Should we make the kicker better?

By Steve Robinson of Eugene, Oregon. Steve is a policy analyst and business consultant in planning and performance measurement, mentoring launch-stage businesses and nonprofit organizations.

Let’s put some facts on the table. According to the Department of Revenue, the top 5 percent of the top 1 percent of taxpayers – about 80 of them – averaged about $24 million of adjusted gross income (AGI) in 2012 and 2013, the two most recent years available. They pay about 7.4 percent of their AGI in state income taxes, or $1.8 million apiece. The kicker in 2016, estimated at $473 million, will be based on 2014 taxes paid, about 8 percent of about $6 billion in total collections. So these fortunate 80, who are doing very well indeed, will receive credits of some $140,000 apiece.

In contrast, the bottom one-third of income earners will receive an average of $3.00, including hundreds of thousands who don’t even file because their income is too small, and will receive nothing.

I think there is a better way. Instead of making the income disparity even worse through these pro rata payments, I would prefer a per-person payment. That would send $130 to every adult and child resident of Oregon, an average of $260 per household. It’s not much, but I’m sure the lowest-income families would put it to good use.

As a result of this change in how the kicker is disbursed, about $250 million would be directed away from the top earners, saving $100 million in federal income taxes. The money would instead go to those at the bottom of the income scale, who are much more likely to spend the kicker in the local economy. I estimate that the per-person rebate would stimulate hundreds of millions of economic activity and tens of millions of added state income tax receipts next biennium.

Now, one might think this proposal would be a no-brainer for progressives. It would take a simple majority vote in the legislature, as compared to the two-thirds majority required to suspend the kicker or otherwise redirect it, say to the Rainy Day Fund or education. But many of my friends are not interested in “improving” the kicker, on the theory that anything that makes it more helpful to the mass of voters would also reduce the chance of repealing it at the ballot box in the future.

I totally agree that repealing the kicker, or even just suspending it – as proposed by Rep. Tobias Read via HB3555 – would be far superior policy. The problem is that any such change would require either a constitutional amendment or a two-thirds vote in both houses. I seriously doubt there’s any chance of either of these things happening soon, maybe ever. I understand that voters overturned the corporate kicker in 2012 and redirected it to K-12 education. But I’m not aware of any evidence that public opinion is moving in the right direction on the personal kicker. People just like “free money.”

For conservatives, the main objection is that it’s not fair to the big taxpayers, because “it’s their money.” But this argument ignores the short-term economic benefits mentioned above. Plus it’s really not “their” money. We’re talking about funds the state has already collected from taxpayers, based on published tax rates. People paid their taxes without any expectation of a rebate. Now the money belongs to the state – that is, everybody who lives in Oregon – and the question is how to implement the Constitutional provision requiring a rebate of the excess over the official revenue projection. That provision leaves it up to the legislature to decide how to do it.

Bottom line for me, it would be worth the short-term economic benefits of redirecting $250 million toward people who need it much more than those at the top. But I can understand the objection that it might make the kicker a little harder to get rid of. I just think that’s a really long shot.

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