Phil Knight is an ordinary guy. He just does it.

Chuck Sheketoff

As noted in The Oregonian, Phil Knight is taking advantage of the uptick in the market and near high price for Nike and selling $93 million worth of stock. The Portland Business Journal reports the total is $150 million. I don't know the actual total or his “basis,” but he's clearing some pretty good change.

He's selling the stock this year, even though Oregon's new top rate that voters must approve in January is slated to tax the proceeds an additional two cents on the dollar (raising our top rate from 9 percent to 11 percent for 2009-11).

It goes to show that people, no matter what their income is, don't decide whether they will try to make more money based on tax rates. Oh, there's some nice anecdotal stories about people moving to Vancouver, WA, to take advantage of the absence of an income tax (Phil hasn't moved), and there are interesting theoretical papers about people moving around the country for tax avoidance (and interesting papers debunking the urban myth that New Jersey and Maryland rich people fled when those states’ increased their taxes on the very wealthy). Accountants and lawyers in Oregon probably have an ethical duty to raise the "move to Washington" issue with clients coming into lots of money, and some might even follow that advice. But at the end of the day wealthy people stay here and wealthy people move here. And raising our tax rates on the wealthy doesn’t impede Phil Knight from cashing in.

And as State Representative (and economist!) Jules Bailey wondered aloud a while back during the session, if someone earning lots of money from stock and other investments didn’t leave with a 9 percent top rate, why would they leave because of an additional two cents on the dollar?

Phil Knight presumably could have waited until the results of the January election are known, betting on it failing (my polling says it would have been a bad bet).

But he didn't. He saw a good price for his stock and he sold it, even though his profits likely will be taxed an additional two cents on the dollar under Measure 66.

The bottom line is that state tax rates don’t deter ordinary people – rich or not – from trying to make more money. They just do it, tax rates be damned.

  • Kurt Chapman (unverified)
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    Hmm Chuck, you never cease to amaze me. I mean that as a complimant. Phil Knight, arguably one of the wealthiest men in Oregon makes ALL of his maoney based on off-shore manufacturing at near minimum level wages in 3rd world countries. His company has probably paid more to Michael Jordan, LeBron James and Tiger Woods than they pay out in manufacturing costs.

    Personally I would think you would find that objectionable, sinc emanufacturing jobs in Oregon would mean more impact on the overall state employment and tax picture than a single person, but since Mr. Knight sees fit to sell of some of his stock options in a dubious rising market he becomes your poster boy to fit your pre-concieved notions about people making money in Oregon despit a rise in personal taxation.

    A more caustic viewpoint might be:

    a) He has figured out methods to donate enough to a tax free foundation to minimize his state/federal tax bite, or

    b) He has good reason to believe that the recently passed Oregon tax hikes will be over turned at the ballot box in January.

  • portlandprogressive (unverified)
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    "It goes to show that people, no matter what their income is, don't decide whether they will try to make more money based on tax rates. "

    No, it just goes to show you that you're a complete idiot. Chuck, how much do you pay in taxes, and why aren't you paying more?

    Please tell.

  • Old Ducker (unverified)
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    Kight is no doubt smart enough to see that current equity prices are totally bogus. My bet is that he puts the money into gold. The US economy is headed to ruin so why should he care about tax considerations?

    Here's a portrait of your "recovery:"

    http://mises.org/images4/TOTBKCR.png

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    HB 3405

    Raises the $10 Corporate Minimum Tax on C-Corporations (that demonstrate no profit on their Oregon return) to ~0.1% of their gross sales in Oregon capped at $100,000. If Oregon Sales are: a. Less than $500,000,tax is $150 b. $500,000> $1 million,tax is $500 c. $100,000> $2 million,tax is $1000 d. $2 million> $3 million,tax is $1500 e. $3 million> $5 million,tax is $2000 f. $5 million> $7 million,tax is $4000 g. $7 million> $10 million,tax is $7500 h. $10 million>$25 million,tax is $15,000 i. $25 million> $50 million,tax is $30,000 j. $50 million>$75 million,tax is $50,000 k. $75 million>$100,000,tax is $75,000 l. Over $100,000 milli0n,tax is $100,000

    Raises the ^.6% Corporate Income Tax on profitable C-Corporations to: a, First $250,000 of income (profit) still taxed at 6.6% b. 7.9% on income (profit) above $250 until January 1st, then.. c. 7.6% rate on income above (profit) above $250,000 from January 1st, 2011 to January 1st, 2013. d. 6.6% rate on income up to $10 million, and a 7.6% rate on income above $10 million from 2013 0n..

