Oregon has certified a $1.41 billion revenue surplus for its most recent two-year budget cycle, and under a law unique to the state that money is legally owed back to the people who paid it. The refund arrives not as a check in the mail but as the state’s “kicker,” a credit taxpayers claim on the 2025 income tax returns they file in 2026. Each person’s share is fixed at 9.863 percent of what they owed Oregon in 2024, a formula that ties the benefit to past tax bills and leaves the lowest-earning filers with the smallest amount.
A $1.41 billion surplus triggered by the “two percent” kicker law
The kicker exists because of a 1979 statute that forces the state to measure what it actually collects against what its economists predicted at the start of each two-year biennium. When collections run more than two percent above that forecast, the entire excess must be returned to taxpayers rather than held or spent. Oregon voters wrote the mechanism into the state constitution in 2000, which is why the refund cannot simply be diverted when lawmakers would prefer to keep the money.
For the 2023 through 2025 biennium, the state’s Office of Economic Analysis certified on November 1, 2025 that revenue had outrun the forecast by $1.41 billion, an amount the Department of Revenue describes as the fourth largest surplus in state history. That certification is what converts an accounting result into a legal obligation, setting the exact percentage every taxpayer uses and confirming that the surplus clears the two percent bar by a wide margin rather than a technicality.
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How the 9.863 percent credit is calculated
Unlike a flat rebate that pays every household the same figure, the kicker scales to the tax a person already owed. The credit equals 9.863 percent of an individual’s Oregon personal income tax liability for tax year 2024, measured before withholding and most other credits. The Department of Revenue offers a simple illustration: a taxpayer with a $5,000 Oregon liability for 2024 would claim a kicker of $493, or that liability multiplied by 0.09863. Federal taxes and taxes paid in earlier years play no part in the math.
Because the amount is expressed as a percentage of a prior bill, the refund is largest for those who owed the most and shrinks toward nothing for those who owed little. The credit is refundable, meaning it can either reduce the balance a filer still owes or enlarge the refund the state sends back. Oregon returned the kicker as a mailed check for part of its history, but the 2011 Legislature changed the method back to a credit claimed directly on the return, so no separate payment goes out unless a taxpayer neglects to claim it. Filers can estimate their exact credit through the Department’s online calculator before they file.
Who qualifies, and why some Oregonians receive little
Eligibility carries two firm conditions. A taxpayer must have filed a 2024 Oregon return that showed an actual tax liability, and must file a 2025 Oregon return to claim the credit, even someone whose income would not otherwise require filing. That structure matters for retirees living largely on Social Security, which Oregon does not tax, because a person with little or no 2024 state liability has little or no base for the 9.863 percent calculation and may see a token credit or none at all. The kicker rewards prior tax paid, not current need.
Several conditions can further change what lands in a taxpayer’s hands. The state allows filers to donate the entire kicker to the Oregon State School Fund for K-12 education by checking a box on the return, and it can apply a refund toward outstanding state debts such as child support, court fines, unpaid prior taxes, and certain school loans. The kicker is not taxed by Oregon, though the Department warns it can be taxable on a federal return for those who itemized state income taxes in a prior year. The Department has already begun issuing 2026 refunds for electronically filed returns, so the money is reaching early filers now rather than at some future date.
The scale of the surplus makes the kicker one of the largest single transfers Oregon will make this year, yet its design guarantees an uneven result. A retiree drawing a sizable pension or large individual retirement account withdrawals, and paying Oregon tax on that income, stands to claim a meaningful credit; a neighbor living on lightly taxed retirement income may claim almost nothing from the same $1.41 billion pool.
That tension is built into the law rather than an accident of this cycle. The kicker was written to return excess collections in proportion to what each taxpayer contributed, which keeps it constitutionally durable but also means the phrase “returning money to taxpayers” describes a benefit weighted toward higher earners. For Oregonians deciding whether the credit is worth the paperwork, the Department’s position is straightforward: the only way to collect it is to file both returns and claim it on the 2025 form.
This article was produced with AI assistance and reviewed against primary sources by The Money Overview editorial team.
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