Oregon lawmakers appeared on a fast track last March to refund $300 million in personal income taxes the state collected on federal stimulus payments over the past year.
Members of both parties agreed that Congress never intended those stimulus checks to be taxed, and lawmakers seemed to be working collaboratively on a solution that would refund most or all of the money to 900,000 Oregon taxpayers.
Since then, though, nothing has happened.
A bill slated to refund the taxes passed out of a House committee Monday – but without the proposed amendment that would have addressed the tax refunds. A similar bill in the Senate has stalled while Democrats, who control the Legislature, consider how to proceed.
“We’re still debating what to do about this, if anything, and we haven’t made a decision,” said Sen. Ginny Burdick, D-Portland, said Tuesday. She chairs the powerful Senate Finance committee and is co-chair of the Legislature’s joint committee on taxes.
“Our goal is to direct the help to the people that really need it, and to be fair and to really accomplish what the stimulus sought to accomplish, which is getting help to the people that need it the most,” Burdick said.
Oregon’s stimulus taxes were generated by a quirk of state tax law. Oregon is one of six states that allow taxpayers to deduct a share of their federal taxes from their state tax obligations.
That’s usually a tax break. But Congress structured the stimulus payments as a federal tax refund. Lower federal taxes meant Oregonians had less to deduct from their state taxes, which in turn generated a higher Oregon tax bill.
The federal government authorized $1,800 in COVID-19 relief payments in two installments during 2020 and another $1,400 in March for all but the most affluent.
Those who received stimulus payments still came out way ahead, but they owed an extra $333 in state taxes on average. The actual amounts varied considerably, but even some lower-income households paid a few hundred dollars more in Oregon taxes because of the complex ways the stimulus payments affected their state taxes.
House Democrats say they intend to take up the tax matter but haven’t said how.
“The federal stimulus checks helped Oregonians put food on the table and keep a roof over their heads. We are still working to offset consequences of Oregon’s tax law which is tied to federal law,” Rep. Nancy Nathanson, D-Eugene, said in an email. She chairs the House Committee on Revenue.
“I’ve been working closely with Senator Burdick on the technical details and am fully committed to addressing this issue this session,” Nathanson wrote in a follow-up message.
Even if the Legislature acts promptly, Oregonians won’t see the money soon. Changes in Oregon tax law don’t become effective until 90 days after a legislative session ends. And the Oregon Department of Revenue has warned it could take even longer to implement whatever changes the Legislature adopts.
Oregon Sen. Dick Anderson, R-Lincoln City, introduced a bill early in the session that would refund the additional taxes generated by the stimulus payments by November. Anderson, serving his first term, said Monday that he thought the tax refunds were on a fast track when the issue first came up in February and March.
“There wasn’t any roadblocks. Everybody was wide open, good idea,” Anderson said. He said there had been fruitful discussions with legislative staff and state administrators about just how the payments would work.
Now, though, the first-term senator said he thinks he was being naive.
“I think we’ve done everything right,” Anderson said. “The game of politics comes into play. And that’s what’s been captured here.”
