Oregon: Second Lowest Tax Rate on New Investments

Chuck Sheketoff

A newly released corporate-funded study concluded that Oregon had the nation’s second-lowest “effective business tax rate” for new investments among all states and the District of Columbia. Only Maine had a more “competitive” tax structure than Oregon.

This study is further proof that it would be a serious mistake for Oregon lawmakers to reduce business tax rates or grant yet more corporate tax subsidies. Oregon business taxes are already low, and the loss of revenue would only harm Oregonians and the state’s business climate.

The study was conducted by the accounting firm Ernst & Young on behalf of the Council On State Taxation (COST), an association of multistate and multinational corporations that lobbies for lower business taxes in states across the country. COST represents about 600 corporations, including major Oregon employers such as Nike, Intel, Hewlett-Packard, US Bank and Xerox (PDF).

The COST study compared the state and local business taxes that would be incurred by corporations investing in new facilities or expansions of existing facilities. The analysis takes into account the state tax structures in place in 2009, as well as any changes scheduled to become law through 2014.

The study shows that corporations in Oregon are getting off easy when it comes to helping fund important public services from which corporations themselves benefit.

Read Corporate Study Says Oregon Has Second Lowest Tax Rate on New Investments with link to full report.


Oregon Center for Public PolicyChuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org.

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    Instead of Chuck's summary, I suggest people read the actual study.

    The good news is that the study does conclude that Oregon's corporate income tax is conducive to investments in Oregon by profitable corporations that are already here, even without additional tax incentives like the BETC. The main reasons Oregon does well under this methodology is that we have single-factor apportionment (which means building a facility in Oregon doesn't draw more of a company's total income into our state) and we have no sales tax. Under this methodology, it would be shocking if we didn't show well. We would be well-advised not to mess with single-factor apportionment.

    The study does not even purport to consider a lot of things though:

    1. The study doesn't even consider an unprofitable company, which would be affected by the gross receipts tax of Measure 67. Thus, Chuck's comments in his press release on that subject are not supported by the study.

    2. The study does not consider the impact of Oregon's high personal income rates on the decision of corporate managers of whether or not they want to move here. This has an impact on relocation of corporate headquarters to Oregon which the study, by its terms, does not address.

    3. The study says nothing at all about Oregon's tax rate on personal capital gains. Thus Chuck's comments in his press release criticizing proposals on the table for a reduced capital gain rate for individuals are not even relevant to what the study actually says.

    Bob Wiggins

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      You can't have low taxes on everything and still support public education and prisons. I know you aren't an anarchist so someone has to pay the taxes. So who? Intel always defends its tax exemption from the single sales factor by saying the employees pay the taxes. If the personal income taxes are lowered and cap gains are lowered and business taxes are lowered, what is left?

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        You are correct that I am not an anarchist. But lower tax rates are better than higher tax rates.

        The study Chuck cited shows that in many ways, our current corporate tax system is good (particularly single-factor apportionment), so I wouldn't make big changes there, other than deep-sixing the gross revenue tax in Measure 67. The study didn't give any weight to additional incentives like the BETC (and other special-interest credits). I would be supportive of eliminating them, which would have a positive revenue impact.

        On the spending side, the state needs to improve on prioritization of what it wants to spend money on, and it needs to do a much better job to make sure that the money it spends does the most public good.

        We should spend money on maintenance of assets we have already built, like our roads and bridges. Spending scarce state resources on big shiny new toys, even if much of the funding comes from the federal government, makes absolutely no sense. Trains to Milwaukie and Lake Oswego should not be pursued.

        We absolutely need to get control of the cost of total compensation (salary, benefits and PERS) of public employees.

        We should want to create a more competitive personal income tax, that has lower maximum rates, more progressivity at the lower income levels, and a more competitive rate on capital gains.

        These changes will result in increased private economic activity in the state.

        If after the state does everything possible on controlling the growth of employee compensation costs, prioritizing spending to the things that matter most to Oregonians, and avoiding the temptation to spend scarce resources on shiny new objects like trains, if tax revenue doesn't meet what the public broadly agrees is expenditure need, then I would support a broad-based sales tax at a constitutionally limited rate (and the rates of all other taxes would also have to be constitutionally limited as well).

        I'm pretty sure the foregoing does not classify me as an anarchist.

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          Well we can agree that you are not an anarchist and we can also agree that the Lake Oswego trolley is not a wise expenditure. The problem with your sales tax solution is the Oregon voters just don't agree leaving us where we are today.

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    Hey folks -- We seem to have had a technical error that resulted in a bunch of comments (including mine and Chuck's) getting deleted. Not sure what happened. Looking into it.

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    Conspiracy to silence me!!! :-)

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