The House speaker and the Senate president were elected without a hitch. Legislators were sworn in and started dropping bills. Some of them are ours, so we were off to Salem to start talking them up.
Semiconductor Incentives. The Biden administration is working to bring home manufacturing, and under the CHIPS Act, the Commerce Department will begin dispensing funding in the spring as part of the effort. The business lobby, led by the Oregon Business Council, has been pressing the legislature to hand out all kinds of goodies. One bill draft, for example, would create a “job creation tax credit” and a “family wage tax credit”—both paying any business that adds jobs and putting part of the cost on taxpayers. The draft also would revive and increase the research credit which the legislature let expire in 2017 at the governor’s recommendation and extend four tax expenditures 12 years without formal review.
Our message is that the tax code is an inefficient way to target spending. If the legislature wants to subsidize semiconductors, it should set a budget through the appropriations process. And semiconductor expansion should not be an excuse to circumvent the scheduled review of tax expenditures.
Unlike Governor Kate Brown, who embraced the Oregon Business Council’s agenda in total, Governor Tina Kotek has said she would support expenditures of $200 to $300 million. We’re waiting for details.
Enterprise Zones. We’ve been researching agreements under which the state allows counties to waive property tax payments in exchange for promises from businesses—and feeding our findings to The Oregonian, which has published a series on the abuses allowed under the agreements. What do we call an abuse? How about giving tax breaks to retailers like Amazon, which site their warehouses according to business necessity and then plead with local governments for tax gifts. In other cases, metro Portland jurisdictions have given tax abatements to data centers, which gobble up valuable land and have few employees. There are multiple bills to extend these enterprise zones with no changes.
We asked Rep. Dacia Graber to introduce HB 3011 which would make modest changes to Enterprise Zone programs. The bill would require more transparency, exclude retail warehouses (Amazon, UPS, etc.), shorten 15-year rural zone agreements, and in metro Portland deny benefits to low-employment-density buildings like data centers.
Opportunity Zones. In 2017 Congress created Opportunity Zones under the premise that tax-free income for rich investors would alleviate poverty in low-income neighborhoods. But most investments have been in real estate projects that gentrify neighborhoods, not create economic opportunity for the people who live in them. For example, the Portland Ritz-Carlton, financed with Opportunity Funds, replaced dozens of food carts with luxury condos (up to $8 million), hotel rooms and office space. Because Oregon is tied to the federal tax code, residents don’t pay state taxes on income from Opportunity Zone investments no matter what state they’re in.
We asked Rep. Andrea Valderrama, who was a Revenue Committee member in the last session, to reintroduce the bill we generated in 2020. (A version of the bill was scheduled for the House floor the day Republicans walked out, effectively ending the session.) HB 3909 would follow the example of several states that have denied corresponding state income tax benefits for their residents. Based on a recent congressional cost estimate, we think enactment would return to the General Fund more than $200 million that wealthy taxpayers have been able to defer paying over the past four years.
Opportunity Grants. The scholarships awarded to low-income students are funded two ways. In the current biennium, Opportunity Grants received $166 million through Ways and Means and an additional $14 million per year through auctions of tax credits. But the buyers of tax credits have siphoned $3.8 million that would have gone to students had the funding mechanism been through biennial appropriations.
SB 129 and HB 2075 would extend the tax credit auctions from 2024 through 2029. We are urging the Revenue committees to amend the bill and kill the auctions before another takes place in December and asking the Ways and Means Committee to make up the difference. Oregon has more outrageous examples of wasteful spending, but none is dumber.
These ideas would mark modest improvement. We expect to play defense on a bunch of terrible bills—soon. Vigilance.