The kicker: "really dumb tax policy"

Late last week, the state's budgeteers announced a $1.1 billion kicker - the largest ever.

While the $344 million corporate kicker will now go into a rainy day fund (thank you, Democratic Legislature!), the personal kicker continues to create instability in state finances.

The kicker kicks when state economists make a projection for state revenues that's short by more than 2% of the actual revenues.

As Senator Ginny Burdick (D-Portland) told the Register-Guard:

"The kicker is a really dumb tax policy, and this does not help it at all."

Separately, the R-G editorialized against - in no uncertain terms:

It's ridiculous to expect two-year revenue projections to be accurate within 2 percent. In the 14 biennia since the kicker law took effect, the forecast has been within 2 percent of the target only once. Projections of corporate income tax revenues have never been within the target range.

And while the kicker kicks money back to taxpayers when revenues are higher than expected, when the state falls short, we don't invoice taxpayers to make up the difference. Instead, Oregon goes through one of its periodic spasms of budget-cutting and school-shortening.

The R-G has a better idea - and the numbers to prove it:

Over time, however, the amounts by which the projections exceed and fall short of the projections even out. In five biennia between 1979-81 and 2003-05, personal income tax revenues fell $1.9 billion short of projections. In nine other biennia, revenues exceeded the projections by a total of $1.7 billion. If Oregon had been able to use excess revenues to offset shortfalls, the state's budgetary road over the past three decades would have been much smoother.

The $1 billion-plus excess in the 2005-07 biennium is by far the biggest ever, and adding it to the totals causes the long-term excesses to exceed the shortfalls by $800 million. Yet it's possible, even likely, that a shortfall soon will bring the numbers closer to balance. The record excess being refunded now is still smaller than the $1.25 billion shortfall of 2001-03.

How can we create the political capital to change this policy? What will it take?

Discuss.

Comments

  • East Bank Thom (unverified)
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    Were there other recent threads on the "kicker"? I want to direct my comments to the right place.

  • Jonathan Radmacher (unverified)
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    Can someone explain the math on this to me ... as I understand it from the headline story on the $1.1B kicker, everyone's kicker check will be 18.6% of their state tax, prior to credits (which actually makes the credits even more valuable, as a percentage matter). So how does a 2% excess in revenue lead to an 18.6% kickback, particularly where the corporate kicker isn't being kicked back. It seems like the number would be something more like 4%. Can anyone explain this?

  • LT (unverified)
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    And don't forget the amount of money it costs to print and mail the checks. Republicans of the "we must have spending discipline" variety didn't even want to admit that cost money when they were in the majority.

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    I think coming up with a more accurate formula could be one way of solving the problem. The other would be to make it slightly more difficult for the "kicker rule" to come into effect.

    If I understand it correctly (someone please correct me if I'm wrong) if the collection of revenue is over 2% of what is forecast, then the money is returned to the taxpayers. I'd say changing it so that the forecast needs to be within either 4% or 5% would be a good start.

    My guess to do either of these your going to have to have a net gain of seats in the Oregon Legislature as there is no way any of the Republicans would stick their necks out to vote for it.

    I'm waiting for a troll to tell us "it's my money, why should the government keep it?"

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    I also want to add, that if something like I proposed was done, that at least 50-75% of it should go into a rainy day fund that could be used for when there is a downturn in the economy.

  • Urban Planning Overlord (unverified)
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    While the personal tax kicker is stupid policy, I don't see any way to repeal it without a political firestorm and probable successful referendum to restore it. And the election of a few more Republicans to the legislature as part of the backlash.

    Better to find another source of revenue. I would suggest proposing an increase in the marginal state income tax rate from 9% to 10% for all income in excess of $200K, with the money dedicated to a "rainy day" fund.

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    Thank You "Knopp the Dope" That's how we refer to our former Representative Tim Knopp here in Central Oregon who was one of the major backers of the kicker initiative that put it in the Oregon Constitution. Why not have a kicker based on a "Rainy Day Trust Fund". In the good years and the Trust Fund is Maximized to a predetermined limit - taxpayers receive their kicker. During the leans years - no kicker.

  • LiberalIncarnate (unverified)
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    I checked off to have the state keep my kicker.

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    Just encentivize the economists not to underestimate revenues by firing those that do. Pretty soon it won't be a problem anymore.

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    "Just encentivize the economists not to underestimate revenues by firing those that do. Pretty soon it won't be a problem anymore."

    Yes, and then we can icentivize physicists to stop believing in gravity.

  • Miles (unverified)
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    How can we create the political capital to change this policy?

    Generally, most voters believe government is wasting their money. Depending on their politics the specifics will change: some hate the idea of spending taxpayer money on health care for illegal immigrants; others hate that public employees have better health care and pension coverage than private sector workers; others read about the multi-million dollar computer systems that don't work, or silly stories in the Oregonian about $300 desk chairs in the capitol. Add to that the right-wing spin machine, like the Oregonian's article about the kicker where they have the following quote: "Jason Williams, executive director of the Taxpayer Association of Oregon, noted that the state's current two-year budget is 20 percent higher than the last one." Of course, Mr. Williams does not mention that it's a 20% increase from a budget that was cut dramatically during the recession, and in inflation-adjusted terms we're just getting back to where we were in FYs 99-01.

    How do we change it? We reframe it. We insist that Chuck Sheketoff is quoted everytime that Jason Williams is quoted. We develop rapid response teams that point out basics, like the fact that while public employees do have good health care and retirement, their overall compensation is lower than their private sector counterparts; that good desk chairs cost $300 for everyone, not just government (and avoid large workers comp payouts for back injuries); that 50% of computer projects fail in the private sector as well; that providing health care for illegal immigrants is a public health issue, as well as a human rights issue.

