Why the boom in tax revenue?
he Oregon Office of Economic Analysis issued the June 2022 Economic
and Revenue Forecast
this week. Every party leader had something to
say, good, bad or indifferent. Their words hold little value for an
individual that has watched their taxes wildly spent.
The forecast is divided into three headings. The first is titled “Cyclical
Economic Recovery Complete, Structural Labor Challenges Remain.”
What does that mean to the working class? There are plenty of jobs
available, which means jobs is not a factor in the rise in homelessness.
It also covers agricultural workers and the counties that will be hit the
hardest when HB 4002
limits work hours on farms.
The second forecast is the unprecedented revenue boom that has left
us with unprecedented balances in the current biennium, followed by a
record kicker in 2023-25. The 2021 tax year had a record 70% increase
at $1.2 billion after the kicker returns.
But what isn’t being talked about is why the boom in tax revenue.
There was a difference of 8.6% higher taxable income than actual
income. A high number of tax filers cashed in a wide range of assets in
2021 to get through the pandemic. This created taxable income that
wasn’t related to a growth in the economy.
It is also an indicator of how
desperate people became. It was 600% more than those cashing in
during the housing boom or the tech boom with over $16 billion in
realized capital gains. The forecast for next biennium won’t have those
taxable assets and shows no growth, and may decline after the kicker.
Another false boom is the increase around $500 million in Corporate
Excise Taxes (CAT). It pads the revenue but what is it doing to
businesses and purchasers? The forecast also suggests the markets will
slow down projecting about $25 billion less from CAT than the original
The forecast is already anticipating the 2023 legislature will skim off 2%
from the kicker in a phony budget adjustment they have done the last
two budget sessions. But they also project a 5% kicker above the
adjustment amounting to $3.033 billion. The corporate kicker, which
now goes to schools is projected at $931 million.
“Thanks to the Kicker, Oregonians will get some of their taxes back and
with it, a much-needed break from the increasing burden of inflation,”
Senate Republican Leader Tim Knopp (R-Bend) said. “The Kicker
continues to act as a check against the Democrat’s continuous urge to
blow out the spending. Now, more than ever, it's essential to protect
the Kicker. Too much spending got us into this inflation mess, it’s not
going to get us out. As of now, we have extra money, but our
economists are predicting an economic downturn soon. We must
budget wisely for the future.”
A D V E R T I S E M E N T
A D V E R T I S E M E N T
n summary, the forecast cautions that inflationary booms usually don’t
end well if it is entrenched in the economy. Employment could loose
97,000 jobs and the general fund could have a $2.6 billion hit below the
Governor Brown mentioned sizable reserves. Perhaps she meant to say
forecasted reserves. This biennium the reserves are at 10% of the
general fund and projected to climb to 17.7% this year and 18.7% by close of the biennium. If unused, the forecast is for reserves to reach
25% in the 2029-31 biennium.
It seems the March 2022 forecast was too optimistic. The June forecast
for the 2023-25 biennium shows a total decline of $1,991 million
change from the March 2022 forecast. Personal income taxes declined
$2,093 million but corporate taxes show a gain.
Senate President Peter Courtney issued this statement. “Oregon clearly
has one tough economy. Our forecast is up for the eighth time in a row.
We have to be careful. Experts are seeing storm clouds on the horizon.
Oregon has done a good job saving. We’ll keep moving forward.”
What does “forward” look like? Many states are cutting taxes so all may
benefit and reduce the inflation impact. What Oregon’s legislature does
will depend on voters.
|Post Date: 2022-05-20 08:05:53||Last Update: 2022-05-20 08:39:01|