Oregon’s Latest Economic Estimate Predicts Record $3.4 Billion For Taxpayers. Is It Possible To Acheieve?

Brisk wage and employment growth in Oregon is generating record state revenues that could send $3.4 billion back to taxpayers in 2024. At the same time, the state’s Office of Economic Analysis declared a recession is a “coin flip.”

“It’s a coin flip between a soft landing and recession,” the official added. “For now, our office expects a soft landing and continued economic growth.”

In spring, the office anticipated Oregon taxpayers would get a $3 billion kicker in 2024. State income tax rebates are issued every two years when revenues exceed official projections by 2%. According to Wednesday’s forecast, which analyzed current economic conditions and estimated state revenues through June 30, 2023, the next “kicker” could be $3.4 billion.

2024 taxpayers will get the refund as a credit. Depends on how much tax they paid. The median payout would be $700 to $800, says EAO economist Josh Lerner. This is roughly double what taxpayers got in 2018. The personal income kicker was $1.9 billion.

Kickers are based on revenue. In 2024, the corporate tax kicker is expected to exceed $1.1 billion, up from $931 million this spring. Companies don’t get the money back. The corporate kicker goes to education.

The prediction predicts that Oregon’s economy would slump as consumer spending and employment growth slow. When and how severe the slump will be is unknown, the forecast says. Economic analysis office: recession risk is “uncomfortably high”

Rising inflation causes recessions. Forecasters say Oregon might enter a recession by the third quarter of 2023 if inflation persists, causing job losses, income stagnation, and decreased consumer spending and company profitability.

If that happened, it would hurt the state, the prognosis warned. “The projected recession would weigh substantially on (state) income,” the prediction added. But Oregon could have a soft landing, the forecast said. The government’s coffers are full.

Oregon’s key revenue instruments continue to outpace forecasts, says the forecast. Personal and corporate tax receipts are substantial, reflecting the economy’s income improvements. Democrats praised the projection, saying it vindicated their policies and spending plans.

State Senate Majority Leader Rob Wagner, D-Lake Oswego, said Oregon’s economy is solid. Democratic expenditures in housing, education, and child care are paying off.

Under Democratic leadership and a growing economy, the state Legislature has added millions to health care, housing, and other initiatives.

State House Majority Leader Julie Fahey, D-Eugene, also remarked. β€œToday’s revenue prediction indicates sustained growth in our economy and underscores why we must continue to invest in working low-income Oregonians, and small businesses,” Fahey said. “That includes focusing our spending on lowering the cost of living, tackling the affordable housing crisis, building stronger schools, and supporting small businesses.”

Gov. Kate Brown said, “With growing costs of living affecting Oregon families and businesses, the Legislature can build on last session’s investments in housing, workforce development, behavioral health, and child care.”

According to the prediction, Oregon’s government income and economic activity are driven by a variety of factors.

Oregon's Latest Economic Estimate Predicts Record $3.4 Billion For Taxpayers
Oregon’s Latest Economic Estimate Predicts Record $3.4 Billion For Taxpayers

β€œDespite substantial growth in labor income, much of the 2022 flood of personal income tax receipts can be ascribed to nonwage types of income,” the estimate said. Business and rental income, dividends, capital gains, and retirement account withdrawals are nonwage income.

Forecasters say that as high-income extension filers send in their tax returns, business and investment revenue is growing stronger by the day.

The prediction stated households had benefited from salary gains and accrued savings from earlier in the recession, but debt has been below previous levels.

Consumers have plenty of spending power and aren’t worried about job losses, the forecast stated. Oregon’s policies affect inflation, the prediction says.

Many labor contracts are loosely related to inflation, therefore rising inflation “may lead to larger compensation increases for public workers”

Oregon’s minimum wage has risen in recent years and will be indexed to inflation starting in 2023. The index tracks consumer costs. The minimum wage is expected to rise by 5% in July. The estimate says Oregon’s rent stability statute will enable rent hikes of 14% in 2023.

Oregon’s unemployment rate, now around 4%, will jump to 4.6% by late 2024, forecasters say. Forecast: “This is a soft landing.”

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