The star-studded “Oregon Semiconductor Competitive Task Force,” chaired by Ron Wyden, Kate Brown and the CEO of Portland General Electric industry includes industry, government and academic boosters intent on promoting a more inviting climate for semiconductor companies. Since the task force issued its “initial report” in August, TFO has been teasing facts from fiction, comparing its wish list to the more than $2 billion in subsidies Ohio and New York gave Intel and Micron, and communicating our findings to state and local officials.

The Task Force wants new tax credits, more industrial land and aid to industry-focused job training. Considering the task force’s origins and composition, that’s not surprising. But we’ve been urging legislators, ahead of the 2023 session, to examine the incentives the state already provides to Intel and others, its capacity to give more, and whether and how devoting significant additional resources to one industry fits into Oregon’s economic vision.

In our conversations with legislators and in testimony to Washington County commissioners, we note that Intel, the state’s largest private employer, pays almost nothing to the state or Washington County:

  • Over phases completed in 2005, Oregon slashed taxes for manufacturers that sell most of their production outside of Oregon by adopting the “single sales factor” (dropping payroll and property from the apportionment formula)—as advocated by Intel, its greatest beneficiary
  • The CAT applies only to sales within Oregon, a tiny fraction of Intel’s in-state output
  • Its Strategic Investment Program agreement with Washington County exempts Intel from millions of dollars in property tax; the state reimburses the county for some lost revenue
  • Oregon has no sales tax, a benefit worth $6 to $9 million on every $100 million spent on building materials or equipment

In recent years Intel has reported annual revenue and net income exceeding $70 billion and $20 billion, respectively. Almost none of it pays for Oregon’s K-12 and higher ed the company depends upon.

Intel’s decision to build a fab in Ohio was wise—not because of the largess the state bestowed on it but because Intel wanted to expand its geographical footprint. But the Santa Clara-based company’s strategy is not part of the narrative in Oregon. Instead it’s that the state and local governments should do more for the semiconductor industry—much more.

The report presents assumptions about the amount of tax revenue expansion would bring—assumptions it does not explain. Unless legislators dig into the presentation, they may

throw more money at new fabs than they will generate in economic activity benefiting Oregon.

The report does not mention that with more fabs come demand for more housing and government services (education, transportation, health care, etc.). What plans would policymakers devise to address them?

One item in the report is the projection that 2,000 new jobs would generate $57 million in annual tax revenue.  We suggest that the new hires be broken down to the number of jobs any particular business might commit to create. For example, Microchip Technologies, as it fishes for subsidies, says it will provide 650 high-wage jobs in Gresham. Ongoing revenue from 650 direct hires and additional suppliers, school teachers and fast food workers would generate $19 million a year—not $57 million. Policymakers should take note.

That’s just one of the details we’ve been investigating.

If you want to help with this work, let us know!