Oregon’s latest revenue forecast shows the projected personal kicker is $3.5 billion, which will be credited to taxpayers when they file their returns in the spring of 2024. The projected business kicker is 1.1 billion dollars, which will be withheld for education expenditure.
Overall, forecasts show the state will see about $600 million in increased additional tax revenue.
The Oregon Department of Administrative Services report, released Aug. 31 to Oregon lawmakers, also comes with a warning about a nationwide recession.
“The risks are real. The outlook is essentially a reversal from a soft landing to a recession,” the economic outlook for the government’s revenue forecast says.
Read Oregon’s full revenue forecast here.
Governor Kate Brown released the following statement regarding the state’s revenue forecast for September:
“Thanks to the fiscally responsible decisions the State of Oregon has made over the past few years, we are well positioned with significant reserves to meet all of the economic challenges that lie ahead. Now we must continue to make investments to benefit Oregon’s working families, so that all Oregonians can feel the benefits of our strong economic recovery.
“With the rising cost of living continuing to impact Oregon families and businesses, the Legislature can, in the budget for the next biennium, build on the investments we have made in last semester – particularly in housing, workforce development, behavioral health and childcare.
“And, thanks to the work of the Oregon Congressional Delegation and the Biden-Harris administration to pass the Cut Inflation Act and the bipartisan Infrastructure Act, we can continue to invest federal dollars. to cut costs and create jobs for working families.”
Revenue Forecast Summary
Economists are on the lookout for recession.
The combination of slower economic growth, high inflation and rising interest rates has always been problematic. That said, despite the cross-currents in economic data so far this year, the US economy is unlikely to have entered a recession. Employment and industrial production continue to grow.
Personal income and consumer spending are growing rapidly, but are struggling to outpace the fastest inflation the United States has seen since the early 1980s. While that might be reassuring today, the risks weighing on the outlook are real. Inflation remains the key issue. Even if headline inflation slows in the coming months, the underlying inflation trend should remain above the Federal Reserve’s target. As such, the Fed is still raising interest rates to cool the economy.
Since the impact of rate increases is usually felt one to two years later, it is extremely difficult to put a fair policy in place. In our office’s recent forecast advisory meetings, there was a strong consensus that the risk of recession was uncomfortably high.
The outlook is essentially a reversal from a soft landing to a recession. For now, our office maintains the baseline, or most likely outlook, such as a soft landing and continued economic expansion.
Employment, income and spending continue to grow, but at a slower pace than previously forecast. This slowdown in growth is necessary for inflation to come down. However, if inflation does not slow as expected and the Federal Reserve raises rates further, our office’s alternative scenario of a mild recession beginning in late 2023 is more likely.
As budgeting season approaches, growth in Oregon’s major revenue instruments continues to exceed expectations. Personal and corporate tax collections remain strong, in line with the revenue gains seen in the underlying economy. The forecast for the current biennium 2021-23 has been revised upwards. Although the near-term forecast calls for additional revenue, this is offset in future budget periods by a more pessimistic economic outlook.
Spending and wage growth will need to slow to bring inflation under control, translating into lower government revenue growth across a wide range of taxes. The potential recession would weigh heavily on earnings over the next few years. However, even if the economic expansion persists, General Fund income is due to hangover in 2023-25.
The resources of the General Fund have continued to increase in recent years despite the granting of substantial supplementary funds. This growth is expected to come to a halt in the near term, as non-wage forms of income return to earth and labor market gains slow. Recent gains in reported taxable income have been driven by taxpayer behavior as well as underlying economic growth. Investment and business income are not always realized for tax purposes because they are earned in the market at the same time.
The end of 2021 was a great time to cash in on assets, with high stock prices and corporate valuations, and potential federal tax increases on the horizon. Income reported on tax returns last year increased at more than double the rate of economic measures of income. After so much revenue has been drawn into the 2020 and 2021 tax years, less will be realized in the short term. And with rising recession risks, profits and gains could turn into losses, and a smaller proportion of filers could be subject to the higher rate.
Ultimately, the unexpected revenue growth seen this year left us with record balances for this biennium, followed by a record high in 2023-25. The projected personal kicker is $3.5 billion, which will be credited to taxpayers when they file their returns in the spring of 2024. The projected business kicker is $1.1 billion, which will be withheld for business expenses. ‘education. If current balances are not spent, the General Fund net income for the next biennium 2023-25 will be reduced by $24 million from the June 2022 forecast.
The Oregon Economic Forecast is published to provide information for planners and decision makers in state agencies and private organizations to use in their decision-making processes.
Oregon’s revenue forecast is released to open the revenue forecasting process to public scrutiny. It is the basis of much of state government budgeting. The report is published four times a year; in March, June, September and December.