Oregon's unusual -- and popular -- "kicker" law is in the cross-hairs of Democrats in the state Legislature.
The kicker law, which stems from the state constitution, mandates that when state tax collections exceed 2 percent of the projections, taxpayers are owed a refund. Oregonians who pay income tax receive a check, usually right before Christmas.
It's obvious why a rebate or "kicker" is so popular. Who wouldn't enjoy a little extra cash?
But lawmakers are using the current fiscal crisis as an opportunity to revisit and change the law. They hope to get a measure on the ballot to divert some of the kicker funds to a state savings account that could be used in tough economic times.
"There's broad agreement that the kicker is stupid fiscal policy," House Speaker Dave Hunt said, well, bluntly.
And he has a point speaking purely theoretically. Refunding excess tax collections isn't prudent policy when taxes have to be increased to make up for a shortfall, which is what happened recently. Voters approved Measures 66 and 67. It would make more sense to save the excess cash in a so-called "rainy day" or emergency fund so taxes wouldn't have to be raised in the midst of a deep recession.
Yet, the reality is Oregon's lawmakers aren't likely to bank the cash for any significant period of time unless there are safeguards in place that prohibit its use. Lawmakers, and we concede we are speaking in generalities here, too often spend the cash when clouds are forming rather than waiting until it is actually raining.
This happened for two decades in Washington state. Rainy day funds were established, money was stashed away and lawmakers found a way to tap the fund.
A few years ago a constitutional amendment was approved and Washington started putting excess funds into a savings account that has actual safeguards. And then the economy took a dive. Not much money, relatively speaking, had accumulated in the account. And what is in the account will be used to help bridge (albeit very little) the current $2.6 billion revenue shortfall.
Making a major change to tax policy isn't prudent in the midst of a financial crisis.
Perhaps, when this current recession has passed, Oregon's legislators might want to ponder the idea of a constitutionally protected rainy day fund. This will allow for more reflection and long-term considerations.
At that point, the discussion would also have to focus on very stringent safeguards that will ensure money saved cannot be frittered away.
That day isn't here for that discussion. Oregonians should keep their kicker law in place for now.
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