    I'm waiting for a troll to tell us "it's my money, why should the government keep it?"

    But David, this is exactly what a lot of moderates (and even a lot of Democrats) believe. Until we change the way government is viewed, we have no chance of changing the kicker. And while we're at it, now that Democrats are in charge of the state government, they need to be hard asses about these issues. E.g., why is bailing out OMSI in the public interest? What happened with the Highway 20 construction project, and what have we done to avoid it ever happening again? Are schools really spending tax dollars in the most efficient way? Is every dollar we spend on the Oregon Health Plan spent wisely?

  • the_Con (unverified)
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    Miles makes some great points. I just want to add that many taxpayers do see the faulty economics of the kicker yet like it because it seems to be one of the few instances that government gives back to everyone fairly. Most other issues seem to have caveats based on interest groups.

    So maybe the best a progressive democratic government can do in this iteration is fix the kicker so it still gives back money, but smooths out some of the economic shortfalls.

    Furthermore, maybe fixing the kicker has to be coupled with rehauling the tax system to make the taxpayer feel that they have more direct say over where their taxes go. What do you think would happen if all taxpayers were allowed to allocate 10-20% of their taxes across 5-10 broad categories -- schools, health care, roads, etc?

    At the very least, taxpayers might feel that they have more say than they do now.

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    "the few instances that government gives back to everyone fairly."

    come again? The refunds are totally regressive. Rich people get thousands back.

  • Miles (unverified)
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    If we can't generate political will to totally repeal the kicker, here are two options to make it better:

    • Only refund the amount that is more than 2% of the forecast. Right now, once that 2% threshold is reached, all of the "excess" over the forecast is refunded. How about we only refund the revenue over the 2% threshold, and the 2% gets put into a rainy day fund?

    • Means-test the refunds. Anyone with, say, more than $100,000 in taxable income doesn't get a refund. That's only about 10% of all Oregonians, but since those 10% get about 50% of the kicker (and pay about 50% of all income taxes) this will reduce the payout, and target the refunds to the middle class.

    Both options still leave the kicker in place, but politically they can be sold to the voters more easily than a total repeal.

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    * Only refund the amount that is more than 2% of the forecast. Right now, once that 2% threshold is reached, all of the "excess" over the forecast is refunded. How about we only refund the revenue over the 2% threshold, and the 2% gets put into a rainy day fund?

    I had an idea earlier this year:

    First 1% gets to stay in the general fund. Next 3% goes to the rainy day fund. Anything beyond that 4% goes back as a kicker.

    You can shuffle the thresholds, but I think that might satisfy a lot of folks.

  • Kitty C (unverified)
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    I'm confused Torridjoe, about the rich people getting thousands back, and the refunds being regressive. Can you be more specific?

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    "I'm confused Torridjoe, about the rich people getting thousands back, and the refunds being regressive. Can you be more specific?"

    The amount of your refund is tied to the amount of taxes paid.

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    Posted by: torridjoe | Sep 4, 2007 4:05:53 PM The amount of your refund is tied to the amount of taxes paid.

    So a corresponding refund in taxes paid via a progressive tax scale is somehow regressive?

    Don't get me wrong, I think the kicker is a stupid idea which needs to be fixed (your idea up-thread about the 1,3,4 three-tier approach is an interesting idea) but I am a little confused by the logic of calling the kicker regressive.

  • the_Cn (unverified)
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    Adjusting the kicker percentages to make sure money goes into the general fund or a "rainy day" fund makes ECONOMIC sense, but please tell me how you will sell this to Joe & Jane taxpayer who will simply see this as having to pay more taxes?

    Joe & Jane want government to run on LESS money not MORE.

    Or: What are Joe & Jane going to get in return?

  • Miles (unverified)
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    So a corresponding refund in taxes paid via a progressive tax scale is somehow regressive?

    Given that Oregon's top income tax rate of 9% is applied to all income over $6,500, it doesn't qualify as progressive. It's basically a flat tax, except for students and others working only a few hours a week.

  • andy (unverified)
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    I don't see what the big deal is with the kicker. It seems like a fairly logical way to send the money back to the taxpayers when the revenue is greater than what was required for the year.

    It would be a little more efficient to just drop the tax rate from 9% down to 8% or whatever it needed to be to get the inflow matched better to the budget expenses but I guess returning the excess also works okay.

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    "It seems like a fairly logical way to send the money back to the taxpayers when the revenue is greater than what was required for the year."

    Yes, but what's the logic in doing that? If you work more than 40 hours, do you give back that money to your employer?

    More tax revenue simply means there was more income made. When you make income, you pay taxes. Make more money, you pay more taxes. Not a hard construct.

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    Posted by: Miles | Sep 4, 2007 4:35:03 PM Given that Oregon's top income tax rate of 9% is applied to all income over $6,500, it doesn't qualify as progressive. It's basically a flat tax, except for students and others working only a few hours a week.

    You are arguing that Oregon's tax rate is basically flat (i.e. de-facto regressive) which I don't necessarily disagree with (i.e. Oregon does have a fairly flat rate and so can be termed "regressive") but if the amount of the kicker is tied to how much you paid in a flat-tax rate (i.e. regressive) basis, then it is a "progressive" kicker. Or conversely, is you have a real progressive tax scale, higher income pays a higher percentage and the kicker is "regressive".

    My point is you can't argue that a tax/kicker are both regressive in the same system. If the tax is regressive then the kicker is the opposite, and vice-versa.

