget cycle.

State economists confirmed the total Wednesday during their presentation of the quarterly economic and revenue forecast at a meeting of the House Revenue Committee in Salem.

But State Economist Mark McMullen said officials are refining just how the $5.6 billion — a record since lawmakers created the kicker more than four decades ago — will be distributed in the form of credits against 2023 returns due in April 2024. Officials have until Oct. 1 to certify the kicker, although the amount was set when the 2021-23 budget cycle ended June 30.

What hasn’t happened yet, McMullen said, is a calculation of 2022 total tax liabilities. Oct. 15 is the deadline for tax filers — many of them from higher-income households — who sought six-month extensions from the regular deadline back on April 18.

“If we are off from that percentage by a little bit, we are talking about real dollars,” McMullen said.

The pending kicker of $5.6 billion in personal income taxes is almost three times the previous record of $1.9 billion set two years ago. The credit against the liability for 2022 taxes that were due this year is estimated above 40%, more than double the 17.34% from two years ago. The record credit was 18.6% after the 2005-07 budget cycle, when kicker checks were still mailed to taxpayers. Lawmakers changed kicker refunds back to credits against tax bills, instead of checks to taxpayers, in 2011.

Preliminary numbers furnished by McMullen and Josh Lehner in their presentation indicate that for an average household with adjusted gross income of $69,400, the kicker credit against 2023 taxes will be $2,100. For median-income households with adjusted gross incomes between $35,000 and $40,000 — half the households are above and half below that range — the kicker credit will be about $980. The median is more reflective of Oregon taxpayers than the average, which is higher because high-end households push up that number.

Also in the preliminary numbers: For a household in the bottom 20% income bracket of less than $11,400, the average credit is only $60. For a household in the second tier, between $11,400 and $28,700, the average credit is $440.

“It really does seem dramatic here in terms of the difference of this kicker credit across income tiers,” McMullen said.

“The vast majority of this credit goes to high-income filers. That is not necessarily unfair, given that the percentages are the same. What it reflects is that Oregon has a progressive tax system.

“Higher-income filers had a lot more (tax) liability in 2022 than lower-income filers.”

Corporate tax revenue way up

Oregon also reported excess corporate income tax collections of $1.8 billion, well beyond the previous $851 million record from two years ago. However, voters in 2012 decided that those excess amounts go into the state school fund, though the amounts do not count against the base for future years.

The $1.8 billion will be added to the $10.2 billion lawmakers approved for the state school fund in the 2023-25 budget. Neither amount counts local property taxes that go to schools.

The kicker law was approved by lawmakers in 1979 as part of a larger property tax relief package, which was ratified by voters statewide in 1980. The property tax relief program made its last payments in 1986. But the kicker became part of the Oregon Constitution in 2000, so only voters can change it. Since 2000, lawmakers mustered the necessary supermajorities to divert excess tax collections in 2007, when they created a rainy-day fund with the projected $319 million from corporate tax collections. They have not done so with personal income tax collections.

Unlike previous forecasts back on Feb. 22 and May 17, which resulted in dramatic projected gains in tax collections, McMullen said the latest forecast indicated only slight growth. The tax-supported general fund and Oregon Lottery proceeds — the two most flexible sources of income for state budget spending — are now projected to yield $143 million more in the current budget period.

The latest forecast is only the first in the current budget cycle.

Economy changing

Gov. Tina Kotek had this to say after the release: “This revenue forecast provides encouraging news about the state’s economic stability. We must leverage the opportunity presented by another positive forecast to invest in housing production and other urgent needs to support Oregon families and the state’s long-term economic growth.”

Meanwhile, Oregon reported a total of $2.95 billion in reserves and the ending balance at the start of the budget cycle on July 1. That will increase to $3.75 billion by the close of the cycle in June 2025, assuming that lawmakers do not tap reserves or draw down the ending balance.

Lawmakers can draw money from the education stability fund or the rainy-day fund only with 60% majorities and specified economic triggers. They can draw from the ending balance with a majority vote, though a law reserves a portion of the ending balance to be carried over into the next budget period.

McMullen and Lehner spent most of their presentation explaining recent economic changes that may affect future revenue forecasts.

They said Oregon is poised for economic gains through productivity improvements, particularly pending investments in semiconductors and other high technology. But they also said that Oregon may see fewer economic gains from population growth as deaths exceed births and the rate of people moving to Oregon matches the rate of those leaving the state, as measured by the surrender of out-of-state driver’s licenses.

For the first time in four decades, Oregon recorded a net loss in population in 2022. McMullen said the last time that happened was in the early 1980s, after mill closures and a deep economic downturn that resulted in a post-World War II high in Oregon’s unemployment rate. It took almost seven years for a full economic recovery in the late 1980s.

Last year’s net loss could be a blip — or the harbinger of things to come.

McMullen said data analyzed by the Cleveland Federal Reserve for metro areas indicate that population losses in the Portland area may be stabilizing, though they may continue in the central urban core, a pattern occurring elsewhere across the nation. He said economists and others will get a better idea about Oregon’s situation after the release of detailed U.S. Census data this fall.