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May 30th, 2012 RACHEL GRAHAM CODY | News Stories
 

A Smack in the Kicker

A union-backed initiative to repeal the corporate tax rebate draws fire from reformers.

news2-kicker_3830ILLUSTRATION: Jonathan Hill
For years, state Sen. Ginny Burdick (D-Portland) has been working to get rid of one of the biggest oddities of Oregon’s income tax system, a rebate called the “kicker.”

First passed by the Legislature in 1979, the kicker is a relic from when the State of Oregon actually took in far more tax revenues than officials expected. If the revenue rolling in exceeds projections by 2 percent, the kicker requires all the extra money goes back to taxpayers—individuals and businesses alike.

Over the years, the kicker has meant welcome rebate checks to Oregonians, but it also prevents the state from saving for economic downturns and contributes to Oregon’s volatile economy. 

So it’s surprising that Burdick is now denouncing the best chance in years to kill part of the kicker: A union-backed initiative petition, for which supporters are still gathering signatures, that would end the kicker for corporations. The initiative is aimed at the Nov. 6 ballot.

Any extra money, backers say, would go to K-12 education. The kicker for individual taxpayers would remain untouched.

The initiative “falls somewhere between meaningless and extremely harmful,” Burdick tells WW. “All I can hope is, it doesn’t make the ballot. It will throw a monkey wrench into real financial reform.”

Our Oregon, an advocacy group funded by three of the state’s largest public employees unions (the Oregon Education Association, Service Employees International Union, and American Federation of State, County and Municipal Employees), is sponsoring the initiative.

Burdick says her own efforts to eliminate the kicker are part of a broader discussion about tax reform, and the unions’ decision to zero in on the corporate kicker makes comprehensive reform more difficult.

Scott Moore, spokesman for Our Oregon, says he is aware of the politically delicate relationship between business lobbyists and unions after 2010’s Measures 66 and 67, when voters raised income-tax rates on the wealthy and businesses.

But Moore says Our Oregon has grown frustrated with the Legislature’s repeated failure to pass kicker reform.

And he says the group’s polling shows a large number of voters support eliminating the corporate kicker.

“Going to the voters means you can find the public policy that works and go with that,” Moore says. “It means we can avoid the horse-trading and political games that would otherwise hold this policy hostage.”

Oregon voters locked the kicker into the state constitution in 2000. The personal income-tax kicker for individuals remains popular.

“In some quarters,” says state Sen. Frank Morse (R-Albany), “it’s the holy grail of politics.”

Few, however, defend the corporate kicker. Sarah Pope is legislative director of the Oregon Business Association, which has supported corporate kicker reform in the past. She says her group won’t comment on the measure—at least not before the state determines whether the initiative makes the ballot.

But Pope agrees that picking off low-hanging fruit—the corporate kicker—makes overall reform tougher.

“We are frustrated by the unions unilaterally moving on this one issue,” she says. “That will probably make it harder to go after other stabilizing measures.”

Burdick and Morse, who for years have worked together on tax reform, say the better plan is to fix both the personal and corporate kickers at the same time—and guarantee the money goes into the state’s rainy-day fund, which lawmakers use to smooth out budget gaps when revenues fall short.

And the unions’ initiative, Burdick and Morse say, doesn’t actually guarantee schools come out ahead after the corporate kicker rebate is diverted to K-12 budgets.

“There’s nothing good to say about the corporate kicker,” Burdick says. “But unless you reform it alongside the personal kicker and put that money into a stability fund, the effort is meaningless.”

Chuck Sheketoff, executive director of the Oregon Center for Public Policy, dismissed such concerns as “straw men.”

“Saying it should go to the rainy-day fund ignores the more fundamental issue of this [being] better than having the money go to profitable out-of-state corporations,” he says.

State economists don’t anticipate the kicker kicking in again until at least 2017—and the total corporate rebate will probably be smaller compared to the personal one.

The last time the tax rebate went out, in December 2007, the corporate kicker was $344 million ($1.1 billion was sent to individual taxpayers). With the support of business groups, the Legislature diverted that biennium’s corporate kicker into the rainy-day fund.

Subsequent changes to kicker calculations mean the rebate will be even smaller when it eventually kicks again.

“Whether it passes or fails, the initiative takes the steam out of kicker reform,” Burdick says of Our Oregon’s initiative. “I’m very disappointed that [unions] would go off on their own and create the political perception that the problem is solved.”

Moore disagrees. “It is illogical to think if we get a big win, that is the end of the conversation,” he says. “A victory should spur more change.” 

 
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