OPINION: The Kicker Reconsidered

Oregon’s “Kicker” law was passed by the Legislature in 1979, supported by voters in 1980, and finally enshrined in our State Constitution as Measure 86 in 2000. Oregon’s tax kicker law is a unique feature among U.S. states that automatically triggers a refund to taxpayers when the state collects more revenue than anticipated.

Whenever the kicker is ready to kick unanticipated revenue back to taxpayers, the State Legislature can redirect that refund into other budgetary priorities through a two-thirds supermajority vote. However, due to the high Legislative vote threshold as well as what has essentially become an institutionalized tradition, the kicker is now almost uniformly sent back to taxpayers. But according to the original supporters of the kicker, the initial impetus behind it was not to create a tax refund but to even out the biennium-to-biennium budget and prevent the type of “boom and bust” budgeting cycles that Oregon — a state heavily reliant on the volatile income tax — might otherwise fall into. Nevertheless, by institutionalizing the kicker as a refund to taxpayers, the State has lost a great deal of otherwise prudent financial investment.

And to be clear: there’s nothing necessarily imprudent about trying to smooth out the state’s budgeting cycles. The voter approved adoption of the kicker law represented a response to legitimate concerns about government spending and the volatility of our revenue system. By implementing the kicker, Oregonians sought to create a mechanism that would automatically keep budgets from ballooning out of control when state revenues exceeded the forecasts, which would of course be almost immediately cut back to draconian levels in a subsequent cycle. That’s no way to run a state.

The problem we are facing, however, is that rather than wisely investing the excess revenue in Oregonians, we simply give it away mostly to those who least need the help.

Here is how the kicker generally works:

  • 1. Revenue Forecasting: The Oregon Office of Economic Analysis makes revenue forecasts for the state budget.
  • 2. Comparison to Actual Revenue: At the end of the budget period, if the actual revenue exceeds the forecast by 2% or more, the kicker law is triggered.
  • 3. Refund Calculation: The excess revenue is then refunded to taxpayers. The amount is calculated as a percentage of the taxes paid by individuals during the relevant budget period.
  • 4. Distribution: The kicker refund is distributed in the form of a credit on state income tax returns.

Oregon’s kicker law has proponents and critics, and the assessment of its costs and benefits can depend on one’s perspective. Let’s be frank: there are very legitimate arguments on both sides. Particularly, with regard to “taxpayer relief,” it is absolutely true that many struggling families would benefit greatly from the type of tax rebate the kicker can offer, given that our income tax system is mostly a flat rate.

But the current rebate structure is not the kind of targeted value-based investment that would yield the best outcome. And while the kicker law provides direct benefits to taxpayers and enforces fiscal discipline, it also has drawbacks related to budget stability and the ability to address long-term priorities through savings or capital investments.

We need a State Treasurer who can cut through the politics and work within the current statutory framework to set this right.

As State Treasurer, I will establish and formalize an ad hoc Surplus Redistribution Advisory Committee whenever the kicker appears ready to kick. The committee will be made up of appointees representing a bipartisan cross-section of industry, workers, local governments and other interests, as well as delegates from the Legislature. The committee will be responsible for, with the assistance of staff, advising the State Treasury in issuing an official recommendation to the Legislature as to how kicker funds might be allocated in a way that prudently maximizes the financial effects. This may be a combination of the usual broad-based tax refund, need-based refunds, debt buy-down, capital investments, targeted grants, or any other one-time payments that yield long-term benefits. Using “one-off” kicker money for “one-off” projects – not to support ongoing programs.

The Legislature will, of course, not be obligated to follow such advice, but I believe that with the right people at the table willing to work towards common goals we will have an opportunity to begin institutionalizing measured deliberation of our spending, rather than a reflexive and unreflective non-decision. This way, the intent of the kicker to control state spending is maintained, but while allowing us to make investments that will help maximize our resources and capacity. This is something that can be done without a Constitutional Amendment; we just need the willingness to have the tough decisions and come together across the aisle.

Jeff Gudman is a former member of the Lake Oswego City Council and a candidate for state treasurer in 2024. He can be reached at JGudman7150@msn.com