The kicker is frequently talked about during budget discussions but it is also often misunderstood. The kicker law was first passed by the Legislature in 1979, along with a spending limit and a tax relief plan. In 2000, voters approved a constitutional amendment placing much of the kicker statute in the Oregon constitution.

 

The Two Percent Surplus Kicker Law divides the General Fund into corporate revenue and all other revenue. If actual collections for a biennium exceed the Close of Session forecast (from nearly two years before) by two percent or more, all money above the forecasted amount is returned to the taxpayers (either personal or corporate).

 

Since the kicker has been in effect, the personal income tax trigger has been exceeded eight times. Personal kicker refunds/credits have been distributed on seven occasions for a total of $1.7 billion. The corporate kicker has "kicked" six times, with distributions made to corporate income tax payers five times, for a total of $444 million. Faced with Measure 5 budget problems, the Legislature suspended the kicker in 1991 and 1993. Five times, including the current biennium, recessions have occurred and revenue has fallen short of the two percent trigger.

 

The kicker law, in effect, is a temporary tax rebate when the economy is doing well. In the business world, this would mean that any times sales exceeded expectations all income above those expectations would go back to the stockholders or to the consumers and none of that unanticipated growth would go into a reserve or into investment in the company to generate future profits.

 

When revenues fall short of projections, as it did during the last three years, the kicker has no effect. There is no mechanism in place for an automatic tax adjustment when the economy grows at a slower rate than anticipated so the state must reduce budgets, raise taxes, or find other temporary funding mechanisms.

 

A corporate kicker is currently anticipated for 2005-07 in the amount of $43.3 million.