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Tax bill a good deal for state
The surprise special session of the Oregon Legislature that Gov. John Kitzhaber will convene Friday is likely to be a quick and congenial gathering.
Which is how lawmaking ought to be when the bill on the table is so sensible and beneficial to the state.
Kitzhaber was right to call this bill “a huge win for the state of Oregon” in a press conference on Monday.
Here’s how the bill works:
It gives the governor the authority to guarantee the current state tax structure will stay in place for any company that commits to spending at least $150 million on capital improvements, and hiring at least 500 new employees, over five years.
The impetus for the bill, though, is one company.
One very large and very wealthy company that was started in Oregon, remains here and now wants to expand here: Nike.
Nike and some other international firms with operations in Oregon, such as Intel, like the way the state assesses income taxes. Since 2006 Oregon has used a “single-sales factor” policy, which means companies such as Nike are taxed only on their sales inside the state.
The benefit, for a company such as Nike that does billions in sales outside Oregon, is obvious.
The bill the Legislature is likely to pass Friday wouldn’t change the tax system — it would guarantee that that system will remain in place.
Critics have branded the proposal as both a tax giveaway and a capitulation by the governor and the Legislature to what amounts to extortion by Nike.
The first complaint is feeble.
The proposed bill wouldn’t change the rules for Nike or any other company, and it certainly wouldn’t give those firms anything, in terms of tax policy, that they haven’t had for the past six years.
Nor does the bill provide companies a leak-proof tax shelter. For instance, Nike and any other company that might sign a deal with the governor under the auspices of the bill would still be subject to higher tax rates should the Legislature or voters decide to raise them, or to a new tax should lawmakers or voters choose to impose such.
The bill’s guarantees aren’t permanent, either: The bill includes a 10-year “sunset” clause so a future Legislature can decide whether to continue the practice.
The second complaint — that Nike is in effect gaining special treatment through the implied threat that without the bill it’ll move to greener tax pastures (Nike has said nothing of the sort, though) — at least contains a scrap of plausibility.
Except tax policy is not a zero-sum game.
Lawmakers have an obligation to their constituents to compare the potential costs and benefits of tax policy.
In the current case, the benefit is at least 500 jobs at a company that pays its in-state workers an average of $100,000, which means significant new income tax revenue for Salem, while the cost, quite likely, is nothing at all.
Little wonder, then, that both Kitzhaber, a Democrat, and Rep. Bruce Hanna, a Republican leader, both endorse the bill wholeheartedly.