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    "My point is you can't argue that a tax/kicker are both regressive in the same system. If the tax is regressive then the kicker is the opposite, and vice-versa."

    Sure you can. Anything that imposes a higher burden on those with less income is regressive. A flat tax is regressive; a tax benefit that benefits people with higher incomes is also regressive. Progressive always means a tilt towards those with fewer resources.

  • Charles (unverified)
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    Toerid, You can't be serious. If you are, boy do you need an education. Comparing the kicker to "If you work more than 40 hours, do you give back that money to your employer" is just not even close to being rational.

    The State didn't work "overtime", so therefore it should keep the kicker.
    The taxpayers earned more and paid more taxes than the state needed to pay for the work the State does.

    What sort of mental gymnasitics are you doing.

    You then go on to make my point, "More tax revenue simply means there was more income made. When you make income, you pay taxes. Make more money, you pay more taxes." But then you make the mental tumble that the State therefroe earned it? Gee whiz guy. I doubt very many of our Blue friends find your explaination rational.

  • LT (unverified)
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    Charles,

    Do you trust the estimation process which produces the kicker so much that you will promise to donate money to charity if a prediction you make about your income 2 years from now is more than 2% different than what you predict in Sept. 2007?

    And why print and mail the checks? Why not go back to making it part of the tax refund process? Has the kicker become an entitlement?

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    "The taxpayers earned more and paid more taxes than the state needed to pay for the work the State does."

    Exactly. When you earn more money in a year than you expected--and thus have funds beyond your budget--do you give the money back? Fuck no. You spend some, pay some bills with some, and save the rest. Do you really pretend that everyone's needs are being met with what we provide government now?

  • Charles (unverified)
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    Good greif LT, now you are wandering. It matters very little if the "estimation process" isn't perfectly reliable. The budget is set by it and it gets funded.

    Neither the State nor the "process" produces the kicker, the taxpayers produce it. And the prior budget and funding remians intact. The kicker aint the State's or the process'.

    Why does the kicker spawn such irrational spin?

    I can't imagine how you tumbled down that "charity" and a "prediction of my income" comparison. Say what?

    It appears some of you are in desperate need to cling to any rationale to keep the kicker, no matter how irrational it is.

    I know plenty of fellow Blues who see clearly the real world rationale and legitimacy behind the kicker. They fully admit that had there not been a kicker during the 90s it all would have been spent, ramping up the budget and worsening the shortages when the recession hit.

    On the kicker being an entitlement? Of course it is, far more that at least a few government programs. People are entitled to their own money back when the government takes too much. It aint me declaring such. In the case of the kicker there's this pesky little thing called the Oregon Constitution that says so. Now you wouldn't want to trash our constitution would you?

    Yes it costs more for the State to write and send checks seperate from the refund process, but so what?

    The State regularly does things or adopts programs that cost many millions which shouldn't be funded at all. At least the kicker is sending taxpayers their own money back. Apparently the only waste you see is sending out kicker checks:) I suspect Torrid has a similar view.

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    Is the cost of accounting, printing, mailing and processing the kicker checks deducted from the total amount sent back to taxpayers? How do the 49 other stae handle the "excess" money beyond estimates? They put it into the state coffers. What happens to those states during economic downturns? Do they cut services etc? Have any of our elected reps ever brought this up in Town Halls etc?

    "The Con" suggests: What do you think would happen if all taxpayers were allowed to allocate 10-20% of their taxes across 5-10 broad categories -- schools, health care, roads, etc? At the very least, taxpayers might feel that they have more say than they do now. Gee Con, why don't we get rid of all those pesky elected representitves and just vote directly on every possible issue facing the state? It worked so well in ancient Greece, you just schedule a day each week to hear the topics and text in your answer. I can see the TV ads now by the various lobbyists-turned-"Public Advocacy Groups". Maybe we should just elect a few more Dems and then we can ask them to amend or repeal the kicker, fix our tax laws and save everybody a lot of money in the long run.

  • Kicker Lies (unverified)
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    Charles-

    First, I think you'll find few friends on your side here, so forgive me for piling on.

    You wrote: The taxpayers earned more and paid more taxes than the state needed to pay for the work the State does.

    That's the fundamental misunderstanding about the kicker that most people buy into. And it is that misunderstanding that anti-taxers (like you perhaps?) exploit to their advantage.

    The kicker has ABSOLUTELY NOTHING to do with how much money the state needs to pay for its work. It is entirely based upon how much money the state economist thought the state would have for the present biennium.

    In other words, two years ago, the state economist predicted that we'd have X amount of dollars to fund the government. So, the legislature, being constitutionally bound to produce a balanced budget, wrote a budget that fit within those constraints.

    But now, as it turns out, Oregon had a really good two years, economically speaking. So, we end up with X + 18.6% dollars we could have used to fund government services.

    Now, you can't fault a guy for trying, but the state economist has about the worst job around. He can use all the tools and all the economic theory at his disposal, but accurately predicting how much money the state will have two years out is little more than a crap shoot.

    The kicker is based on an economist's prediction of what will be, NOT what is actually needed.

    $1.1 billion would make for a pretty sweet deposit in the rainy day fund for this and future generations. Instead, you get an XBox 360.

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    I enjoyed some of the ideas others came up with. Definately insightful. It seem to me like reform is a better option then repealing it.

    I do agree with you Miles that the D's need to be hardass and make sure they aren't giving away the bank. Fiscal responsiblity (including a rainy day fund) could go along ways toward keeping control of the State Legislature.

