SALEM, Ore. — When the federal government began offering stimulus payments to Americans during the COVID-19 pandemic, they were not intended to be taxed at either the federal or state level. Due to a quirk of Oregon's particular tax code, however, many of them were.
An estimated 870,000 Oregonians owed more in state taxes because of the two Economic Impact Payments (EIP) issued in 2020, with more to come next year due to the third payment that came in 2021. According to Senate Republicans, those additional taxes amounted to roughly $300 million.
Earlier this year, lawmakers designed a bill that would refund these additional taxes back to Oregonians who were penalized by the stimulus payments, Senate Bill 842. Despite widespread support for the bill, however, it has remained stalled in the Senate committee on Finance and Revenue.
Republican Senator Dick Anderson, who introduced the bill in March, attempted to bring the bill up for debate on Thursday and was rebuffed by Democrats.
“I am a former mayor,” Senator Anderson said. “I am used to passing common-sense, bipartisan ideas that fix unintended consequences. It's extremely disappointing that partisanship got in the way of this bill. There is no defensible reason to be taking part of Oregonians’ stimulus checks, especially given Oregon’s current financial position.”
Senate Republicans cited a letter that U.S. Representative Peter DeFazio, a Democrat, penned in February, urging Governor Kate Brown and Democratic leaders in the legislature to return the taxes on stimulus checks.
When lawmakers heard comment on SB 842 in April, one of the only speakers to express significant concerns about the bill was Betsy Imholt, director of the Oregon Department of Revenue.
Imholt explained the major pressure her department was under due to ongoing COVID-19 impacts; an ongoing tax season with the deadline pushed back to mid-May, in addition to the sudden project of quickly refunding taxes levied on unemployment checks during the pandemic. Imholt said that Revenue staff were already working overtime to meet these crucial deadlines.
"The most practical path to implement Senate Bill 842 would be for this reduction — to build it into next tax season," Imholt said. "By making the correction next tax season, we can build the forms, instructions into our planning right now, and work with the e-filing vendors to automatically calculate the correction. We can do the correction both for 2020 and 2021 at the same time . . . this would be simple for taxpayers, and it would be most efficient on our end as well."
While the reasoning for Democrats' decision to oppose advancing the bill is unclear, Imholt's arguments may have prevailed, opening up the possibility that refunds for the 2020 payments will appear when taxpayers file in 2022.
“Democrats blocking this legislation shows Oregonians exactly where their priorities are,” Senate Republican Leader Fred Girod said. “This money belongs in the pockets of Oregonians. It is only right to return it to them. I hope that Democrats will find it in their hearts to move this legislation during the next session.”