HERE’S A SNAPSHOT of our broke-ass state:
Ailing senior citizens worry they’ll be ripped from family and filed into nursing homes. College tuition has surged to keep classrooms open. Teachers fret over pink slips. Health insurance and food stamps for the poor may wind up more expensive or harder to come by.
It’s all to save a million bucks here, 10 million more there, as Oregon suffers through an oh-shit financial crisis that seems to be years from ending.
But here’s the weirdest image of all: At a time when schools and health programs need every last tax dollar, Oregon is actually poised to hand back revenue. To corporations. Many of which aren’t from the state. All because the state economist underestimated their profits.
If trends hold through next summer, the giveback would top $40 million—enough to fund every classroom in the state for two days. The state’s primary fiscal crutch, income tax revenue, is more than $1 billion in the hole.
“It’s giving a tax cut to the most profitable businesses,” said Chuck Sheketoff of the Oregon Center for Public Policy, a longtime critic of the practice. “Why would we subsidize them?”
Turns out, we have to. Blame Oregon’s so-called “kicker” law. Basically, lawmakers are compelled to send back cash any time tax revenues exceed projections by more than 2 percent.
Crafted 31 years ago amid a tax rebellion—not unlike today’s—the measure is meant to keep lawmakers from seeding permanent programs with one-time windfalls. But it also makes it hard for Oregon to stash money under its mattress.
And now we could really use the money. That’s why there’s finally been serious talk about making the kicker go away. Or at least making it easier for Oregon to save cash. The subject was broached last week by Governor Ted Kulongoski’s Council of Economic Advisors.
“Right now, we have a system of cash prizes for bad guesses,” says Joe Cortright, chairman of the council. “If we’d plowed that money into a rainy day fund, we’d be in much better shape.”
But kicking the kicker requires chutzpah many politicians lack. Feeling fresh bruises from the fight to hike taxes on the rich, Kulongoski failed to persuade lawmakers to put the question to voters. And polls show only tepid enthusiasm—or hardly any at all.
That’s not surprising. Since the kicker’s inception, some $2.8 billion in income taxes has been sent back—including a record $1.1 billion in 2007. Voters made it part of the constitution in 2000.
Bill Conerly, another member of the council and chairman of a free-market think tank, was quoted in Salem’s Statesman Journal saying, “The thing I like about the kicker is that you cannot add more people and more programs in boom times.”
But tweaking the corporate tax kicker could be easier. There’s precedent, and there might even be sympathy.
Two years ago, lawmakers mustered a politically difficult two-thirds vote to suspend a giveback worth nearly $350 million. Much of it went to a reserve account the state has steadily drained.
Oregon Department of Revenue figures from 2007 also showed most of the companies in line for rebates were large firms—like banks and chain retailers—very often based out of state.
More outrageous? Corporate tax revenues are exceeding expectations, economists say, only because those businesses are hoarding their profits instead of hiring more or investing in equipment.
“It should be a no-brainer,” Sheketoff says of suspending any corporate rebate. “They’ll be coming into session in January, facing a $2.5 billon shortfall, and at the same time they’ll be giving millions away to corporations.”
That said, those opposed to the kicker are free to do their part while waiting and hoping for Salem to act. Paul Warner, director of Oregon’s Legislative Revenue Office, said taxpayers may choose to divert parts of their kicker refunds to special funds for schools and other programs.
I asked how much money the state has received back as a result. His reply? “Less than a million.”
GET A GODDAMNED CLUE OREGON – DITCH THE KICKER! How stupid are the voters in this state? And while we’re at it, lets get rid of measure 11.
Sometimes I just have to scratch my head at the assininity of Oregon’s voters. Pathetic.
@Denis – You make estimated tax payments every month, too – they come out of your paycheck. At the end of the year, you calculate what you actually owe and either pay the difference or get a refund. That’s exactly the process you’re describing here, for businesses.
So you will owe the state $10,000 in taxes this year as an individual citizen. But you had a great year, made more money, and those automatic paycheck deductions totaled $15,000. You’re saying that the state should just decide to keep the extra $5,000, never mind what the actual tax rate was promised to be?
