Obama to visit Oregon on Friday

Kari Chisholm FacebookTwitterWebsite

President Barack Obama is headed back to Oregon next week. He'll be visiting Intel - to highlight for Americans just how critical education is for "winning the future" with respect to high-tech jobs.

From the Associated Press:

President Barack Obama will travel to Oregon next week to visit Intel Corp., yet another step in the president's effort to draw attention to the role of education in preparing Americans for new high-tech jobs. During the trip to Hillsboro, Ore., on Friday, Obama will tour Intel's semiconductor manufacturing facility with Intel CEO Paul Otellini. Intel has its own education program, including curriculum, competition and online resources to encourage studies in science, technology, engineering and math.

Intel has long argued for a more robust investment in education. As noted in 2009 by Chuck Sheketoff here at BlueOregon:

[In the NY Times,] Intel Board Chair Craig Barrett states: “We are watching the decline and fall of the United States as an economic power — not hypothetically, but as we speak.”

To what does Barrett attribute the country’s economic decline? According to the article, “Mr. Barrett blames a slouching education system that cannot be easily fixed . . .”

Not much more than a decade ago, Intel was Oregon's largest taxpayer -- a status that it proudly touted, as the company contributed some $50 million a year to state services and public schools.

How much does Intel contribute now to Oregon schools and our public services? We don't know - they no longer say. But as recently as 2009, they were selling energy tax credits at less than face value. That implies, as Sheketoff noted at the time, that their taxes had hit the $10 minimum.

Of course, under Measure 67, that $10 minimum no longer applies - and their new minimum is something like 0.1% of Oregon revenues. Still, not much.

Hopefully with the President's visit to Hillsboro, Intel will renew its commitment to Oregon's public schools and the many other state services that make Oregon a great place to do business.

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    I'd like to see President Obama tell the story of Intel founder and former CEO Andy Grove. He should point to the a May 1997 New York Times full-page ad where Intel's Grove thanks the City College of New York for getting him started three days after he arrived in New York as a Hungarian immigrant with limited English proficiency (PDF).

    Obama could point out that but for a tax-supported public institution, what would Andy Grove have done on day three in the U.S. and where would Intel be today? No private sector school was there with open arms for the kid from Hungary.

    Obama could remind Oregonians and people everywhere that Intel used to pay about $100 million a biennium in corporate income taxes to Oregon and ask us all to imagine what that kind of money could buy today in terms of engineering talent and education if they once again became good corporate citizens and paid a fair share of taxes.

    He probably won't, but we're supposed to keep hope alive, right?

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    So, Paul Otellini, Intel's CEO who will be escorting the President is a Republican who donated to McCain, Gordon Smith, and other Republican campaign committees. (Less than 10% of his political contributions in the last three years went to Democrats, but almost half of that went to our friend Senator Wyden. Go figure.)

    I wonder how that conversation will go and if Paul will get off the crazy train after spending some time with the President.

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    I’m a bit skeptical of the numbers suggested for Intel’s corporate income taxes and that these numbers justify a judgment of preferential treatment. I would have expected the revenue associated with Intel’s sales in Oregon to be small given that few Oregon high-tech companies buy large volumes of Intel products. And, products built in Oregon and sold elsewhere may also be down significantly given the kind of products built in Oregon.

    I suspect that Intel’s contribution to schools and local governments through property tax is quite large. The highly visible property tax breaks given to Intel facilitated the enormous investment in chip fabrication plants in Oregon. Property tax law just never contemplated the buildings that Intel and every other chip manufacturer needs. Some adjustment is needed in the definition of “building” verses “equipment”.

    For example, is the vibration-removing foundation part of the building or part of the required equipment to build a chip? These foundation devices are non-trivial and can remove the vibration of passing vehicles on nearby streets. They are critical to specific stages of chip manufacture and have no equivalent in any other kind of building.

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      Steve, it's my understanding that the $50 million per year number comes from Intel's own press releases at the time.

      And you're right, Intel's Oregon sales are surely small. But that's precisely why their taxes dropped so precipitously. Oregon corporate income taxes used to be calculated using a combination of factors - sales, property, and staff size. When Oregon switched to using local sales as the exclusive factor, Intel's tax dropped accordingly.

      Intel has large property holdings here and a large staff base - both of which are good proxies for their demand on state services. But unfortunately, that doesn't matter anymore.

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    What do you mean by writing: But unfortunately, that doesn't matter anymore.

    I would hope that the income tax revenue from employee salaries, and the property taxes paid by the same employees located here in Oregon would be significant; perhaps even being the largest contributor by any employer in the state of Oregon.

    Sure, the property tax on Intel factory equipment should be and probably is small, considering the quick obsolescence of said equipment.

    At a recent City Club forum on the employment problem here in Oregon, the entire panel essentially said, "thank god for Intel", though it was a secular comment.

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      Chuck Sheketoff can probably explain this better than I can, but I'll try again.

