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December 2012

Jeld-Wen’s HQ Decision: Proof that Taxes Don’t Matter and Nike Deal is Foolish

by Chuck Sheketoff

The news that Jeld-Wen, Oregon’s largest private company, is establishing its North American headquarters in North Carolina confirms that corporate taxes are at most a minor consideration in a company’s decision of where to locate.

It also demonstrates the folly of the rush to enact the Nike Tax Deal law.

Why? Because North Carolina is a state with higher corporate income taxes than Oregon and Georgia, the other state Jeld-Wen was considering for its headquarters.

North Carolina does not employ single-sales factor apportionment — the formula used by Oregon (and Georgia) to calculate what share of a multi-state corporation’s nationwide profits it will tax. Under single-sales factor apportionment, Oregon and Georgia only consider the share of the company's sales that occur within the state in calculating the share of profits subject to tax. They do not consider the share of the company’s property and payroll located within the state.

North Carolina uses a different formula that does take into account property and payroll. Thus, the location of a company’s headquarters leads to higher taxes under the formula used by North Carolina, but not under Oregon’s and Georgia’s single-sale factor formula.

It is also noteworthy that North Carolina and Georgia rank worse than Oregon in business tax indexes published by corporate-funded institutes. For example, the Tax Foundation’s 2013 State Business Tax Climate Index lists North Carolina among the top 10 worst state “business climates.” The Tar Heel state ranks 44th, while Oregon ranks 13th.

Or take the Council on State Taxation’s 2011 Competitiveness of State and Local Business Taxes on New Investment study. It ranks Oregon as having the nation’s second lowest effective tax rates for new capital investments. North Carolina ranks 34th.

So why did Jeld-Wen choose North Carolina for its North American headquarters?

It’s the old adage of “location, location, location.”

According to today’s story in the Portland Business Journal:

Jeld-Wen Chief Administrative Officer Ron Saxton told the Business Journal in September that expanding the company's presence in the south will allow it to better serve two of its largest customers, Atlanta-based Home Depot and North Carolina-based Lowe's.

Add to that the fact reported in The Oregonian that Jeld-Wen’s president lives on the East Coast, and North Carolina Governor Bev Perdue’s acknowledgement that Jeld-Wen has been operating in North Carolina since 1962 and has two manufacturing facilities there and you can be certain that other factors, not taxes, drive location decisions.

Those factors trumped the fact that Jeld-Wen’s world headquarters is, and for the time being will remain, in Oregon, where the company began.

True, North Carolina is giving Jeld-Wen a $2.5 million grant if they create jobs and maintain them for 9 years.

But as Paul O’Neill, a former Alcoa executive and former U.S. Treasury Secretary under President George W. Bush, put it: “If you are giving money away I will take it. If you want to give me inducements for something I am going to do anyway, I will take it. But good business people do not do things because of inducements.”

The Jeld-Wen decision should be a lesson for Oregon lawmakers that they should not buy Nike’s plea for “tax certainty.”

And the Jeld-Wen decision should teach Oregon lawmakers that it is foolish for Oregon to use tax dollars to lure businesses. That money could be used to strengthen our schools and other public services, rather than subsidize corporations for things they are going to do anyway for a host of other reasons.

Oregonians and Oregon’s business climate would be better served by using tax revenue to invest more in our schools, job training, health and human services, the judiciary and other public structures that enhance quality of life, create a more skilled workforce and facilitate commerce.


This post was originally published on www.blueoregon.com on December 14, 2012. The original post can be found at http://www.blueoregon.com/2012/12/jeld-wens-hq-decision-nike-taxes/.

 

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