    LT, your right the kicker has become a defacto entitlement and people expect their money back. The sad thing is, when the forecast is so far off (or there is a downturn in the economy) the state suffers and so do those who have services cut.

    The kicker has become a wonderful right-wing propaganda message that they can skew to make the false rhetoric stick. At some point, people need to hear the other side, not just what the anti-tax people spew up.

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    It seems like a fairly logical way to send the money back to the taxpayers when the revenue is greater than what was required for the year.

    Yes, it is. But what do you recommend that we do when the revenue falls short of what was required for the year?

    Should we just invoice taxpayers for a sudden, surprise, one-time tax increase?

    Or should we instead take the money from the surplus years and put it into savings - where it'll wait for a year when there's a shortfall?

    As the R-G beautifully pointed out, the shortfalls and surpluses seem to even out roughly over time.

  • David Wright (unverified)
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    Anything that imposes a higher burden on those with less income is regressive.

    TJ, sorry, you're just plain wrong on that point. You're not alone, a lot of people claim that anything that hits those with less income harder is regressive, but it just ain't so. By your definition, the price of a loaf of bread or a gallon of milk or a ride on MAX is regressive. But it's not.

    Dictionary definition of "regressive" according to Merriam-Webster (emphasis mine):

    decreasing in rate as the base increases (a "regressive" tax)

    A regressive tax is one where the tax rate drops as the basis for the tax increases, not strictly speaking as the payer's income increases (unless income is the basis for the tax).

    Now, in this particular case, the original base for the tax was income, and Oregon's income tax is very very slightly progressive, so the higher your income the higher the rate (though as others have pointed out the max rate applies at such a low basis that it may as well be considered a proportional tax).

    But in any event, the kicker is applied proportionately to the amount of original taxes paid. So the kicker alone would be a proportional instrument (a fixed rate no matter how large or small the basis), neither progressive nor regressive. Since it applies proportionately to a slightly progressive tax, it leaves the progressiveness (such as it is) of the original income tax intact.

    Now, as to your deeply flawed comparison with giving back extra earned income (such as overtime pay), that's really not analogous to the kicker situation. It's more like a person who hosts an annual kegger and charges a cover on a sliding scale. You have some idea based on previous years, how many people are likely to show up and how much on average each person can be expected to contribute to the party fund. You budget for supplies and incidentals based on that estimate, and you go buy the kegs and whatnot.

    Then on the night of the party, you may or may not collect as much in cover charges as you had estimated. Maybe more people show up than last year; maybe fewer people show up. If more people show up, you might need to run out for more beer when the keg is tapped out, adding to your party expenses. If not enough people show up, you may not be able to cover the cost of the beer that you bought. Even if you have the same number of partygoers as last year, you might get more rich kids who are able to pay more in cover charges. Or you might get a bunch of freeloaders who can't pay much at all but are perfectly happy to drink your beer, and possibly even broke some furniture while they were here.

    Now, under the Oregon system, if at the end of the party you had collected more in cover charges than your party expenses, you'd have to split the leftover cash with everyone who had paid a cover, proportionate to how much they had contributed in the first place. But if you hadn't collected enough, you'd be stuck with the bill (or, more likely, you'd have run out of beer before the night was over and the party would be a bust).

    I happen to agree that the kicker is a bad idea, basically for the reasons described in my little analogy. You really have no idea in advance how much you're going to collect in cover charges (taxes). And, since you're stuck with the bill if you come up short, you should be able to keep the change if you come out ahead as well (and maybe spend that leftover on better beer for next year's party. And more pretzels.)

    And the people going into the party know what their cover charge is going to be up front, so they really don't have much room to complain at the end of the night if there are still a couple of bucks left over. They generally aren't the ones to clean up the empties the next morning anyhow.

    Uh.... but I digress. ;-) My point was that the kicker is a bad enough idea when you tell the truth about it, but when you distort the reality by claiming that it's regressive, or that it's like a person giving back their overtime pay, you lose credibility with people who actually do know what they are talking about, and you weaken your own case.

    The main trouble that the average Joe has, by the way, with the idea of giving up the kicker (or with raising taxes in general, for that matter) is that the average Joe probably paid $10 for a small dixie cup full of foam while some other jerk got in for $5 (or for free) and drank all the cold beer and ate all the good snacks. So asking Joe to give up that $1 refund, let alone asking Joe to pay $11 next year, is an awfully tough sell. Whether that's the reality of the situation or not, that's what Joe saw at the party, and that's the perception that you have to overcome.

    By the way, if the kicker is fundamentally bad economic policy, what is the point of any sort of split like the 1/3/4 idea? I mean, it's interesting and all, but philosophically inconsistent with the basic argument that the state should keep any overage at all. In other words, if you accept that any amount of over-budget revenue should be paid back to the taxpayers, then there's no legitimate reason why the entire amount of over-budget revenue shouldn't be returned.

    For what it's worth...

  • David Wright (unverified)
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    Sorry for the lengthy previous post... but I do have an additional question or two...

    At the beginning of the budget process, the guestimated revenues are established and that's how much money is budgeted for the biennium, correct?

    If so, then what happens when the budgeted allowance falls short of the need when revenues are higher than expected? Do the needs go unmet? Or is the budget extended with the extra revenue?

    If the state is not allowed to spend money that wasn't budgeted, even if it's sitting in the state treasury; and the state is required to have a balanced budget where expenses match revenues; what, then, does the state do with unbudgeted revenue that falls under the 2% mark that triggers the kicker (if this ever happens)?

    And if the state is allowed to spend money that wasn't budgeted, what then is the point of the budget in the first place?

