Make the kicker more equitable – by a majority vote of the Legislature

The constitutional provision establishing the kicker specifies who should receive the refunds - taxpayers - but not how the money should be allocated among them

For decades, Democrats have bemoaned Oregon’s bizarre “kicker,” under which the state sends refunds to taxpayers if tax revenues exceed the state economist’s estimate. (It’s not about “the state having more money than it needs;” it’s just about “the state economist was too pessimistic.” If we only hired starry-eyed optimists as state economists, there’d never be a kicker.) Next year, we are projected to have a whopping $5.5 billion kicker, because the state economist wasn’t as wildly optimistic as he would have had to be to predict the continuing strength of our economy.

Democrats’ complaints are twofold: (1) the “kicker” money isn’t available for state services like education or infrastructure, and (2) rich people get huge kickers while poor and middle-class people get much smaller ones. (Next year, the average kicker for the richest 1% will be nearly $60,000.) But Democrats don’t try to do anything about it, because, the story goes, the kicker is popular, it’s in the Constitution, and it would take either a statewide vote or a two-thirds vote of the Legislature to change things.

As far as using the kicker for services is concerned, they might well be right. But as to those huge windfalls for the rich, I think they are wrong. I think that by a simple majority vote, the Legislature could make the kicker much more equitable, giving poor and middle-income people more and rich people less – and it would be popular as all get out.

(By the way, since I am writing about state law, I should make something very clear: although I work for the Oregon Department of Justice as an environmental lawyer, I am speaking here solely for myself, and my words do not in any way, shape, or form reflect an opinion of the Department of Justice.)

The kicker, historically, goes out to people as a percentage of each person’s tax liability in a given year. Since rich people pay a lot of taxes, they get big kickers.

But the Constitutional provision on the kicker just says "the total amount of the excess shall be returned to personal income taxpayers." It doesn't say "as a percentage, for each taxpayer, of what they paid." That was a choice that has been made. I see absolutely no reason why the Legislature couldn’t change it to be: "we'll give everyone a tax credit of: (1) the amount you paid in taxes last year, or (2) $X, whichever is smaller” – with the X determined by the overall amount of the kicker. That way it would still all be “returned” to taxpayers, just with a different formula. Poorer people would get a refund of all the taxes they paid; middle-class and richer people would get more than poor people, but they’d all get the same fixed amount. Oh, and since this wouldn’t be a “bill for raising revenue,” it should not trigger the 3/5 vote requirement for tax increases.

This change would make a big difference. Back when the kicker was estimated to be “only” $3.9 billion, the projection was that a family right in the middle of Oregon incomes would get $790, while the richest 1% would have averaged $42,000.  With the kicker going up to $5.5 billion, you’d expect middle-income people to get around $1,100, and the top 1% (roughly, people who make over $566,000 a year) to get an average kicker of $59,000. The moderately rich families – those in the top 5% but not the top 1%, earning between about $230,000 and $566,000 - would get an average kicker of about $11,000. (Of course, as with any average, people at the top of each range would get more, and people at the bottom less.)

I don’t have precise numbers, but under my reform, next year, I think that the “X” amount that both middle-class and rich families would get would be, not $1,100, but in the ballpark of $2,000 - $3000. An extra thousand bucks or two is a very welcome surprise to a middle-income family.

I am told that in the past, when legislators have raised similar ideas, someone in the Legislative Counsel’s office has told them something like “no, you can’t do that, because when the voters put the kicker in the Constitution they THOUGHT they were requiring that kickers be distributed as a percentage of taxes paid.” But if you are going to claim that the Constitution should be construed to include language which it does not in fact include because of what you think voters thought … well, if that’s ever a good argument, it certainly isn’t in this case. If you look at the material in the 2000 Voters’ Pamphlet on the “kicker in the Constitution” measure, it certainly gave voters no reason to believe they were voting to give huge windfalls to rich people. The ballot title didn’t say the kicker had to be distributed as a percentage of the taxes each taxpayer paid. It just said “refund general fund revenues exceeding state estimates to taxpayers.”

The Explanatory Statement in the 2000 Voters’ Pamphlet didn’t say the kicker had to be distributed as a percentage of taxes paid, either. Not a single argument, for or against the measure, in the Voters’ Pamphlet in any way suggested that the kicker had to be distributed as a percentage of taxes paid. The arguments just said much more general things, like that the kicker “return[s] the remaining funds collected over 2% to the people of Oregon.” And “[t]he kicker is an over-collection of money, and people are entitled to a refund."

In fact, the Explanatory Statement included this language: “Ballot Measure 86 would permit the Legislative Assembly to determine the means by which "kicker" refunds are returned to taxpayers.” If the Legislature adopted my suggestion, that’s all they would be doing: “determining the means.”

The only argument left would be “well, the kicker previously (before 2000) had been distributed proportionately to taxes paid, so people would have expected that to continue.” Well, first of all, I seriously doubt that voters in 2000 carried the mechanics of the kicker around in their heads; they just knew that they randomly got some money from the state every once in a while. But in any event, what they were actually voting on was a measure to put the general principle of the kicker – that money be returned to taxpayers – in the Constitution. The idea that a distribution of the kicker that results in rich people getting boatloads of money was front and center in voters’ minds when they approved that general principle, and essential to their vote, so we need to read that into the language of the Constitution, is absurd. Does anyone seriously think people would have voted “no” if they thought that in the future the kicker might be distributed more equitably?

Because of arcane legislative rules, it may be too late to do this in this legislative session. But Governor Kotek could call a short special session to address it. Kate Brown did that in 2018 on a much less important tax issue. Kotek could do it to give all poor and middle-income families a break – and stop randomly shoveling huge sums to the rich.

Steve Novick is a former Portland City Commissioner. The opinions here are his own; he does not speak for his current employer.