Economists say Oregon tax revenue up slightly

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SALEM, Ore. (AP) — The state of Oregon will see an influx of tax revenue from investments in the next few months, followed by a drop in future years as investors carry forward income to avoid potential tax increases, state economists said Friday.

The projection means the state should have about $87 million more to spend in the next two-year budget — a slight bump over the last projection — as lawmakers craft a new spending plan.

Still, the $16.6 billion in total anticipated revenue for the general fund and lottery is $700 million less than the estimated cost of continuing state services at current levels.

Economists expect capital gains taxes will be up 44 percent this year, and say corporate income tax collections also are coming in higher than projected.

State Economist Mark McMullen said it's now possible that those taxes will rise fast enough to trigger a tax provision known as the corporate kicker that would provide millions of dollars in tax rebates for corporations.

Oregon voters approved a ballot measure in November redirecting corporate kicker rebates to schools, but the measure wouldn't apply in this case because the initiative doesn't take effect until the next two-year budget period.

Economic growth is improving a bit but is still slower than typical economic recoveries, McMullen said.

Since Oregon doesn't have a military base or much defense industry, the state wouldn't be as seriously affected by automatic federal spending cuts set to take effect in March unless Congress cancels them, McMullen said.

The biggest risk to Oregon's budget would be a cut in federal funding for Medicaid, the health care plan for low-income Americans also known as the Oregon Health Plan.

"As long as Medicaid is off the table, it probably won't be catastrophic on the local level," McMullen said.

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