Why single out corporations, here? That seems like a completely arbitrary distinction. A lot of people get tax refunds at the end of the year. Why not tell the state to keep them all?
(Also, all of the ‘dire’ scenarios in your opening paragraph are true every year, every decade, recession or no.)
@3rd Prize – Were you hoping for money back when you file your taxes this year? Well, it sounds like you’re just going to let them keep it, now! Awesome, that’s super nice of you.
@Reymont:
I’m not sure your comparison works. Yes, if I’ve paid the state more than the fair share for my total earnings at the end of the year, then yes, of course, I should receive a refund. But that’s not what’s happening here. Under the kicker scenario, someone would be predicting my income and then capping my actual tax burden based on that prediction, no matter how much more money I’ve actually made.
To me, that sounds like underpayment; I ought to be taxed on however much I’ve earned.
As for why the corporate kicker, that’s the one that, this year, looks likely to kick. And it’s been suspended in previous years, which suggests there might be appetite again to do so. It’s a lot harder to mess with PIT, so maybe you can nibble at reform by starting with the corporate tax. Although I wonder if both ought to go, with safeguards in place to make sure the money is saved or invested, not used to grow government willy-nilly.
@Denis – If that’s how it’s working, I totally misunderstood.
But if someone at the State UNDER-estimated how much income these corporations would have, how did they end up OVER paying? My first understanding would explain an overpayment…but I don’t see how your explanation does. Wouldn’t a low estimate result in tax prepayments that were also too low?
@Reymont:
Cripes! Read the article :
“Basically, lawmakers are compelled to send back cash any time tax revenues exceed projections by more than 2 percent.”
Nobody “over paid”. Corporations made more money than the State estimated, so the State has to return the tax revenues in excess of the estimate.
@RTFA – Sorry, your sentence just doesn’t make any sense. If the state has to refund money, the corporations obviously overpaid. Those two words are tired together…an underpayment wouldn’t result in a refund.
The process went like this, as I understand it. The state tells a corporation what their total tax will be for the year, and collected part of that money every month. Since the company made more money than they expected, those partial payments have added up to more than the agreed-on tax. The corporations overpaid, and so the state has to refund the extra. Except that Denis and 3rd Prize up above are saying “Well….we already HAVE their money. Why should we give it back? Neener neener.”
I’m saying that’s no more fair than if the state decided to keep any refund that YOU are owed. They’ve got your money, too – why trust them to return it, if they aren’t going to return someone else’s?
@Reymont, The state economist estimates the total state tax revenue, which is related but not directly tied to individual corporations tax burdens.
@Reymont:
Indeed, I’ve been meaning to jump back in, but it was busy, what with the holiday and a very expansive news section this week that I’m sure you all will read.
@poojamie has laid it out: The economist doesn’t tell individual companies what they owe. All he does is guess how much revenue the state should hope for when making a budget. You’re taxed on what you earn like always; the tax rate doesn’t change.
Is it just me, or does SpongeBob look pretty worse for the wear?
and how about this for a novel idea, i know its unheard of in this state but “CUT BACK!” all of us that dont work for this bloated state government have had to…why the hell shouldnt you? the state legislature and its spending spree are the problem, not the faithful taxpayers of this state. are you that ignorant? are you still living with mommy and daddy? no mortgage , utilities, food etc bills? if you want to give this dumbass state all the money they seem fit to take from you go right ahead. the rest of us are tired of the b.s. and see government spending as THE problem which it is. dont believe me? wait another month you will see what people think. blaming us for wanting the money we dont owe the state back isnt stupid, giving this out of control and frankly “in the red” state legislature everything it wants (notice i didnt say need) is very misguided.
and if you dont think the legislature is misguided, then please check how much revenue measure 66 is bringing in….hmm half the forecasted amount…but hey thats probably the stupid taxpayers fault too huh? i notice that there is no mention of that completely idiotic measure and its “success ” in your reporting….hmmm seems like news to me.