Those Darn Dems!

I received a lovely little bit of hyperbole in my inbox this afternoon -- an "Action Alert" from the Oregon Republican Party.

The headline screamed thus:

HOUSE DEMOCRATS TO PUSH FOR MASSIVE TAX INCREASE ON OREGON SMALL BUSINESSES

Pretty scary, huh?

Except it's not really true.

At issue is the proposed suspension of the corporate "kicker", the tax rebate that Oregon is obligated to provide when tax revenues exceed projections by 2% or more.  Individual tax payers get a kicker, too, but it's calculated and triggered separately from the corporate kicker.

It's true enough that eliminating the kicker would mean less money back from the state than they otherwise would be entitled to receive.  But it's a bit of a stretch to turn that into a tax "increase".  These are taxes that were already legitimately owed, and paid.  If tax revenues came in at less than 2% more than projected, the kicker would not be triggered but taxes would also not have been "increased" in that case.  So clearly, not paying the kicker is not the same as increasing taxes.

Taxes seem to be very confusing for people, so let me lay it out.  These examples will be for individual taxes, but the corporate tax system works basically the same way.

Let's assume that your state tax liability for the year was $3,000.  You might have had more or less money withheld from your pay during the year, but when you figure your taxes you should have paid $3K.  If you had say $3,200 withheld during the year, you'd be owed a $200 tax refund, because you overpaid your taxes by that amount.  If you had only $2,800 withheld during the year, you'd owe the state $200 more, because you underpaid your taxes by that amount.

The kicker, on the other hand, has nothing to do with your individual tax liability.  It has to do with how well the state forecasters predicted government revenues for a 2-year span when the budget was created.  If the state takes in more revenue than had been predicted 2 years earlier, and that difference is at least 2% of the predicted amount, then the state is obligated to kick back the difference to the people who contributed that extra revenue.  So even though your tax liability had been $3K for the year (let's say that was $6K for two years), and that's exactly what you paid, the state is going to send you back some money anyhow.  Essentially the state is saying that two years ago, it thought that by taxing everyone at the regular rate they would take in a certain amount, but due to whatever factors beyond their control, they ended up taking in more, so they didn't really need to tax everyone at the regular rate after all.

This is different from a normal tax refund, because it has nothing to do with whether you paid the correct amount in taxes during the year (or rather, during Oregon's two-year budget cycle).  Rather, it has to do with whether everyone in the state, collectively, generated more revenue than was expected.

Anyhow, not paying the kicker is not quite the same as raising taxes.  And it's nowhere near the same as not paying a regular tax refund.  In effect, Oregon's kicker law allows for taxes to automatically be lowered by some (generally very small) amount, retroactively for a two-year period only.

But of course, in twisted Republican land, voting against a decrease in taxes is 100% equivalent to voting for an increase in taxes.  It's a tried-and-true tactic that the extreme anti-tax folks use whenever they want to get people riled up.

There are some in Oregon who wish to see the corporate kicker permanently abolished; some smaller portion of those people would like to see the individual kicker go away as well.

It seems to me that wanting to do away with the corporate kicker while retaining the individual kicker is thoroughly inconsistent.  The philosophy behind both is exactly the same, so how can one rationally argue for one but against the other?

On the other hand, it also seems inconsistent to me that the kicker law requires the state to refund excess revenues, but does not require citizens to kick in more tax money when revenue falls short.  The basic philosophy behind the kicker is, the state planned to have X amount of money to spend in a budget, but actually took in Y, so the extra should go back to the taxpayers.  But wouldn't that philosophy also demand that if Y is significantly less than X, the taxpayers should make up the difference?

So there are two logical conclusions that could be drawn here, neither of which is politically popular.  Either rework the kicker law to make people cough up more dough when the state runs short, or eliminate both the corporate and individual kickers.  Except that the kickers were actually written into the constitution in 2000, so good luck getting rid of them entirely.

Comments

[Chris Snethen]

so good luck getting rid of them entirely

I think voter moods have changed about the kicker and a ballot measure to kill it might just pass. It would certainly be an interesting question given the result of Measure 48 (TABOR). Taxes won't be a winning issue this cycle.

[David B. Wright]

Taxes won't be a winning issue this cycle.

By which I presume you mean, anti-tax positions won't be winners?

You may be right about that... but there's a big difference between not supporting anti-tax measures, and actively supporting tax measures.

And like it or not, most people consider the personal kicker to be "their" money. That's why the Dems are starting with the corporate kicker, because it's a lot easier to win popular support from people when you aren't proposing to take "their" money. ;-)

In any event, I hope you're right. As I posted above, the kicker law in its current form makes no sense. And I certainly wouldn't favor changing it to force people to cough up the difference when revenues are low, so it oughtta be repealed entirely.

[Chris Snethen]

but there's a big difference between not supporting anti-tax measures, and actively supporting tax measures.

I think you're right about that. However the Norquist-ites (whom the public despises..Sizemore in Oregon, Eyman here in Warshington) will seek to paint both anti-tax measures AND tax levies with the same brush. And then they're just screaming into the void. Will the public vote for tax increases? We upheld a nickel a gallon gas tax here in Washington. I'm guessing something similar might float through in Oregon as well.

The kicker was painted by Sizemore, McIntyre, and Norquist. The electorate is in no mood to admire their work anymore. I'd bet a measure completely repealing the kicker would get fairly widespread support.