Oregon Gov. John Kitzhaber must have missed this month’s major New York Times investigative series on business subsidies. Less than a week after the nation’s paper of record reported that such subsidies are a “zero sum game,” Gov. Kitzhaber called the Oregon legislature into a one-day special session to pass the Economic Impact Investment Act, a corporate tax giveaway custom-tailored for Beaverton-based sportswear retailer Nike, Inc. The rushed deal and special session were announced last Monday, just four days before the legislature was to consider the bill, and a publicly available version of the proposed legislation was not made available until Tuesday.
HB 4200, which passed the legislature handily on Friday and was signed by Gov. Kitzhaber this week, allows Nike to determine its tax responsibility to the state through the controversial Single Sales Factor (SSF) apportionment method for the next 30 years, whether or not Oregon enacts tax reform during that period. Nike had expressed interest in expanding in Oregon, but the company reportedly expressed to the Governor that it needed “tax certainty” to commit to growing in the state. (Make sure to see the Oregon Center for Public Policy’s excellent take on what would constitute true “certainty” when it comes to taxes.)
In its original form, the legislation would have allowed the state to grant guaranteed SSF tax breaks through the Economic Impact Investment Act for a ten-year period, and those deals would have lasted for up to 40 years. The few accountability amendments passed during the one-day session shortened the amount of time the governor has to strike these tax deals to one year, while also reducing the period during which the tax break lasts to 30 years.
While the bill requires that Nike and any other company vying for the special tax deal invest $150 million and create 500 new jobs, it is silent on wages and other job quality standards. Significantly, the new law fails to set a meaningful term during which qualifying jobs must be retained by Nike or any other company approved for the sweetheart deal. It appears that the last 20 years’ worth of basic accountability reforms – now standard practice for most states – are unknown to Oregon’s lawmakers.
The lack of accountability provisions are not the only controversial aspect of the new giveaway. The Oregonian reported this week that despite the extraordinarily compressed period the legislature was given to consider the bill, the state has been secretly negotiating the deal, termed “Project Impact,” since last July. You can read the state’s non-disclosure agreement with a company called EMK (presumably a site location consulting firm contracted by Nike to pressure the state) here.
Oregonians are not the only constituency to express concerns about the new law. Intel, Oregon’s other major corporate employer, was reportedly involved in several heated exchanges with Nike over a particular provision of the original legislation that would have prohibited it from benefiting from the same deal based on the fact that it is already receiving considerable subsidies through Oregon’s Strategic Investment Program. Unsurprisingly, that provision was removed from the bill.
Oregon, unfortunately, has no such guarantees that economic conditions and fiscal obligations will remain exactly the same in the decades to come. There are no promises the state can make that protect its residents from change, and this new giveaway means that Oregon cannot rely equally on all businesses and individuals to contribute fairly in the future.