If you truly care about working Oregonians, fix the kicker

If you truly care about working Oregonians, fix the kicker

If you don’t mind vast inequality, where the rich amass ever larger fortunes, then the current kicker is for you. But if you truly care about the well-being of working Oregonians and wish to see an economy that works for all, work to make the Working Families Kicker a reality.

If you truly care about working Oregonians, fix the kicker

[This commentary initially appeared in The Oregonian.]

Recently, Oregon Senate Republicans issued a press statement criticizing a proposal by our organization to reform Oregon’s kicker tax rebate. The name-calling aside, it was good to see them express concern over “working Oregonians.”

The economic well-being of working Oregonians should be top of mind for everyone, especially lawmakers. The priority should be how to make things better for workers struggling to make ends meet — the mom whose minimum wage job barely covers the rent, let alone the electric bill.

That’s why we invite Senate Republicans to join us in reforming the kicker into a model that would put more money in the pockets of working Oregonians. Our proposal, which we call the “Working Families Kicker,” would change the current formula for how higher-than-expected tax revenue would be distributed to Oregonians.

Oregonians have discussed changing the kicker rebate for years. Under this system, when income tax collections come in 2% or more above what state economists predicted two years earlier, the entire amount of unanticipated revenue is sent back to taxpayers in proportion to what they paid.

However, the record-shattering $5.6 billion refund that will be returned to Oregonians this year in the form of tax credits makes clear why we cannot wait any longer for change. As currently designed, the kicker means the rich will receive massive rebates, while working Oregonians struggling the most get scraps.

How big are the rebates going to the rich? The average member of the richest 1% is getting about $44,600, about the same as what the typical Oregonian makes in an entire year. It gets worse. The richest 100 tax filers are in line for average kickers in excess of $800,000. It would take the typical Oregonian 18 years to make that much.

Meanwhile, low-income Oregonians are getting peanuts: rebates averaging $60.

Defenders of the current system argue the kicker simply reflects that the rich paid a lot more income taxes than the poor, and thus they get a bigger rebate. But that ignores the ultimate reason why the rich are getting massive rebates.

Our research shows that the real driver of the huge kicker rebates going to the rich is the vast income inequality that has built up over the past four-plus decades. Over that time, the average income of the ultra-rich — the richest 1 in every 1,000 Oregonians — has gone up seven-fold, reaching nearly $8 million per year.

Meanwhile, the income of the Oregonian in the middle has barely budged, increasing only 15%. In 1980, the typical Oregonian needed to work 26 years to equal the income of the average member of the ultra-rich. That’s a lot of work, but now that figure has grown to 182 years.

The ultra-rich didn’t see their income explode because they suddenly became seven times smarter, more talented or more hardworking than the typical Oregonian. The vast inequality we see today stems from the same trends we see nationally, including concerted attacks on organized labor, the weakening of a once progressive tax system and disinvestment in the public services that create real economic opportunity for all.

Bottom line: there’s nothing natural as to why the rich are capturing so much income that in turn leads to their massive kicker rebates.

There’s also nothing preordained about the way the kicker is calculated. The current formula says that the kicker is proportional to taxes paid, but Oregonians have the power to choose a different formula.

A better formula exists with the Working Families Kicker: give everyone the same dollar amount. This would result in most Oregonians getting a bigger kicker.

If the Working Families Kicker existed right now, the Oregonian in the middle would get about $2,100, more than double their current rebate. Low-income Oregonians would also pocket $2,100, instead of chump change. This would do more to help working Oregonians cope with rising costs, which Senate Republicans profess to care about.

The choice is clear. If you don’t mind vast inequality, where the rich amass ever larger fortunes, then the current kicker is for you. But if you truly care about the well-being of working Oregonians and wish to see an economy that works for all, work to make the Working Families Kicker a reality.

Picture of Alejandro Queral

Alejandro Queral

Alejandro Queral is Executive Director of the Oregon Center for Public Policy
Picture of Juan Carlos Ordóñez

Juan Carlos Ordóñez

Juan Carlos Ordóñez is the Communications Director of the Oregon Center for Public Policy.

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