The 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 estimate.

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

In 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 baseline.

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.


--Donna Bleiler

Post Date: 2022-05-20 08:05:53

Last Update: 2022-05-20 08:39:01