      Imagine that you're a state tax official. You've got a state corporate income tax to collect. The problem is, you have corporations that made some of their income in your state - and some of their income in other states. (And, they're going to taxed in those other states, too.)

      So, how do you figure out what percentage of that company's overall income to tax in your state?

      There are three obvious ways to go about it.

      1. Use the % of sales made in state as a useful proxy for the % of income made in the state. Makes sense, since income doesn't happen without a sale.

      2. Use the % of property owned in the state as a useful proxy for the % of income made in the state. Makes sense, since property tells you where the business is primarily located.

      3. Use the % of staff (payroll) in the state as a useful proxy for the % of income made in the state. Makes sense, since where the staff is located tells you where the business is located, and it's staff that generate the income-producing work.

      All three factors make sense as a way of calculating where the business resides and thus, where the income-generating activity occurred.

      And, in fact, Oregon used to use all three factors in combination to sort all this out.

      That made perfect sense.

      But that's no longer how we do it. Today, we completely ignore how much property a business owns and where their staff is located.

      We now calculate their corporate income tax entirely based on where sales occurred.

      This happened just a few years ago, and was largely at the behest of Nike and Intel -- companies with, obviously, large staffs and large property holdings in Oregon, and comparatively small Oregon-only sales.

      This shift in the formula used to calculate Oregon's corporate income tax has meant a huge shift in Oregon's tax base.

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        And yes, Mike, you're right "Thank God for Intel." They employ thousands of Oregonians -- including me, for two summers. (Back when I was an engineering major, and was part of their Honors Internship program.)

        Those employees pay income taxes on the money they earn, and those employees pay property taxes on their homes. That's all good.

        But Intel uses up massive state resources without contributing hardly any corporate income tax.

        Even with measure 67, to match their previous $50 million corporate income tax, they'd have to have $50 billion in Oregon revenues. (Clearly, they don't.)

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          Companies like Intel definitely need services from the community. I’d guess the greatest demand falls on city and county services. To keep a competitive workforce, they need a high quality education system whose funding has become a state responsibility. The airport is critical as well but the port authority is not funded by the state.

          It is interesting to consider which of the many state functions are critical to the mission of a corporation. Big budget state items like transportation, judiciary, enforcement, prisons, and human services all contribute some value. These all seem like items that are important to employees for quality of life and hence are important to a corporation for recruitment. A criterion for allocating responsibility for these services between individual income tax and corporate income tax is not obvious. But, I suspect that Intel does not use massive state resources.

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            But, I suspect that Intel does not use massive state resources.

            Well, I suppose it depends on the definition of "massive".

            But they certainly use more than $10 worth.

            You dismiss the value of our transportation network, our court system, and our law enforcement operations as merely "important to quality of life".

            I disagree. Those things are critical to the successful operation of a major corporation.

            And, incidentally, I think that there's some value in rejecting the very premise of this discussion. The relationship between the government and a corporation is not, and should not be, a merely transactional one.

            The question should not be simply, "What are we getting for our money?"

            While that's one legitimate question, it's also reasonable that corporations that reside here should also have some generalized responsibility for making this state a better place for everyone to live and work here.

            Once upon a time, companies were proud to be "good corporate citizens". If that era is over, it's a sad thing indeed.

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              The other basic question that you haven't asked is whether corporations should be taxed at all. Now some people think that business should pay no taxes because it should all be passed on individuals. While there is a logic to it, the result is higher taxes on individuals than other states and then the complaining and discussion about high taxes has some merit. So in a modern society taxes on business should be part of the mix.

              If business are taxed on income, then the question is how should that be done equitably. What we have now is an unfair business income tax system. My small business will pay more business taxes than giants like Intel and Nike. Furthermore, this keeps the overall tax income from business way below average compared to other states, but a lot of businesses don't think so because the tax breaks are unequally distributed.

              It also tilts Oregon to low overall business taxes and high personal income taxes and nets to lower than average taxes which means inadequate income for education, that business then complains about.

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        Yes I understand this part; just wasn't sure if that was what you were referring to.

        I agree there is no simple answer.

        Take Precision Cast Parts as an example, or perhaps even Boeing - I would guess that neither company produces components that are directly purchased for use in Oregon by Oregonians. But those components are assembled into very expensive jets which not only fly in and out of Oregon, but also may be owned or leased by an Oregonian owned person or individual. The calculation is complex indeed. I am sure there are other examples of products made here that are used exclusively outside Oregon.

        As for public services and infrastructure - what is already here or put in place to attract or keep a business: there is a lot of give and take even with that. Roads, transportation, public safety, etc. When a locale has the right mix of these services and associated tax revenue to pay for them - that is what may attract or keep a business here. Lack may cause a business to leave.

        It's all about balance.

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    Is there a progressive protest against the President planned for this trip. i said during the campaign, I am tired of hoping that someone I voted for would acutally do what I voted for, I want results and Pres. Obama has been a major disappointment in that reguard. I voted for single payor, getting out of illegal wars, respect for human, not corporate rights and change in the way our government works, being for, by and of the people, not the oligarchy that is running this country now.

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