State corporate kicker possible

David Steves, Register-Guard:

True or false: Oregon’s tax system is designed so corporations can get $42 million in tax rebates because their profits were surprisingly large — even as the state faces a $3 billion deficit?

Answer: It’s true. And it’s a scenario that will play out next year if the latest state revenue forecast holds.

The forecast calls for companies to get some of their taxes back through Oregon’s one-of-a-kind kicker program. That was nearly lost last week in the forecast’s bigger news: that state revenue is off by an additional $378 million for the current budget cycle and $3 billion for the next biennium.

In State Economist Tom Potiowsky’s latest quarterly forecast, issued last Thursday, personal income tax revenue will fall $1.2 billion short of the forecast used by the 2009 Legislature to craft the 2009-11 budget. The latest forecast also shows corporate income taxes on track to reach $874 million instead of the $832 million projected at the end of last year’s legislative session.

With 10 months remaining in the current budget cycle, it is far from guaranteed that this latest forecast of a corporate kicker will turn out to be accurate. Even so, Legislative Revenue Officer Paul Warner said he expects the projection to hold up.

“I think it’s more than likely that there will be a kicker,” said Warner, who previously was the state economist. “I think that’s the way the pattern plays out.”

Read the full article here. Discuss below.

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    Steves reports

    Conerly said Oregon’s kicker has forced fiscal discipline on the Legislature during boom times. “Very few people speak well of the kicker, but one thing it does is restrain the creation of new programs in strong times,” said Conerly, who has for more than a decade advocated putting surplus kicker dollars into a reserve that could be tapped during revenue shortfalls.

    It is true that Conerly has been calling for the unanticipated revenues to be saved, not spent, but I find his claim that it has restrained spending during good times to be disingenuous, as he and other Cascade folks complain ad nausea that the state spends too much and called for a new spending cap. He can't have it both ways -- it either works as a restraint on spending (which it isn't, 'cuz actually it is by definition the first dollar spent by the legislature in years when there's a kicker) or doesn't.

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