    I am very curious about the legal restrictions on budgeted funds for the state. Why, for example, could the legislature not simply establish a rainy day fund as a budget line item in the first place -- i.e., a legitimate budgeted expense to fit within the budgeted revenue? One presumably could overestimate revenue by say 10%, and set aside 10% of the state budget for a rainy day fund. If revenues fall short, then only the rainy day fund would need to feel the pinch (hopefully). If revenues exceed the inflated estimates, then yippee for the state and why not kick back the excess?

    I expect there really is some sort of legal prohibition on this kind of scheme, but I'm wondering if perhaps working around such a prohibition would be an easier task than pulling the kicker back out of the constitution?

  • Miles (unverified)
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    Okay, I love the kegger analogy. It works on many levels. The absurdity of the kicker is that it requires you to refund the excess cover charge regardless of how much you actually end up spending on beer, or how much furniture got busted. If you take in 10% more than you expected, you still have to give it back even if you end up spending 10% more than your expected. (So back in the real world, if the cost of providing health care goes up by 15%, and you only assumed it would go up by 10%, you can't use the extra revenue to make up the shortfall. You have to give it back, then cut health care for the poor. Totally absurd.)

    Regarding regressive/progressive, you're technically correct, David. However, most left-leaning economists accept the differential value of money -- i.e., that $1 is "worth" more to someone making $20,000 than it is to someone making $200,000. Based on that, flat taxes are viewed as regressive because taking $2,000 from someone making $20,000 is more difficult for them than taking $20,000 from someone making $200,000.

    But we're arguing semantics. The point is that the top 10% of income earners in Oregon will get 50% of the kicker. They're also the ones who won't miss it if they don't get it. I think a means-tested kicker could be sold politically to the voters, particularly if the portion that the state keeps is put into a rainy day fund (rather than a brand new program).

    As for your follow-up questions, I believe the state economist is bound (either by law or by actuarial code of ethics) to provide as accurate a forecast as possible, based on sound forecasting methods. And the legislature can only spend what is projected. So I don't think they can purposefully overestimate. However, the constitution could be amended to allow additional revenues to be dedicated to a rainy day fund.

  • David Wright (unverified)
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    I don't think you have to be a left-leaning economist to accept the differential value of money. I'm certainly not left-leaning and I understand/accept the concept. But perhaps only left-leaning economists use that as a basis to claim regressivity in a flat (or more properly, proportional) tax.

    If you're going to claim regressiveness based solely on the differential value of money and not on the technical definition of of the term, then "regressiveness" loses negative connotation (as in my examples of the price of everyday goods and services -- if MAX fare is regressive, then regressive ain't always so bad after all).

    Anyhow, the top 10% may be getting 50% of the kicker money back, but only if they paid 50% of the income taxes in the first place. IF you're going to give back any of the money, any scheme other than the current proportional one is simply income redistribution, which while doubtless favored by many on this site, is going to be very easy to argue against.

    If means-testing the kicker is based on the concern that high-income Oregonians aren't taxed enough, or that low-income Oregonians are taxed too much, then that concern should be addressed via the tax rates, not via the kicker mechanism.

    Thanks for the answers to my other questions. So what happens if revenue is, say, 1.5% higher than forecast? Where does that 1.5% go under the current system? Is it simply considered a source of revenue for the following biennium?

  • Steve (unverified)
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    First, the kicker is NOT regressive. Lower income workers pay a lower % of taxes, but get back the same % as the higher income earners (18.6%)

    Second, when did regressivity ever matter with respect to the stupid taxes like tobacco and lottery? I really don't see anyone complaining about how hard this hits the poor at all, so at least be consistent.

    As a taxpayer, I would agree to higher taxes if there was some return. WHen Teddy K says $1B more of education money doesnt lower student:teacher ratios, but goes into benefits, I think most taxpayers look somewhat askance at contributing more to a govt that delivers less.

    If you can drop the govt "earns" taxes, please. Getting money regardless of services provided is not earning.

  • Charles (unverified)
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    Kicker Lies said, "The kicker has ABSOLUTELY NOTHING to do with how much money the state needs to pay for its work."

    Oh Bullshit. You're playing games with "needs".

    Put aside the debate between the left who says there's never enough and the anti-taxers who say there's always too much to spend.

    The state budget is precisely what needs to be funded. The kicker apopears only after that the budget is funded.

    Singing the "we need more song" has ABSOLUTELY NOTHING to do with the prior budget and it's funding.

    Your'e purposefully mixing in your desire to ratchet up the spending as more money comes in with the needs of a passed budeget. A passed budget needs the amount of that budget.

    Now you obviously beleive that Oregon "needed" that budget to be higher but again that has ABSOLUTELY NOTHING to do with the concluded budget and funding of it. You want higher budgets? Don't worry that's happening. Our Democrats, having achieved the majority status are assuring it.

  • Charles (unverified)
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    Kicker Lies also said "The kicker is based on an economist's prediction of what will be, NOT what is actually needed"

    Not true. The budget is based on an economist's prediction. Not the kicker. You'e spinning that the kicker is set by the prediction. It is not.

    It is far more true that the kicker is based on the budget and actual revenue and has ABSOLUTELY NOTHING to do with the prediction.

    1) Prediction 2) Budget 3) Funding 4) Revenue collected 5) Kicker

    The kicker is not a result of the prediction.

  • Charles (unverified)
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    one more comment for the day,,, David English said, "At some point, people need to hear the other side, not just what the anti-tax people spew up." You've got to be kidding. People don't hear the anti-kicker side? Geeze, that's ALL they hear from our newspapers and the liberal cabal. How can you possibly pretend the Oregonian editorial page, for instance, has beaten the anti-kicker drum year in year out with every spin imaginable. Yet you imagine people have only heard the anti-tax side?

