Sixth Straight ‘Kicker’ Rebate Could Go to Taxpayers in 2026

State economists put odds of $582 million refund at ‘50-50’

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Economists say Oregon could be headed for an economic slowdown in the next two years and it might be bad enough to hold off another big “kicker” refund — but things could just as easily head the opposite direction.

The latest state economic projections find that high interest rates, population loss and other factors could increase the likelihood of a recession, as reported by Oregon Public Broadcasting.

Last week in Salem, representatives of the Office of Economic Analysis presented lawmakers with the office’s latest quarterly revenue forecast. Since the first quarter of 2024, Oregon has seen unemployment continue to fall and personal income rise, both against projections. Income tax revenue from the first quarter — $164.7 million — was nearly 24% higher than the March 2024 forecast. Corporate income tax collections —  $69.2 million — were nearly 75% higher than expected.

In light of this, Oregon is on track to send $582 million back to taxpayers in 2026. It would be the sixth straight kicker rebate to go back to taxpayers. Enacted in 1979, Oregon’s unique kicker law refunds income tax payments that come in at least 2% above what state economists predicted. Since it was implemented, the kicker — which is unlike any other tax refund program in the nation — has been triggered more often than not.

In their latest forecast, state economists announced that personal income tax and corporate tax payments far exceeded projections. Wages are growing and the share of state residents with a job has never been higher. But they cautioned that economic warning signs exist in the form of stagnant population growth, slow job growth, and a loss of manufacturing jobs, OPB reports. With these factors in mind, the Office of Economic Analysis calls the latest kicker a “fifty-fifty proposition at this point.”

“It’s far from a sure thing, because we have another tax season to go,” outgoing state economist Mark McMullen is quoted as saying.

McMullen recently stepped down as state economist, 12 years after his appointment. He worked under four governors and served the longest tenure of anyone to hold the role, but he doesn’t have the best track record predicting revenue. Each of his biannual forecasts has resulted in a kicker payment, and they’ve gotten larger. In 2016, $402 million went back to taxpayers, and two years later, $464 million was refunded. At the height of the pandemic, the state refunded a record $1.7 billion.

And this year’s kicker goes far beyond. A separate corporate tax kicker is set to send $588 million to Oregon K-12 schools. In total, the state will send back $5.6 billion, or around one-sixth of the general fund.

Despite the kicker’s popularity with taxpayers, missed projections by state economists draw the ire of labor unions and Democratic lawmakers who’d prefer revenue be spent on legislative priorities like housing and addiction. Service Employees International Union 503, the largest public employee union in Oregon, went as far as to issue a memo last year calling for McMullen’s ouster.

McMullen’s departure to take a job at a think tank called Common Sense Institute Oregon leaked on CSI Oregon’s website before state officials could make an announcement, as reported by Willamette Week. Senior state economist Josh Lehner will serve as acting state economist until McMullen’s replacement is hired.

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