Do You Pay Taxes?
How corporate breaks stick it to Oregon.
By Alan Pittman
Arrgghh, tax time again.
Well, OK, people have to do their share to pay for public services in Oregon. But what if not everyone pays a fair share? And what if you have to make up the difference?
That’s been the reality in Oregon for decades. State and local politicians have lathered billions of dollars in tax breaks on corporations and the wealthy with little objective justification. Many tax breaks were supposedly for “job creation,” but now Oregon has among the highest unemployment rate and lowest wages in the nation.
Meanwhile, average schmucks without lobbyists with their hands in Salem’s pot have to make up the difference. That comes in reduced services, like some of the shortest school years in the nation. Or it comes in eventually or immediately higher taxes on lower income suckers to make up the difference: Oregon has one of the highest income tax rates on poorer people in the nation.
But two-thirds of state corporations in Oregon get so many tax breaks that they owe only the $10 minimum per year. A study by an anti-tax group this year ranked Oregon’s business taxes second lowest in the nation.
So while you’re writing that income tax check this month or property tax check later this year on the back of your shriveled pay stub, here’s a look at some of the more egregious state and local tax breaks, sucker.
Intel giga-break. The state will give away $121 million in “Strategic Investment Program” property tax breaks in the current two-year budget, according to the Oregon Department of Revenue’s Tax Expenditure Report, a 400-page list of tax breaks. Most of the SIP’s tax slurp will go to subsidize multi-billion dollar chip plants near Portland and multi-billion dollar profits for Intel, one of the most lucrative corporations in the world. Proponents argue that Intel wouldn’t have built the plants and created jobs without the big breaks, but they offer little objective evidence.
Independent economists have published numerous studies indicating that such tax breaks go to companies that would have chosen the same location anyway based on business reasons such as cheap educated labor, market access and lower land and utility costs. State economists have also found that rather than reducing local unemployment, the companies moving here mostly bring out-of-state workers, increasing the population by about two people for every one new position.
Another issue is whether the subsidy would have created more jobs if the money had instead been spent on needed government social welfare programs. Such state spending can get multiplied tenfold by federal matching money and create large numbers of jobs while doing good, according to the Oregon Center for Public Policy (OCPP). Economists have also found that education, crime prevention and other government spending can have far higher job and economic multipliers than factory jobs.
Critics also argue that this tax break and others like it are unfair to the many other small businesses and other industries and individuals that pay taxes and employ far more people in more stable jobs.
About 80 percent of property tax breaks cut state revenue while 20 percent of property tax breaks are shifted directly onto other taxpayers to make bond and levy targets, according to the Tax Expenditure Report. About half of property tax revenue ends up going to the state to fund schools, and half goes to local governments.
Enterprise zones. The EZ tax break will give away an estimated $41 million in the next budget with even fewer restrictions than the SIP break, according to the tax report. The EZ tax break per job is unlimited. The property tax break can even go to a company that’s reducing its work force.
Most of the EZ tax break used to go to the Hynix chip plant in Eugene, but after more than $66 million in breaks, Hynix closed last year and moved 1,100 jobs to China, not counting contracted services. Millions more in other local supposed “job creation” breaks went to HMT Technology and Sony Disk Manufacturing. Both of these also closed, creating more jobless people in need of social services. Lane County’s unemployment rate is now more than twice what it was before Hynix came a decade ago.
Nike tax swoosh. Sneaker mogul Phil Knight, the richest man in Oregon, is the chief beneficiary of one of the state’s richest tax breaks. The “Single Sales Factor” break will dunk $90 million in corporate income tax breaks in the next biennium, mostly to Nike. The tax break basically gives multinational corporations operating in Oregon a big break by allowing them to reduce the amount of income claimed as subject to Oregon taxes. The Legislature just did it for Nike in 2005.
