Posted by: Josh Lehner | May 25, 2018

Kickers in Comparison (Not So Fun Friday)

In our office’s latest economic and revenue forecast, we now project that revenues this biennium will come in above the 2% kicker threshold for both personal and corporate taxes. This outcome is still far from a done deal as we have more than a year to go in the two year budget cycle, and more importantly we still have a whole tax filing season to come. The jury remains out.

That said, I thought it may be helpful to put the projected kicker in perspective. A common question we have been asked, both last biennium and again this week, is something like “That’s a really big number. Has Oregon ever paid out a kicker of that size?” The short answer is yes, we have. The long answer is yes, we have and given the economy is much bigger today than in decades past, the recent kickers are actually quite small. It really comes down to knowing both the levels (absolute $s) and rates (forecast error, or % of tax liability).

During the forecast presentation Mark made a comment along these lines in the context surrounding the fact that Oregon is losing Representative Barnhart to retirement this year. Rep. Barnhart has chaired the House Committee on Revenue since 2007, and we are thankful for his service. He is also the last man standing on the revenue committees who can tell people that a $500 million kicker really isn’t that big. The largest personal kicker paid out was just over $1 billion a decade ago. And yes, the kickers in recent biennia and the current projected kicker are larger in absolute terms than those paid out in the 1980s and 1990s, but Oregon is a much bigger economy today than back then.

This second chart tries to show this point. Instead of looking at the kicker size in dollar amounts, it looks at their size in comparison to tax liability. If the current forecast holds, it would be the 8th largest kicker in our office’s history, out of 12 total. The kickers generated during the 2013-15 and 2015-17 biennia rank as the 10th and 11th largest kickers.

Another question we get is if the forecast is off by 2 or 3 percent, why is the kicker credit closer to 6 percent? The reason is the forecast error is over 2 years and includes all General Fund revenues excluding corporate, but then paid out on just one year’s worth of personal income tax liability.

So what does this mean for you, as a taxpayer? It’s still a bit fuzzy at this point given the projected kicker, should it come to pass, will be a credit on your 2019 taxes filed in early 2020 based on your tax liability from 2018 (this year). As such, any calculation is based on multiple forecasts. That said, roughly speaking we’re looking at the kicker credit being about 6%, which translates into the average kicker being around $270, with the median about $125. We will have a better handle of these estimates and at various points in the distribution as we move forward and as our forecasts evolve with economic performance, actual tax collections, and future expectations.


Responses

  1. […] Source: Kickers in Comparison (Not So Fun Friday) | Oregon Office of Economic Analysis […]


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