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--> --> May 31: Gobbling of corporate fodder Cathy Shaw This just in: Manufacturing jobs in the United States are on the decline. Many believe the decline is the result of corporate America taking its assembly lines to the Third World. Others think it's because too many of us don't buy products made in the states. Notwithstanding these common sense reasons for the decline, major corporations across America are somehow convincing state legislatures the reason manufacturing jobs are on the decline is due to taxes. Corporations are telling state legislatures to change the tax structure to make it more favorable for manufacturing jobs. According to the corporations, a simple tax break will determine whether they come or stay. Oregon is just one of many states swallowing this fodder. Last week House Bill 2281 received a hearing in one of the few committees still open for business. Bills that reform campaign finance, save the Oregon Health Plan millions of dollars, and move money tied up in government bureaucracies to schools have all missed their chance. So, what's left on the legislative plate? You guessed it, a lifeline to corporate America. And why not? After all, it's business that contributes to the candidates who currently hold leadership in both the Oregon House and Senate. If you don't believe it check out the web site Money in Politics at oregonfollowthemoney.org. Cliff Garvin once quipped: "It doesn't make sense to talk about successful corporations in a society whose schools, hospitals, churches, symphonies, or libraries are deteriorating or closing." Yet, that is exactly what's happening in the Oregon House with House Bill 2281. HB2281 is just one of a host of bills designed to help a few corporations at the expense of everyone else. Meanwhile, our schools, hospital, churches, symphonies and libraries really are in trouble. First some historical context. There has always been - and I suppose always will be - a political fight about the best way to tax business. This is particularly true for corporations that operate in more than one state. The traditional corporate income tax formula for multiple-state companies is based on the property, payroll and sales they have in each state. For example, a company with 80 percent of its payroll and property in a state, but only 25 percent of its sales would pay the average of those three numbers, or 61 percent, of the company's total income. In Oregon, we already have a double-weighted sales formula. Double-weighted means count sales twice, and divide by four. Using the Oregon method, the above company would pay state taxes on just 51 percent of its income. HB2281 takes Oregon to the next logical (at least for corporations) step: tax only in-state sales. HB2281 is great if you own a corporation that produces lots of stuff in Oregon, but sells most of it elsewhere (e.g. Nike or Intel). According to the Legislative Revenue Office, HB2281 will cost the state an estimated $57-65 million dollar annual loss in revenue. Good for Nike and Intel, but what about the rest us? The kind of business tax incentive found in HB2281 began in the manufacturing heavy communities of the Midwest and Northeast. It is now law in Michigan, Illinois, Massachusetts and Connecticut. Experience in the Northeast and Midwest suggests that once a state limits its taxes to in-state sales, the surrounding states must follow or lose manufacturing jobs. The downside is clear. The more states employ this kind of tax formula, the more it becomes a race to the bottom. Proponents insist we need HB2281 to retain and attract corporations to Oregon. Unfortunately, the impact of skewing corporate taxes in this manner will have a decidedly negative impact on existing sales-intensive corporations. Chief among existing sales-intensive corporations are those producing electricity and natural gas. Should HB2281 become law, an electric company located in Oregon might prefer to sell power to California and avoid in-state sales. Power companies could realize even greater profits by locating in Oregon and selling power outside the state. Creating an incentive to sell power outside Oregon will exacerbate an already difficult energy situation. Worse, any increase in costs will surely be born by the consumer. Rep. Bill Witt, R-Cedar Mill, who is hosting HB2281, no doubt sees a benefit for his metropolitan district. The question is how many small and struggling communities in Oregon will pay for Nike's and Intel's windfall? As one might expect, rural communities are opposing this bill. Unfortunately, this bill is more likely to fall on party than on urban-rural lines. Given that HB2281 will further cut back state revenues, create more uncertainty of electric availability, drive up the cost of gas and electricity, and benefit only a few at the expense of many - it should sail right through the Oregon House of Representatives. Meanwhile, keep hoping that schools get funded. Cathy Shaw is chief of staff for Rep. Alan Bates, D-Eagle Point; an author; and the former three-term mayor of Ashland. Email your... Technical questions & comments to: WebMaster Daily Tidings editorial comments & questions to: Editor Visit our other Oregon Newspapers... | Albany Democrat-Herald | Ashland Daily Tidings | Corvallis Gazette-Times | | Lebanon Express | Newport News-Times | Springfield News | Cottage Grove Sentinel | Ashland Daily Tidings 1661 Siskiyou Blvd. Ashland, OR 97520 Telephone 541-482-3456 © Copyright 2001 Lee Northwest Publishing