Greenwash tax breaks. The amount given away in business energy tax breaks doubled from the last budget to an anticipated $144 million. A recent investigation by The Oregonian showed the actual giveaway could end up twice as high. “The money also is going to risky ventures with questionable environmental benefits and to prosperous companies that need no incentives but are cashing in anyway,” the paper reported in January.
Locally, Weyerhaeuser grabbed $9 million from the break program for burning wood for power. Seneca Sawmill wants to tap even bigger breaks for its proposed wood burner in West Eugene. With hundreds of tons of emissions predicted, local environmentalists have questioned how burning wood represents green power. The break can also go to ethanol plants, another supposedly green energy that environmentalists are worried could actually increase global warming.
Slumlord break. The Eugene City Council has given unaccounted millions away with a property tax break for apartment buildings that will suck away $13 million statewide in the next two years. One of the biggest beneficiaries of the 10-year tax breaks was The Register-Guard family’s High Street apartments. The program doesn’t require low-income housing or even housing downtown. Eugene extended the break far out River Road last year. Local critics have said for years that the breaks mostly go to support student housing that would have been built anyway to meet high demand.
Timber baron breaks. Remember how counties and the state complained bitterly that the federal government needs to give them more money because the feds don’t pay taxes on their forest lands like private land owners? Well, it turns out the private timber owners hardly pay any taxes either. Oregon showers its timber barons with more than a half-billion dollars in tax breaks a biennium, according to the tax expenditure report.
There’s a $356 million break for standing timber, a $118 million break for private forest land, $30 million for logging roads and $5 million for timber sales under contract. There’s even a $3 million break for “environmentally sensitive logging equipment,” loosely defined.
Proponents argue that many of the breaks help protect forest land from suburban development. But that appears to be more about regulation than taxes, as the recent timber company land rush demonstrated before Measure 37 was reformed.
Breaks for the rich. Oregon has a host of tax breaks that primarily benefit the wealthy. The top 20 percent by income claim more than half of all itemized tax deductions in Oregon, according to state tax data. Tax breaks for property tax payments cost $324 million every two years, home mortgage interest $905 million and home sale capital gains $353 million. Half of the people in Eugene are renters and don’t benefit from those big breaks.
Deducting federal income tax gives $749 million in tax breaks, mostly to the wealthy. Oregon also doesn’t tax cars at a loss of $822 million. Other states tax cars’ value, hitting the Lamborghini drivers harder. Oregon has a regressive flat car registration fee.
Young families struggling with foreclosure get taxed fully. But Oregon gives $12 in million property breaks to owners of private planes, including corporate jets.
Rural mansions. There’s $40 million in biennial breaks for owners of forest and ranch mansions to tap into. Farm land also gets $313 million in tax breaks. Some likely goes to struggling farmers, but with few restrictions a big chunk of the breaks go to subsidize land speculation and urban sprawl.
Tax breaks galore. Oregon has far too many unfairly juicy tax breaks to discuss in one recession-shrunk newspaper article. Businesses get $166 million in accelerated depreciation tax breaks a biennium. There’s $20 million for research and development that likely would be done anyway, $10 million for rural doctors but not for the patients they bill, $10 million for film producers, $10 million for insurers, $6 million for commercial cemeteries, $3 million for wine sellers and even a special $1 million tax break tailored for the PGE baseball stadium in Portland.
Even in a recession that’s forcing brutal cuts to schools and vital programs, it’s tough to pry the breaks from the cold fingers of the special interest lobbyists. Tax breaks only increased after the
2003 recession in Oregon. Today, Oregon corporations now pay less than half the relative tax burden that they paid three decades ago, according to the OCPP.
With so many lobbyists rooting for money, the public interest in not getting taken for suckers doesn’t appear to have much chance in Salem. The all-volunteer group Tax Fairness Oregon recently tried to push, not for repealing tax breaks, but merely for collecting more of the estimated $1.5 billion in evasion of already legally required taxes. Special interest lobbyists derailed even that.