Oregon’s rapid wage and job growth is generating record revenue for the state that could return an unprecedented $3.4 billion to taxpayers in 2024, according to the state’s latest economic forecast. .
At the same time, the state’s Bureau of Economic Analysis said the possibility of a recession is a “punch.”
“The outlook is essentially a reversal from a soft landing to a recession,” the bureau said. “For now, our office maintains the baseline, or most likely outlook, such as a soft landing and continued economic expansion.”
In its forecast this spring, the bureau predicted that Oregon taxpayers would receive a kicker of $3 billion in 2024. The state provides personal income tax refunds — a kicker — every two years when revenues collected exceed official projections by 2%. Wednesday’s forecast, which analyzed current economic conditions and estimated government revenues through the current two-year budget cycle, which ends June 30, 2023, indicated that the next “boost” could reach 3 .4 billion dollars.
Taxpayers would get the refund as a credit when they file their tax returns in 2024. The amount a taxpayer would receive depends on the amount of tax they paid. The median — or median — refund would be $700 to $800, said Josh Lerner, an economist at the Bureau of Economic Analysis.
That’s almost double what taxpayers received this year. The personal income kicker this year totaled $1.9 billion.
Kickers are also calculated on company revenue. The forecast calls for the corporate tax kicker to total $1.1 billion in 2024, up from this spring’s forecast of $931 million. However, the companies are not getting that money back. The business kicker is kept by the government and used for education expenses.
But at some point over the next two years, Oregon’s economy will sag as consumer spending and job growth deteriorate, forecasts say. The timing and severity of this downturn remains a matter of debate, according to forecasts.
The Economic Analysis Bureau said the risk of recession remains “uncomfortably high”.
Rising inflation can lead to a recession. Forecasters said if inflation persists, Oregon could see a recession by the third quarter of 2023, leading to job losses, stagnant incomes and lower consumer spending and business profits. .
If that happened, it would have a big impact on the state, according to forecasts.
“The potential recession would weigh heavily on (state) revenues over the next few years,” the forecast said.
But Oregon could also experience a soft economic landing, according to forecasts.
For the time being, government revenues remain abundant.
“Growth in Oregon’s major revenue instruments continues to exceed expectations,” the forecast said. “Personal and corporate tax collections remain strong, in line with the revenue gains seen in the underlying economy.”
Democrats were quick to hail the forecasts, saying they validated their policies and public spending programs.
Senator Rob Wagner, D-Lake Oswego and State Senate Majority Leader, said, “Oregon’s economy continues to be strong. Oregon Senate Democrats’ investments in housing, education and child care are paying off.
He gave no specifics, but under Democratic leadership and amid a booming economy, the state legislature has allocated millions more to health care, housing and other programs. .
State House Majority Leader Rep. Julie Fahey, D-Eugene, also commented on the forecast. “Today’s revenue forecast demonstrates steady growth in our economy and shows why we need to continue investing in Oregon’s hard-working and low-income people, as well as small businesses,” Fahey said. . “That means focusing our investments on lowering the cost of living, solving the current affordable housing crisis, building stronger schools, improving our childcare infrastructure and supporting small businesses. .”
Governor Kate Brown also commented, “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’ve made over the past session, particularly in housing, workforce development, behavioral health, and child care.
Forecasts indicate that Oregon’s government revenues and strong economic activity are being driven by a range of factors.
“Although labor income growth has been very strong, much of the flood of (state) personal income tax collections in 2022 can be attributed to non-wage forms of income,” according to the forecasts. Non-wage income includes business and rental income, dividends, capital gains, and retirement account withdrawals.
“As tax returns from high-income filers begin to roll in, this growth in business and investment income is proving stronger every day,” the forecasters said.
Households have not only benefited from wage increases, but they have also have accumulated savings since the start of the pandemic while debt has remained below historical trends, according to forecasts.
“Consumers really don’t lack the firepower if they want to spend and don’t worry about potential job losses in the future,” according to the forecast.
Oregon’s public policies play a significant role in inflation, according to forecasts.
Many workplace contracts are loosely tied to inflation, and higher inflation “could lead to bigger salary increases for civil servants in the future,” he said.
Oregon’s minimum wage has been increased in recent years in a series of bumps, and starting in 2023 will be tied to the consumer price index, which will rise with inflation. The index tracks the cost of goods and services. The forecast calls for the minimum wage to increase by 5% starting July 1.
Oregon’s rent stabilization law will likely allow rent increases of about 14% in 2023, according to forecasts.
Oregon’s unemployment rate, currently at around 4%, will likely reach around 4.6% by the end of 2024, according to forecasts. “This is what a soft landing would look like,” according to the forecast.