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    Charles,

    Maybe so, but the anti-tax side seems to scream louder. I don't read the Oregonian much, but I'd hardly call it liberal. My point is that services are needed and people like you bitch, moan and complain about the kicker as if it's an entitlement. Yet, when the economy turns for the worse, people like you say tough shit. Way to turn your back on others.

    Next thing your going to tell me is your a Christian. Please make me laugh..I need a good chuckle today. Please go back to watching Fox and being a drone.

  • David Wright (unverified)
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    Charles,

    You've got your facts more than a little bit wrong.

    First off, the state budget is based on the prediction of revenues. If the state doesn't expect to see the revenues, it can't budget to spend the money. So the prediction of revenue defines the budget for expenses.

    Second, you are 100% wrong when you say that the kicker has absolutely nothing to do with the revenue prediction. The kicker has absolutely EVERYTHING to do with the revenue prediction, as that revenue prediction is what sets the trigger for when the kicker "kicks". Without the revenue prediction, there can be no kicker. So in direct contradiction to what you said, the prediction DOES set the kicker.

    Third, you're the one playing games with the term "need". While it's true that the actual level of need can certainly be debated -- it's disingenuous in the extreme to claim that a budget formed under a revenue constraint defines the needs of the state.

    This works both ways. If the state is expected to bring in only half the revenue that it normally does, it does not follow that the actual needs of the state have been cut in half.

    Likewise, if the state is expected to bring in triple the revenue that it normally does, does that mean that the needs in the state have suddenly tripled? No, it simply means that the budget of the state has tripled. The needs may be the same, or double, or quadruple what they were. The point is that the amount of revenue brought in does not define the need for government services.

    No question, there's a debate to be had over what that need actually is, and obviously you disagree with most on this site over budget priorities and spending levels. Hey, me too. But you disqualify yourself from the discussion when you demonstrate that you're so far wrong on the facts that you can't meaningfully contribute to the debate.

  • (Show?)
    Anything that imposes a higher burden on those with less income is regressive. TJ, sorry, you're just plain wrong on that point. You're not alone, a lot of people claim that anything that hits those with less income harder is regressive, but it just ain't so. By your definition, the price of a loaf of bread or a gallon of milk or a ride on MAX is regressive. But it's not.

    My definition is from Brittanica:

    tax that imposes a smaller burden (relative to resources) on those who are wealthier; its opposite, a progressive tax, imposes a larger burden on the wealthy. A change to any tax code that renders it less progressive is also referred to as regressive. {my emph}

    The corollary of a smaller burden is greater relief from a burden. And when you give a tax refund that does not scale the benefit by income (the simpler phrase used here being means-testing), that's a regressive benefit.

  • dddave (unverified)
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    TorridHo writes: "Yes, but what's the logic in doing that? If you work more than 40 hours, do you give back that money to your employer? More tax revenue simply means there was more income made. When you make income, you pay taxes. Make more money, you pay more taxes. Not a hard construct."

    That is idiotic. The state budget us up some 20 freaking percent, and you fools still talk about unstable funding? Teddy K. hires 1700 more state workers because "we can afford it" ?? How much money is enough?? Our biennial budget is up to what now, $48 billion? Holy crap people. Without a requirement for a balanced budget combined with the so called "kicker", there would be NOW WAY IN HELL to stop any spending whatsoever. The state spends every penny it gets. The state taxes us citizens on a percentage basis, NOT FOR NEED. As our economy grows, so does state spending, at an alarming rate. What the hell is Teddy K. going to do with 1700 more state workers? Does anyone even care? The "kicker" is simply OVER COLLECTED TAXES. You dems seem to think the only requirement the state needs to claim our money is to be able to collect it. Once the money makes its way into the state coffers, it is automatically THEIRS. What horsecrap. So this year the budget is up TWENTY PERCENT, and if by some miracle us hard working citizens in the private sector manage to still make money, you bozos will begrudge giving back the overcollected taxes next biennium. Jeez, you greedy dishonest scumbags. I am sure you all are DONATING your kickers back. Unbelievable. Please shoot me in the head.

  • dddave (unverified)
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    One more point. 1700 new state workers. Salary plus bennies, say average $45k (very conservative and does not count endless PERS cost forever) 1700 * 45k = 76.5 million/year

    Estimated money from cig tax for kids med insurance: $43 mil out of $150 mil collected.

    How the hell does Ted even keep a straight face? Maybe because he is talking out his butt so much?

  • Charles (unverified)
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    Oh brother David, now you are pitcing that the anti-kicker side are nicer people?

    Since you "don't read the Oregonian much" how can you wrongly state it aint liberal. Every day it echoes the liberal progressive messages. Try reading it.

    Your point that "services are needed" is shallow and a drone slogan. And I don't "bitch, moan and complain about the kicker", but it is the taxpayers money.

    Then you use the usual twist that "when the economy turns for the worse, people like you say tough shit".

    No that isn't true. You can't perceive accuratley. What's most often said is the State needs to cut back just like the taxpayers do when the economy turns. But you'll no doubt cling to the tired and disingenuous play that there's no where to trim and that government should be insulated from a down economy. That would be "turning my back on others"? Bullshit. Every cycle many areas of waste are highlighted only to have your camp disregard them all and then claim no one every mentioned any. That must be your brand of "Christian".

    David, How can you say I have my facts more than a little bit wrong thejn repeat exactly what I said. That the "budget is based on the prediction of revenues".

