Oregonians, who are set to receive $1.9 billion in community tax credits this year, could get an additional $1 billion on their income taxes in 2024, state economists said Wednesday. .
This early estimate, which is sure to change before it is finalized at the end of 2023, is based on personal and corporate taxes pouring into state coffers in significantly higher amounts than economists predicted a while ago. just a few months, state economist Mark McMullen told lawmakers.
Oregon is the only state in the country that, when things are going well, sends almost every personal income tax penny that exceeds the official forecast to taxpayers rather than hoarding the money for bad times or spend on pressing one-time needs.
“The bottom line is that we’re seeing significant resource increases again,” McMullen said.
Namely, state economists are now predicting that lawmakers will have an additional $979 million available for the current budget cycle than was expected just three months ago.
Higher incomes are fueled by higher wages as employers scramble to attract and retain workers, McMullen said. This translates into additional tax revenue for the state.
“Even though it helps incomes, inflation clearly isn’t free,” said McMullen, who said many Oregonians spend their extra income on necessities like housing and food.
And there are warning signs on the horizon.
“Traditionally, inflationary booms don’t end well,” McMullen said. “Many analysts believe we could see another year of overheated growth and then the bottom will collapse, as monetary policy makers try to get out of it – and are doing too little and too much. late.”
Lawmakers are able to spend much of the current budget windfall over two years, but then will have to balance the 2023-25 budget without the projected billion dollars the state will refund to taxpayers.
This means that for now, elected officials are happy to accept the additional revenue flowing into state coffers.
“Wow…that’s a lot of money,” said Senate Speaker Peter Courtney, D-Salem. “We can build big projects across the state. We can get homeless people off the streets. We can do schools all year round. And we can better recruit, train and assess the police.
Senate Republicans also floated some ideas for the money: $60 million for Oregon State Police to help local law enforcement tackle illegal marijuana grow operations, and $50 million dollars to finance forest thinning operations.
But Senate Republican Leader Tim Knopp of Bend warned against spending all the extra money.
“We need to set aside more funds for the next downturn,” Knopp said. “We also need to seriously consider giving Oregonians tax relief. The government has buckets of cash, but inflation is pinching the pockets of Oregon workers.
In the House, Republican Leader Vikki Breese-Iverson of Prineville also noted the effect of inflation on Oregon households.
“More money for the state is not the same as good news for Oregonians,” Breese-Iverson said. “People are struggling to make ends meet as the state swims in tax revenue.”
House Majority Leader Julie Fahey of Eugene said one of the driving factors of inflation is the cost of housing, and she said revenues should be aimed at addressing the housing shortage in the state.
“Today’s revenue forecast will allow us to invest in the essential programs and services Oregonians need to lower the cost of living and solve our state’s homelessness crisis,” Fahey said. . “(House Democrats) support investing in a coordinated response to homelessness by partnering with local cities and counties in Oregon. We will also seek to fund programs such as Project Turnkey, an innovative model that purchases and transforms hotels, motels and other buildings into shelters and supportive housing.
For her part, Governor Kate Brown echoed the sentiments of her fellow Democrats and used the forecast as another opportunity to put a cap on some of her legislative priorities.
“While I am pleased to see the growth in wages for Oregonians, there is still work to be done to grow, develop and sustain our workforce,” Brown said. “Now is the time to make critical investments in housing, childcare, workers and businesses to help kick-start growth and keep our economy moving.
Brown said she would also like to see investments in public safety, including “evidence-based community violence prevention and response.”
With the release of the revenue forecast on Wednesday, the work of the legislature’s budget writers becomes clearer for the remaining four weeks of the 2022 session. While some emergency spending may be approved when lawmakers are not in session, Decisions on most new spending commitments will have to be made by March 7, when lawmakers are due to adjourn.
Chris Lehman [email protected]