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On Monday, December 10, Governor John Kitzhaber (D-OR) held a press conference to announce that he will convene a special legislative session on Dec 14. The purpose? To pass legislation giving the governor sole authority to negotiate a special tax deal with any corporation willing to make minimum investments in infrastructure and job creation in the state:
On Monday, Nike committed to spending at least $150 million and creating at least 500 jobs in Oregon -- if the Legislature approves a tax-guarantee bill. Citing an independent economic analysis, Kitzhaber said the eventual spin-off could be 12,000 direct and indirect jobs over the next seven years and a $2 billion-a-year boost to Oregon's economy.
Kitzhaber said Nike officials approached him more that a month ago to discuss the company's expansion plans. Kitzhaber said they told him that Nike was being "heavily courted" by other states but wanted to stay in Oregon.
To do so, the company wanted a guarantee that the state would continue its tax policy, known as the "single-sales factor," in which companies are taxed only on in-state sales.
"To me, that's an easy call," Kitzhaber said.
He wants the Legislature to pass a bill that authorizes the governor to enter into an agreement with any company planning an investment that would result in at least 500 jobs and $150 million in capital investment over five years. The agreement would lock in the state's current tax policy for a time frame determined by the governor.
While Nike is the reason for the new law, Kitzhaber said he hopes it could become a tool to attract new businesses and help other Oregon businesses expand.
As the article points out, corporate taxes have been a volatile issue in Oregon for the past several years. In 2010, the legislature referred two measures to the ballot that were passed by the voters, Measures 66 and 67. Measure 67, in particular, created the first ever tax on corporate gross receipts in the state. A de facto sales tax, the measures passed despite a sales tax having been rejected 9 times previously by the voters.
The timing of this special session is intriguing. Currently, there is a 30-30 split of Republicans and Democrats in the House, and a 16-14 Democrat advantage in the Senate. The new legislature, which begins in February 2013, will see a 34-26 Democrat advantage in the House, and the same 16-14 split in the Senate. Despite the official spin that Nike is being courted by other states for the location of their expansion, speculation is rampant that this special session was called to take advantage of the current legislative makeup, which is presumed to be more friendly to business interests than the next legislature might be.
The timing of the session, combined with the nature of this proposed legislation, could also be construed as a tacit admission that Measure 67 was a failure, and was not good public policy. The No on 66/67 campaign was centered around the idea that raising corporate taxes would be a disincentive for businesses to continue to invest in Oregon. As Portland econonomist Eric Fruits puts it,
In 2010, the corporate tax increases known as Measure 67 destroyed a part of Oregon. It destroyed the part in which businesses, their owners, and their employees are viewed as members of the community. The campaign cast businesses as “big” or “out of state,” and that they don’t pay their “fair share.” The measure sent a loud message to businesses: We only want you for your tax dollars."
It is noteworthy that this type of tax negotiation is being offered only to giant corporations that meet the standards set by Kitzhaber and Nike, and that have the political and economic clout to make such demands. Clearly, it is to the benefit of all Oregonians that Nike be allowed to expand and create this many new direct and indirect jobs in our struggling economy. Many Oregonians think that this legislation should pass, but it should be offered to EVERY company in Oregon.
At a special hearing held Thursday, December 13 at a hastily constructed committee meeting, Steve Buckstein of the Cascade Policy Institute testified:
The fact that the Governor is ready to grant tax certainty to Nike and other big companies in return for capital investment and job creation should be applauded. It's recognition that taxes matter, and good tax policy can attract business and jobs. But, Oregonians of all political stripes also appreciate fairness, and I'm concerned that this legislation will be fundamentally unfair, especially to small businesses and many Oregon job Seekers.
The Governor only wants to make tax certainty deals with what he calls "the right kind of businesses" that will drive our per capita income up. This leaves out people who, for whatever reason, have little education and/or few job skills. These are often the young and minorities, for whom a lower wage job is the first rung up the economic ladder.
Also, granting the Governor power to approve or disapprove such deals at all risks charges of favoritism and corruption. Just think about Nike getting its deal while one of its competitors is later turned down. A level playing field would eliminate these concerns.
Granting Nike the certainty of its tax expenditures in the state of Oregon is a good idea. A far better idea is granting such certainty to ALL businesses in Oregon. With the passage of Measure 67, Oregon has placed itself at a competitive disadvantage with all of the states bordering it, and many corporations have left the state or are contemplating leaving to find shelter from the punitive tax and fee environment here. If we ever want to turn around our economy, we must become MORE competitive, not less.