    Good we can move on without the endless minutia. "The prediction of revenue defines the budget for expenses".

    Done, there is no wrong fact there.

    Done at that point is also the budget and the funding by the legislature.

    Later comes the revenue. That's a fact. Later yet, at times the revenue surpasses the budget.

    Of course the legislature spends all that is projected so of course the budegt and projection become one in the same.

    We all know the kicker is a result of revenue surpassing the projection and budget.

    As always you and yours are playing games as you can never state how much is actually needed, or enough.

    You don't like the level of spending ever. It's never enough. You insist more is "needed" in every circumstance. In our recent recession your et al chatter included comments about how there was too much money in the GO GO 90s and now too little during recession.

    I laughed at that as your entire regime never said a word about too much money at the time. You all moaned and groaned all the way through the 90s that there wasn't enough money. Every budget cycle was laced with cries for more. It was never enough even in that booming economy, proving there is no such thing as enough with you folks.

    With you there is no debate about the actual level of need. It's always higher.
    As far as what the bugets fund it's beyond disingenuous to claim that the revenue projections constrain the ability to define and meet the needs of the state. It's delusional to think that everything dreamed up by government bureaucrats and politicians should be piled on as a "need" and then take and keep from tapxpayers whatever it takes. The mission creep from this mindset lays behind us a lengthy track record of perpetual fiscal crisis that is not sustainable. If tomorrow the kicker were retained and spent on what you and yours sees as "needs" the current problem would immediately re-establish and worsen as more and more "needs" arrive while forever outpacing the ability of taxpayers and the economy to keep up.
    It's all very irresponsible and reckless.

    "The point is that the amount of revenue brought in does not define the need for government services".

    Yeah I know that's the problem. You want the government to define themselves how much is needed.

    Whereas I see that as the recipe for the perpetual fiscal crisis we witness.
    Better take in what the taxpayers can afford and reign in government to operate within that allowance. Regardless of what you or anyone else regards as "needed".

    Having ventured through layers of the endless layers and government tasks we fund I am beyond confident the reigning would be very easy with little harm to the genuine and fundemental responsibilities of government.

    Unfortunatley every time there is a debate over what is actually needed your camp defends all things as vital.

  • (Show?)

    "The state spends every penny it gets."

    Which explains the kicker and the rainy day fund how, exactly?

    Thanks for playing, though.

  • Charles (unverified)
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    "What the hell is Teddy K. going to do with 1700 more state workers?"

    Well, although they recently didn't even exist, when the next recesion hits he and his Blueies will claim they are all vital to the basics services Oregonians need and demand. A "rainy day" will be declared to to sustain them :) and Torrid will have some smarmy view that the rainy day fund is insufficient. :):)

  • Miles (unverified)
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    Wow, this thread took a turn for the worse. But to get us back to the orginal question about how we create the political capital to change the kicker, David Wright wrote: If means-testing the kicker is based on the concern that high-income Oregonians aren't taxed enough. . . that concern should be addressed via the tax rates, not via the kicker mechanism.

    In an ideal world, I agree. I would love to see the tax rates in Oregon become more progressive, even if it was done purely in a revenue neutral way. Making Oregon's income tax brackets tiered like the federal system would be a huge improvement. But I also don't see it happening politically. If we can accomplish something similar through a kicker reform, that's a step in the right direction, but definitely a second-best solution.

    Would it be easy to argue against? Sure, but I think there is potential for a winning argument. After all, the corporate kicker was repealed based on the idea that 1) it's a tax giveaway to big corporations, and 2) most of the money goes out of state. The argument for not sending kickers to those making more than $100,000 is that 1) it's a tax giveaway to rich people, and 2) most of the money will be invested out of state, not returned to the economy through higher spending. (I don't have any proof that other upper income folks will save their kicker rather than spend it, but I know that's what I'm going to do with my mine.)

    As for the troll-like comments, I would say two things. First, the savings and efficiencies that conservatives claim they come up with every year are usually quite small compared to the entire budget. During the recession, we could have eliminated every inefficiency and wasteful program, and we still would have had to cut education, health care, and public safety. Second, what determines a state's level of "need" is its voters. This idea that the "government" somehow exists seperate from the public is just weird.

  • pdxatheist (unverified)
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    re: liberalincarnate.

    that's an excellent suggestion, just having the state keep it. is that something you check when you file the state tax returns? i'm very torn on that one: i agree the kicker is totally stupid and would love to see the state keep all 'kickers' for the rainy day fund, not just the corporate kicker. at the same time, i desperately need that money: right around holiday time, i could use it to buy xmas presents instead of going deeper into debt.

    but as a responsible, tax-loving liberal, shouldn't i donate that back to the state? but that would only be a drop in the bucket, since i bet 99% of oregonians will be keeping theirs. but doesn't every drop count? should i profit by this boneheaded policy or do the right thing and not keep it? arrrrrrgh! i feel like the guy in that farside cartoon: the fisherman sitting on the boat having a conniption fit trying to decide 'fish or cut bait? fish or cut bait?' i have to admit that i'll probably keep it and feel bad about it.

  • (Show?)

    Chuckles,

    Your rants are amuzing at best. So your "solution" is when there is a down turn cut everything. Nice.

    Let's start by letting people out of prisons.

    Better yet, let's start closing schools. That ought to lead to more crime and more people in prison so we can pay for people to sit behind bars longer.

    No, the only thing I'm advocating is changing the system slightly not repealing it.

