Kitzhaber calls special session to gain special powers to make tax agreements with companies

Kari Chisholm FacebookTwitterWebsite

This morning, Governor Kitzhaber announced that he will be calling the Oregon Legislature into special session in one week, on December 17th.

Why? So far, he's not saying. He's expected to make an announcement at 11 a.m.

Of course, the special session will happen under the old Legislature - in which there is still a 30-30 tie in the House and Bruce Hanna and Arnie Roblan are still the co-Speakers.

Maybe he just wants to make sure all the losers earn their final month's check.

Of course, with just one week to Christmas plans, legislators will have plenty of incentive to keep things tidy and avoid prolonging things much.

Update: 10:54am (Carla Axtman) Nigel Jaquiss at Willamette Week is reporting that the session has to do with "statutory changes that will promote job retention and creation at Nike". The shoe company's world headquarters is in Washington County.

Jeff Mapes is reporting on Twitter that the session will be about a major company planning a significant expansion--looking for "tax stability".

Update 11:10am: (Carla Axtman) Governor Kitzhaber is calling the special session on Friday, December 14th. Nike is "ready to commit to a significant expansion". With a potential economic impact of 12,000 jobs and billions in dollars driving the economic expansion. Nike wants a commitment from the legislature that they won't be changing tax rules. Kitzhaber is proposing an economic investment act that would allow the governor to enter into an agreement with any company that creates at least 500 jobs and that would invest at least $500 million into the state.

Nike is prepared to sign an agreement now, Kitzhaber says, if Oregon will commit to not changing the tax picture in Oregon. He says there is a sense of urgency around completing this deal--and Nike is working to get this done as soon as possible. They are being courted by other states and Kitzhaber says he wants to keep them in Oregon. The expansion is for operations--and Kitzhaber says he doesn't have the details on where the expansion will take place.

Bottom line: Kitzhaber wants the governor to have authority to directly work with a company in order to provide them with special tax breaks/incentives to get them to stay or enter the state.

Update 1:05pm: (Kari Chisholm) I just spoke with a representative from the Governor's office, and have some additional detail to offer.

The important point from the Governor's perspective is that the agreement that the Governor would offer companies like Nike would only relate to the way that income taxes are calculated -- the single-sales factor. The agreement would not preclude the Legislature (or the people) from raising tax rates, nor would it preclude the Legislature (or the people) from creating a new tax. Nor does it authorize the Governor to offer up any new tax breaks or exemptions to these companies.

Rather, the proposal would simply allow the Governor to guarantee companies that make substantial investments that they can count on the current method of calculating incomes taxes for a set period of time, even if the Legislature changes it for everyone else.

To be sure, the "single sales factor" is somewhat controversial - and has been discussed at length here at BlueOregon over the years. It's a big deal for companies in Oregon - like Nike, Intel, Columbia Sportswear - that are headquartered here, but sell their wares globally. So, it's no surprise that these folks would want a commitment of some stability in the way that their taxes are calculated.

Now, I happen to think the single-sales factor is somewhat problematic. But I can also understand why a company looking to make a billion-dollar investment here would want to know that the tax structure they're operating under is going to stay in place for a five- or seven-year period after they make that investment.

Obviously, the devil will be in the details. So, as always, stay tuned.

Comments

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    One would hope it's to adopt emergency measures to address the climate crisis, including removing funding from huge highway expansions like the CRC boondoggle, strengthening our clean fuels commitment, and boosting clean energy and efficiency investments.

    As, heck, the World Bank is projecting a 4 degrees C bump and pushing for leaders to turn down the heat.

    "A 4°C warmer world can, and must be, avoided – we need to hold warming below 2°C," said World Bank Group President Jim Yong Kim. "Lack of action on climate change threatens to make the world our children inherit a completely different world than we are living in today. Climate change is one of the single biggest challenges facing development, and we need to assume the moral responsibility to take action on behalf of future generations, especially the poorest."

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    Maybe he wants to talk about Washington making marijuana legal on Thursday and the impact it may have on Oregon.

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    Is he trying to sneak through another increase in the state's CRC contribution with the clock ticking?

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    Gov. Kitzhaber is a closet Doomsday Prepper. He wants to convince the legislature to liquidate the State's assets before the Mayan apocalypse.

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    Screw Nike. What a ridiculous thing to do, call a session to help one company avoid taxes. If Phil Knight is really threatening to go elsewhere, he can penetrate himself with an Air Jordan.

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    Kitzhaber may have done a good job couching the situation - but this is a power grab by Phil Knight, plane and simple. Nike is looking after it's bottom line, and has promised to take itself and its toys with them if they don't get their way. Their message to Oregon - Just Screw You.

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    Well, Orwell would approve of the double-speak employed, where "Tax Stability" really means a tax break shake-down. There is a vacant villa in Belize I think, Phil Knight could look into that if he needs tax stability that badly.