    Basically, there is a steady phase out of much of the increase.

    Stated another way, C-Corporations have paid a $10 corporate tax for 78 years. So if you are Macy's with stores all over Oregon Macy's pays just $10.

    Go to Defend Oregon and pledge to vote YES on Measures 66 and 67!

    Such a deal..

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    "Posted by: portlandprogressive | Oct 20, 2009 3:51:53 PM Chuck, how much do you pay in taxes, and why aren't you paying more?"

    Wow. Reading comprehension is not your strong suit is it? The point is, a higher tax rate isn't a disincentive for people from them to try to make more money, contrary to the non-think cliché fright-wingers push.

    What on earth that has to do with Chuck paying more than his tax obligation or not, the world will never know.

    What DOES dissuade larger companies from locating in Oregon is if they have an unstable school funding mechanism.

  • Old Ducker (unverified)
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    "What DOES dissuade larger companies from locating in Oregon is if they have an unstable school funding mechanism."

    Dude, are you for real? Ok, the auto companies that set up shop in Alabama or the other companies that moved to Mexico, India or China did so because of the incredible public education in those places... LOL!

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    Dude, are you for real? Ok, the auto companies that set up shop in Alabama or the other companies that moved to Mexico, India or China did so because of the incredible public education in those places... LOL!

    Why do you think Intel and Nike are here...and continue to stay here?

  • Old Ducker (unverified)
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    "Why do you think Intel and Nike are here...and continue to stay here?"

    Nike doesn't manufacture much here, do they? What's your explanation for the de-industrialization of this country that has been an ongoing affair for the past forty years?

  • alcatross (unverified)
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    Yeah... but note he's unloading less than ~10% of what he sold last year. Let's see... two cents on $1.35B = $27M - evidently enough to make a difference even to an ordinary multi-billionaire guy like Phil Knight.

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    Here's why Intel came to Oregon -- an article with cites to documents that used to be on Intel's website - I fortunately PDF'd them before Intel took them off. Short answer: clean water, cheap power, skilled workforce, close to headquarters in Santa Clara, "K to life education system" (their words, not mine), quality of life. All the mix that created "opportunity" -- and our tax system was not a factor.

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    I'm always amused when righties show up and claim that higher taxes will somehow cause someone to abandon their desire to make money.

    A scenario with completely made-up numbers: You make $100. The state taxes that 25%, leaving you with $75. You'd like to make $400, since that would leave you with $300. So, you work and work and work, and get there. But by the time you do, the state has raised taxes on the last $100 to 50%. So, instead of $300, you clear $275. Now, given a choice between going back to your old life, where you cleared $75 and your new life, in which you cleared $275, which one do you choose?

    How exactly does higher taxes make people uninspired to seek more money? (Assuming, that is, that the higher tax rate is under 100%.)

  • Bob Wiggins (unverified)
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    I'll try to answer your question Kari.

    Your (admitedly "made up") example contains an important assumption that causes it to miss much of the point. You assume a taxpayer who makes his income through wages. You assert that someone who can make more by working harder will choose to do so as long as the tax rate is less than 100%. I'm pretty sure that's wrong, but, more importantly, it ignors another type of taxpayer--one who puts money he already has at risk in a new investment. Risk capital such as this is essential to creating and growing job-creating businesses. This type of taxpayer has a chance of losing some or all of the money he puts at risk and (absent being politically important enough to merit a government bailout), if the investment fails, his money is gone. The investor may be willing to take that risk, however, if he believes that the after-tax return he can obtain if the investment is successful is high enough to justify the risk. And the tax rate matters a lot in that case. That is one of the justifications for the federal capital gains deduction, and one of the reasons Oregon's lack of a capital gains deduction (and very high personal income tax rate) puts this state at a disadvantage relative to other states (and why the legislature's tax hike would make things even worse).

    The high personal tax rate may or may not cause a particular taxpayer to leave the state (many have; Mr. Knight, who thankfully is a loyal Duck, has not), but it absolutely affects the investment calculus of an investor subject to the Oregon income tax as to whether or not to make an investment in the first place. Bob Wiggins

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    Nike doesn't manufacture much here, do they? What's your explanation for the de-industrialization of this country that has been an ongoing affair for the past forty years?

    Extremely cheap labor and vastly less regulation elsewhere. And in many of those countries that exploitation has done little or nothing to improve the lives of those in the employ. Witness the many problems Nike has had in this regard.

  • Theresa Kohlhoff (unverified)
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    Bob Wiggins, what if we, as Oregonians, do not want to subsidize risk investments with more favorable tax treatment?

