One of the Oregon kicker's fiercest defenders says he expects lawmakers will consider changing or eliminating the state's unique tax refund law as they search for revenue next year.

"I think the kicker will be discussed in the whole dialogue in revenue reform," Sen. Tim Knopp, a Republican from Bend, said in an interview this week.

Thanks to the kicker law, Oregonians just received rebates worth $464 million on their 2017 personal income taxes. State economists recently said taxpayers are on track to receive kicker rebates worth $555 million when they file their 2019 person income tax returns.

Knopp said he expects discussions of changes to the kicker and other potential tax revenue sources to get serious in the fall, likely after the November election. That's when Democratic Gov. Kate Brown, who is running for reelection, will issue her budget proposal for the next two years.

Sen. Tim Knopp

Economists expect the state could face a budget gap of more than $1 billion next year, largely due to the gradual ramp up of state costs for its Medicaid expansion under the Affordable Care Act during the next biennium. The state also faces escalating bills from the public pension system, and lawmakers would like to increase spending to improve K-12 education.

Knopp said he hopes that as part of the tax discussion, lawmakers will consider simplifying the state's tax system and cutting taxes for small businesses. "Part of those discussions have to be around what's going to happen with unfunded liability for (the Public Employees Retirement System) as well," Knopp said.

Knopp, who was one of a handful of Senate Republicans to vote for Brown's business tax cut in the special session earlier this year, said it was a good first step toward helping those companies. He wants the state to go further and copy a new federal tax deduction for certain businesses. People who draw income from those businesses such as partnerships and S corporations already pay lower Oregon tax rates than wage earners.

Oregon's kicker tax rebate is triggered when tax revenues for a two-year budget cycle come in more than 2 percent above economists' forecast from the start of the cycle.

The kicker has been in place for four decades, but it became more difficult to modify after voters passed a measure in 2000 to enshrine it in the state Constitution. Knopp, then a state representative, sponsored the Legislature's referral to voters. "My goal is to make it untouchable. Period," Knopp said at the time.

Looking back, Knopp said he "knew at some point Democrats would be in control and they would want to get rid of the kicker ... The kicker, really short of a spending limit, is the only thing the people have to essentially keep the Legislature from spending every dime in sight."

Voters decided in 2012 to redirect corporate tax kickers to K-12 education. Since the kicker is in the Constitution, any proposal to change it must go before voters.

Sen. Mark Hass, a Beaverton Democrat who is chair of the Senate Finance and Revenue Committee, said tweaking or killing the kicker is just “one of the hundred ideas out there people are talking about.”

Still, Hass said, "I don't think it's good policy."

Sen. Mark Hass, D-Beaverton, right, during a floor session in 2016.

"Most business people can't understand why on the one hand we're trying to raise money for schools and why on the other hand we're returning money to taxpayers," Hass said. He pointed out most of the benefit goes to the wealthiest Oregonians since they also pay the most taxes. The median kicker forecast for this year was roughly $89.

Knopp pointed out the state Constitution already allows lawmakers to vote to suspend the kicker and direct the money instead to paying down debt or funding services. To do so, two-thirds of lawmakers must vote "yes."

However, the political optics of preventing a tax rebate are not good and lawmakers have only opted to hold onto the money a couple of times. They held onto the personal income tax kicker in 1991 and did so with the corporate kicker in 1993 and 2007, said Legislative Revenue Officer Chris Allanach.

-- Hillary Borrud

503-294-4034; @hborrud