Oregon’s economy is continuing to grow despite feeling pressure from global trade wars, low unemployment, and a slackening in business investment, according to a report presented by state economists to a joint legislative committee. The state’s economy has been running on all cylinders for several years now, producing substantial gains in household income and tax revenues collected by the state, but is no longer outpacing the rest of the nation.
In Oregon and across the country, recent economic growth has been driven all but entirely by consumer spending while other indicators, such as manufacturing and labor supply, have weakened. The economists warned that consumers can only carry the economy on their backs for so long and anticipate a correction. With that said, the U.S. will soon exit its first decade on record without a recession and economists believe the expansion will continue, albeit at a slower rate of growth.
The state’s revenue outlook faces substantial headwinds amid tepid growth. Oregon has experienced robust revenue growth in recent years, largely driven by the strong business cycle, state tax policy changes, and the 2017 federal tax law. The economists warned lawmakers not to expect similar revenue growth looking forward; in fact, their forecast calls for tax collections to stabilize around the same levels as the end of the previous biennium, which is still a sizable gain relative to economic growth. This stable outlook means a low risk of the state’s personal income tax “kicker” refund from being triggered for the current budget cycle. Assuming these projections hold, the current budget cycle could become the first time in eight years the state would go without issuing tax refunds to residents.