  • Robert Collins (unverified)
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    I'm pretty sure the gain on his stock sale is taxed as capital gains, not ordinary income.

  • Bob Wiggins (unverified)
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    Theresa, I think you misuse the word "subsidize" when you assert that the state taking less of someone's income than it otherwise might is somehow a "subsidy", but you have little to fear at this point. Oregon taxes capital gains and ordinary income at the same very high rate. Robert, you are presumably correct in the treatment of Mr. Knight's gain for federal income tax purposes (though it is curious from a tax-plannoing perspective that if he intends to use the sales proceeds for charity why he would sell the stock himself and then give the net proceeds to charity rather than give the stock), but Robert you are incorrect for Oregon income tax purposes. Bob Wiggins

  • Jody Wiser (unverified)
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    Bob Wiggins says: The high personal tax rate may or may not cause a particular taxpayer to leave the state (many have; Mr. Knight, who thankfully is a loyal Duck, has not), but it absolutely affects the investment calculus of an investor subject to the Oregon income tax as to whether or not to make an investment in the first place.

    My Oregon tax rate is exactly the same whether my next investment dollar is put into an insured bank account, relatively safe stocks, corporate bonds, mutual funds or venture capital investment. When I’ve invested in pre-IPO ventures in the past, I’ve not considered the tax rate, and Bob Wiggins’ comments won’t convince me to consider the tax rate in the future….because the question I ask is whether I think the chance of an excellent return on the venture capital outweighs the risks.

    if one of the ventures I’ve got money in now happens to make me a million, I’ll not be moving across the river before I sell.

  • Bob Wiggins (unverified)
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    Jody, I've lived in this state my entire life, and want nothing more than for our state to do well (which it isn't right now). That's why I am fighting the tax hikes; because I think they are bad for our state. (Having said that, I read the article about you and respect you for standing for what you believe in; I just don't happen to agree with you.)

    When the legislature passed the tax measures they passed, they presumably concluded that more Oregon investors are like you (investing without any regard for taxes) than like me and most of the investors I know (who take tax consequences into account). If the tax hikes survive, I guess we'll see if the legislature was right. Regards, Bob Wiggins

  • Kev M (unverified)
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    The fact that Phil Knight remains an Oregon resident (and pays his capital gains here) is a charitable contribution to the State.

    I'm sorry, Chuck, but we're supposed to believe that "most" rich people "don't care" enough not to try to avoid taxes. They're rich. It's what they do.

    Wealthy people practically by definition have access to tax avoidance schemes not available to the rest of us. They switch residencies, buy houses, hide income, and open Swiss bank accounts, even if one of them, Phil Knight, doesn't mind making his honest contribution to his state.

    The argument that tax rates, especially the top ones, "don't matter" defies common sense.

  • JTT (unverified)
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    On a (related) sidenote that no one to my knowledge has picked up on: This sale should be a sizable boon to the state coffers at a pretty critical time. How many teachers, police officers and health plan recipients will these taxes on this fund? I think we should all thank Phil for paying his taxes and being an Oregonian, regardless of your feelings toward Nike and the Ducks (go Beavers!). So, I'll be the first: Thanks Phil!

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    He noted that adult labor force participation in France has fallen about 30 percent below that of the United States, which accounts for the comparably higher U.S. living standards.

    Well, right there you've got a potentially untenable assumption supported by a bogus correlation, economics Nobel or no.

    There are a number of potential reasons for high "adult labor force participation", chief among which in the US is an increasing need for middle-class and working-class families to have two breadwinners. If the basic costs of living for things like, say, housing and medical insurance, rise far faster than the wages in one country -- leading to non-working spouses moving into the workplace -- and you compare it to another country where there's a government-managed public insurance system that has generous family benefits and vacation mandates, then I suppose you might find a disparity in the "adult labor force participation" but I doubt you could say that the first country is the one that had a median "higher" living standard or that the difference was because the parties of the second part were just sitting back sipping Chardonnay made from tax grapes.

    As for "high and increasing marginal taxes have serious negative consequences on economic growth, labor supply, and capital formation”, considering what we've just gone through the past year (and if you've been paying attention, for a number of years before that) how's the low-tax, no-regulation, anything goes (Bernie Madoff was bringing in hookers and blow to the office! You'd have thought that would have tipped off someone that something wasn't kosher.) environment been doing for capital and economic growth. One thing's for sure, there's plenty of labor supply!

  • conspiracyzach (unverified)
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    <h2>Nike exists in its current cult-like state because weak media and rabid liberals have merged and obscured/diluted any real news investigations. Keep it up. www.youtube.com/luddite333</h2>

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