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    To put that into perspective, Oregon's total labor force is just under 2 million. So this one deal which could bring 12,000 new jobs into the state, will moves the unemployment dial by 0.5% to the good.

    Given those facts, are people seriously saying they believe that Kitz should just let Nike walk?

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      Sal, are you seriously saying you think Nike WOULD walk? I think that's the hypothetical megacorporations want us to believe, and the economists tell us these incentives have virtually no impact. They have transportation and executive infrastructure here. Building elsewhere eliminates much of the benefit they want us to give them, so I'm not convinced.

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    Maybe no one reads the New York Times these days. Just published (Dec 1st): "As Companies Seek Tax Deals, Governments Pay High Price"

    In the end, the money that towns across America gave General Motors did not matter.

    When the automaker released a list of factories it was closing during bankruptcy three years ago, communities that had considered themselves G.M.’s business partners were among the targets.

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    Oh no!--at first glance this looks like a gigantic tax giveaway that Nike has already extorted from the gov. In addition, it endangers our future by trying to give this special giveaway power, this "economic investment act," to future governors as well.

    Worst of all, I suspect that it plans the giveaway along the lines of, say, the notorious BETC, where the state gets no legal guarantee that all those imagined jobs will ever come to be, and yet the corporate boss gets to keep the tax breaks no matter what. Is there any wonder that the state lacks money for Oregon education and vital services?

    Is there perhaps any hope, if this should get the nod from our elected representatives, of at least getting some legal guarantees regarding the grand corporate speculations about future jobs, which we have heard so many times before, but which always seem to make legislators drool?

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    Fortunately, Kitzhaber has the intelligence and political chops to not ignore Nike. For the sake of almost nothing, Portland let Columbia Sportswear move its headquarters. Under any view of it, a single employer adding 12,000 is huge. This beats economic gardening by a mile.

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    Well, the divided opinion here makes it seem likely that this will pass. Too bad.

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    I'm more concerned about what an agreement not to change Oregon tax law for Nike will mean for those who want tax reform?

    What message does this send to other Oregon Businesses? The small 20 employee business who can't get special promises from the State? What incentive do we all have to reform, and perhaps increase taxes, knowing that if you're big enough, then you can be excused from "common sacrifice"

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    As Evan pointed out, the New York Times ran a series on tax deals for big businesses that concluded they just don't pan out and cost the states way more money that the jobs generated. Maybe Kitz is calling this session because he's afraid the more Democratic legislature next year won't go for it.

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    I really haven't ruminated on this enough to say whether I think the proposal is a good idea or not. But can I just say that the timing of this sucks.

    I'm tired of special interests creating a crisis and then demanding that government do something to fix the very crisis they created and that they do so in short order so that the fix will be subject to only a minimal review process.

    It stinks of "Crisis Capitalism" and is just a smaller version of what we are seeing with the whole "fiscal cliff" nonsense.

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    This is what I see as having happened. Nike over the decades has used its political will to force its favoritism on the state. Not even in matters relating to its own business, but the way that the Oregon university system is ran, and the ways that county and cities themselves are ran.

    So Nike has used the latest set of elections, to empower the Governor to overstep the separation of powers, and control the congressional purse strings. This is so that Nike and others, have essentially less resistance, in order to get and maintain sweetheart deals, for essentially promises and not obligations.

    So the governor calls an emergency session, running up to the Christmas holiday, and before the makeup of legislature changes. On the premises that this issue materialized instantaneously, and that it shouldn't have to go through either legislative procedure or public opinion.

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    Any governor would capitulate to this. Still it sucks that this kind of extortion racket can be laid upon state or local govt.

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    I have no problem with the state granting a time-limited (say, seven year) guarantee of the single sales factor for a company that invests, say, a minimum of $1 billion of new money and creates a minimum of 10,000 NEW FULL-TIME Oregon jobs -- AS LONG AS the company maintains that level of employment through the entire seven-year period. If, during the seven year period, the company lays off enough workers to fall beneath the X + 10K threshold, the favored treatment should vanish. And if they want to extend the guarantee beyond that time, they can add another billion dollars invested and another 10,000 brand new jobs.

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    Nike now wants not only a guarantee of its lucrative profits that are paid by taxpayers, but it wants to circumvent democracy altogether. It is seeking a prior guarantee from the State of Oregon, in a hypothetical belief that the state is about to reform its tax code (a rare event in itself), that will exempt it from normal legislative processes that other citizens and corporations are subject to as the legislature goes through the democratic practice of deciding what is best for Oregon. In a democracy, in open debate, the legislature takes into account the balance of needs in the state, the proper means for achieving them, and a reasonable plan for paying for these needs among all the constituencies of the state. (I know it doesn’t happen this way, but it’s a dream.) Nike, however, wants its corporate handouts to be special to them, taken up on an emergency basis, democracy be damned. This desire to undermine democracy is even more dangerous than the bribes they are offering.

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