Incentives to Lure Businesses Waste Taxpayer Dollars

The Legislature is working on a tax credit increase for “energy businesses.” These businesses already have a 35% tax credit, spread over 5 years, up to $10 million. The proposal is to increase the credit to 50% for up to $20 million.

Both are a waste. John Sedgwick, the co-founder and vice president of Solaicx, which is the latest and largest company coming to the state, has this to say:

“The ready availability of skilled people was far and away the main reason for choosing Portland.” He goes on to add that “We love the incentives and that the expanded credit would be “…icing on the cake.”

So much for the supposed need for the incentives. Studies going back over 20 years have shown that almost all incentives to lure business, from autos to high-tech, cost the taxpayers more than the economic benefit of the jobs created.

— Richard Leonetti is from Oregon Tax Research

  • baldeagle

    Show us the studies.

    That said, companies always say in their public statements that incentives are not the deciding factor before making a committment to invest in Oregon. In private, they ask for incentives. Incentives have always been an influence in conducting business. Example; car companies who offer rebates on auto purchases. Why? Because rebates are influential when bying an auto.

    States and communties compete hard for companies shopping around for a place to conduct business, open a new processing plant, a distribution center or a manufacturing facility. Oregon is particularly interesting to Green companies because of its enlightened stance on energy independence.

  • iop

    I can see incentives for the laregr businesses, but smaller businesses never see them or never use them. That means most companies never get the opportunity.

  • Steve Plunk

    It frustrates me that we need to offer incentives in the first place. Fair taxes and reasonable land use laws should be enough to attract business. If the legislature would fix those problems incentives would be totally unnecessary.

    I’ve also noticed incentives themselves are unfair. Why offer tax breaks to new employers while ignoring the plight of companies that have been around a while? Again, if you create an overall business friendly atmosphere you have to bribe business to come here. It really isn’t so much being business friendly as much as no so anti-business.

    As Richard Leonetti pointed out the cost more than they are worth, they corrupt the system, and they create an unfair playing field. Why are we doing this at all?

    These incentives also create situation ripe for corruption. Not the envelope full of cash corruption but the soft corruption of bureaucrats helping their favorites and then later going to work for them.

    • Captain_Anon

      I disagree. Columbia Sportswear wasn’t happy with Portland and thier permitting, but when Washington County offered them a nice package of tax incentives, they bolted. thier lease is almost up now and they are once again shopping for a new headquarters – so that they can get additional tax incentives either from washington County, or *gasp* back in portland – whom they have been having talks with (as reported in the paper not too long ago). if it was purely a fair business climate and all about land use, they would never consider portland. they would stay in Washington County or go to Clackamas County.

      further evidence: Boeing moved from thier long time headquarters of Everett and Seattle to Chicago. why? tax incentives and other goodies the city of Chicago offered. under a level playing field, they would have chosen to stay in seattle. economics would have dictated it. their roots were there, thier workers and families were there, thier biggest factories are there, their reputation is thier, thier private air field is there just south of downtown. the move would cost millions. which they would NOT have done except that Chicago ponied up and offered them massive incentives. now, Chicago and Illinois are reaping thier corporate income tax instead of washingtong, along with all the income tax from those high paying white collar jobs that left too.

      You’re probably right that the initial cost is more than the return. except when you take into account the multiplier effect, the synergy of other businesses (notice how computer chip makers, virus protection companies, and other computuer companies locate near each other and attract other companies to the area), the income tax/propety tax from the high end jobs etc. but it usually has to take place over the long term. and i think that much of the benefits are felt by the cities, not the Counties. which is one reason why while portland is experiencing an unexpected windfall, the county is experiencing its 7th straight budget of cuts.

      • Steve Plunk

        Columbia Sportswear was unhappy with Portland and it’s permitting so it left for Washington. Was it because of Portland or because of the incentives? Boeing left the Seattle area but was it for Chicago’s incentives or Chicago’s central location as an airline hub or maybe because progressive Seattle’s business climate?

        Better than incentives is the creation of a pro-business climate that is fair to all.

        • Captain_Anon

          I’m going to go with Incentives. Boeing wasn’t going to make the move, then Chicago threw more incentives at them. just having a central location and a top tier airlines headquartered doesn’t make a business uproot its entire management team that has been established for 80 years. move all it’s corporate operations and employees and thier families. that doesn’t make business sense. the cost to move was astronomical. the incentives bridged the gap. Boeing is in Everett, which has a different business climate than Seattle anyway. Microsoft is in Kirkland and Bellvue – different climates than Seattle. Seattle is also headquarters for Alaska Airlines i believe – which is a large, reputable airline.

          Columbia WAS unhappy with portlands permitting process. but Washington County threw them money to lure them away. and if Columbia was so concerned about only the permitting, they wouldn’t even consider portland again, like they currently are. it’s about money, incentives, and tax breaks.

          The truth of the matter is, EVERY state, and EVERY big city give breaks to big business to lure them. it pays off for the city in income taxes, the multiplier effect of high salaries, and reputation.

          right or wrong? its what everyone does, so everyone else has to do it to keep up.

  • Britt Storkson

    How is it ever right, fair or just to take money from people who earned it and give it to those who didn’t earn it no matter what the objectives are?

  • james of salem

    I think the 1st part of Sedgwick’s statement is just platitude. It’s true just about anywhere in the US. He is here for the icing.

    Places with reasonable taxes & land use don’t need special, taxpayer-funded incentives. The business climate in general should be the incentive.

  • Captain_Anon

    Just read today that Troutdale is courting UPS for a major regional hub and dangling tax incentives out there. they are competing against washington and other states cities for the hub….. all using tax incentives to lure them. it’s an everyday reality.

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