    Your the one that's nitpicking and bitching at me about my statement that the anti-tax people scream loudly. You believe what you want to Chuckles, go watch Fox News sit in your Lazy-Boy chair and chain smoke. Better yet, have a couple beers and kill your liver. The world would be much better without you.

  • David Wright (unverified)
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    A change to any tax code that renders it less progressive is also referred to as regressive.

    OK, TJ, I'll accept that the kicker is effectively a change to the tax code, in that it does modify the effective tax rates that everybody ends up paying. And I'll accept that a change that actually makes a tax structure less progressive is effectively making it more regressive.

    But the kicker doesn't do that. It is absolutely proportional, neither increasing nor decreasing the relative progressivity of the tax system.

    Quick example to demonstrate the point. Say we have two people, one makes $10K the other $100K. Ratio of income is 10 to 1 from high earner to low earner.

    Someone making $100K is going to pay nearly the full effective 9% rate in Oregon; let's say for the sake of argument that his tax burden is a full $9,000 or 9%. Someone making $10K, on the other hand, has much less of his income subject to the full 9% rate; again for the sake of argument and to make the math easier, let's say it's an even $600 tax bill for a 6% rate. (The exact tax bills are not particularly important here, it's how the relative tax bills change that we're talking about.)

    The high earner pays a rate that is 1.5 times the rate of the low earner (9% vs. 6%). This is one measure of the progressivity of the tax system (1.0 ratio is exactly proportional; greater than 1 is progressive, less than 1 is regressive). Given the 10x disparity in income, this equates to a 15x disparity in actual taxes paid ($9,000 vs. $600).

    Now the state comes along and pays a 20% kicker. So Mr. Big-Bucks gets 20% of his $9K bill, or $1,800 back. Mr. Poor Penny gets 20% of his $600 bill, or $120 back.

    Note that the disparity in actual refund ($1,800 vs. $120) is exactly the same 15x as the original disparity in taxes paid.

    Now, the new effective tax rates for our example folks work out like so: Big Bucks now had to pay a total of $7,200 ($9K - $1,800) for an effective rate of 7.2%; Poor Penny now had to pay a total of $480 ($600 - $120) for an effective rate of 4.8%.

    And what's the ratio of effective tax rates after the kicker? 7.2% divided by 4.8% is the exact same 1.5 ratio in relative tax burdens that we started with. The progressivity/regressivity of the effective tax rates after the kicker is absolutely unchanged.

    If you don't like my starting numbers, pick your own and run through the same exercise. You'll find that whatever tax burden ratios you start with will come out exactly the same when you're done paying the kicker. Every time.

    Miles, you're going to run into some significant push-back when you start referring to people making $100K as "rich". I believe there was a thread (or a significant portion of a thread) here on BO not too long ago regarding that very subject. Lumping wage earners making that kind of money into the same generic category as the really rich folks who make their money off of money rather than labor is going to turn off a bunch of people who otherwise might be sympathetic (and have the money to contribute) to your cause. Yes, I absolutely understand that $100K puts a person firmly in the top single-digit percentage of incomes, but why should those people be cut off from the tax refund entirely if there's going to be a refund at all?

    I understand the idea of going with the compromise solution as a step towards a better outcome, but I would argue that changing the kicker mechanism for some people but not all people actually makes the system worse, whatever the outcome. If the system is broken, don't break it further, fix the actual problem.

  • Miles (unverified)
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    Miles, you're going to run into some significant push-back when you start referring to people making $100K as "rich". . . .Why should those people be cut off from the tax refund entirely if there's going to be a refund at all?

    Since that income puts them in the top 10% of all income earners, it's hard to argue they're not rich, isn't it? Maybe we should start being more honest about income distribution in Oregon -- I'm fed up with politicians referring to the middle class as $50k - $200k a year.

    I'm fortunate to find myself in the >$100k category, so I understand the point you're making (small house, kids in public school, two practical Japanese cars, no boat, no vacation home, no conspicuous consumption at all, really, unless you count the absurd amount of money we spend at local farmers markets). But politically, you're only alienating less than 10% of the voters. And I'd happily vote for a policy that takes away my kicker -- it's really no different than all the tax increases I also vote for -- and so would many of my friends. But it could be scaled to $150k, or even $200k. My overall point is that when there are unmet public needs on the table, it doesn't make much sense to send money to the top income earners who don't need it and will simply add it to their savings.

    And I don't disagree that this is simply patching a broken system. I just don't think we're going to fix the system anytime soon, so I'll take a patch over the status quo.

  • Charles (unverified)
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    David English,

    Wow, chill out there pal. The "world would be much better without you"(me)???????

    Say it aint so. I suppose you, like all things blue, make the world a better place?

    When the economy dips and revenue falls there's no need to let people out of prisons, close schools or to pay people to sit behind bars.

    Where did you get that idea? Oh yeah from the coolaid.

    A good start would be to get rid of Teddy K's 1700 new state workers. Followed by much of the statewide planning bohemoth which produces endless planning that either never works or is never even adopted. Followed by cuts at ODOT administration, OLCC, DEQ vehicle test stations, cuts at the ODE and other very wasteful agencies. Getting rid of public employee unions would be good too.

  • (Show?)

    To add just a little to Miles' last comment:

    In conservative double-speak, his $100,000+ income makes him a rich liberal, while his $170,000+ Republican neighbor is a middle class conservative.

    We have to be better about getting out the quote from G.W. Bush recorded at a fundraiser and shown in Fahrenheit 911 -- to his $1000 a plate audience "Some people call you the elite; I call you my base," about who the real elitists are.

    <h2>For every latté liberal there are two or three capuccino conservatives.</h2>
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