The median Oregon taxpayer will receive close to $1,000 back on their taxes next year thanks to state tax revenue continuing to surpass expectations, state economists told lawmakers Wednesday.
Oregon’s latest quarterly economic forecast, released Wednesday, tells a familiar story: Tax collections and wages are higher than before the COVID pandemic and inflation remains high, though it slowed in recent months.
And the state is set to pay out a record-breaking $5.6 billion through the unique “kicker” rebate, which kicks in when revenues collected exceed official projections. Oregonians will receive money back when they file their 2023 tax returns next spring, and higher-income Oregonians who pay more in taxes will receive more money back.
The rosy forecast – the third this year – indicates the state is in an “inflationary boom,” with growth outpacing expectations. It prompted calls by Democratic and Republican leaders for investment in services and infrastructure in Oregon, including housing, roads and water.
On the kicker, economists predict the top 1% of earners, with adjusted gross incomes higher than $466,700, will bring home $44,600. The median taxpayer, who earns between $35,000 and $40,000, can expect about $980 back. The average taxpayer, who earns just less than $70,000, would see a $2,100 rebate. And the lowest 20% of taxpayers – who earn less than $11,400 annually – would receive just $60.
“This really does seem dramatic here in terms of the differences in this kicker credit across income tiers in Oregon, where really the vast majority of the credit goes to higher-income filers,” state economist Mark McMullen told a legislative panel. “Now, that’s not necessarily unfair, given that the percentages are the same. What it reflects is that Oregon has a progressive tax system, and that the higher income filers have a lot more liability in 2022 than lower income filers.”
The actual numbers may shift as more high-income taxpayers who requested extensions file their tax returns over the coming weeks. Oregon has never had a kicker this size: the previous record, set in 2022, was $1.9 billion.
“This one isn’t just bigger,” said Rep. Nancy Nathanson, D-Eugene and chair of the House Revenue Committee. “It’s a multiple of a few times bigger.”
More money for services
Along with sending more money back to taxpayers, lawmakers will have more money to put toward state services and programs. They already approved a $31.9 billion state budget for the next two years, but they can add extra funding during the short legislative session that begins in February.
General fund resources are up $437 million, thanks in large part to higher-than-expected corporate tax filings. Lawmakers from both parties and Gov. Tina Kotek welcomed the forecast and quickly called for using the money on priorities including housing and infrastructure.
“This revenue forecast provides encouraging news about the state’s economic stability,” said Kotek, a Democrat. “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.
Senate Minority Leader Tim Knopp, R-Bend, also cited the state’s housing crisis as he argued for infrastructure investments.
“Oregonians are all too familiar with high costs of living, excessive taxes and a severe lack of housing thanks to decades of failed policies pushed by Democrats,” Knopp said. “This is the time to boldly invest in infrastructure like roads, sewer systems and water for all Oregonians who want to build or buy a home affordably.”
Senate President Rob Wagner, D-Lake Oswego, and House Speaker Dan Rayfield, D-Corvallis, mentioned behavioral health, community safety and public schools, along with housing, as spending priorities.
“We know that Oregon families are still struggling with daily costs,” Rayfield said. “This stable forecast reaffirms that we can continue to find creative solutions to our ongoing efforts and provide oversight that leads to tangible outcomes like securing family wage jobs and connecting people with addiction and mental health services.”
Senate Majority Leader Kate Lieber, D-Portland, echoed Rayfield’s concerns about families not feeling the effects of a strong economy.
“The 2024 legislative session will be absolutely critical,” Lieber said. “We must keep our economy moving in the right direction and make sure that our hard-earned tax dollars are being used wisely to fix the issues impacting all Oregonians. Even with this good news, our communities need action on affordable housing and homelessness, family-wage jobs, behavioral health and addiction, community safety and more.”
And House Minority Leader Vikki Breese-Iverson, R-Prineville, warned against spending – while calling for increased funding for law enforcement.
“While this morning’s economic forecast revealed Oregon’s revenue is stabilizing, the Legislature cannot view this as a free pass to spend with reckless abandon,” Breese-Iverson said. “We must exercise fiscal responsibility while prioritizing Oregon’s most pressing issues.”
What the Legislature is able to accomplish during its 35-day session next year remains an open question. Most Senate Republicans, including Knopp, ran afoul of a voter-approved state law that intends to keep lawmakers with excessive absences from running for re-election. Republican senators are challenging that law in court, but they have few incentives to cooperate with the Democrats who control both chambers.
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