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Report Shows Tax Bill Squanders Revenue and Will Not Improve the Economy

News Release
June 1, 2001

A report released today by the Oregon Center for Public Policy (OCPP) finds that a proposal which alters Oregon's corporate income tax apportionment formula will deliver large tax cuts to a few companies, but will generate few jobs and will not help the economy.

According to the report, House Bill 2281B, which adopts a “single sales factor” formula that taxes companies based only on their sales in Oregon, is a poor example of economic development.

“House Bill 2281B would give tax breaks to multi-state corporations regardless of their future investment in Oregon and even if they lay off workers,” according to Jeff Thompson, co-author of the report and an economist with the OCPP. “Even the Legislative Revenue Office expects this proposal to generate just 100 jobs. At $500,000 per job, the deal doesn't look so good,” Thompson said.

The report shows that none of the states with single sales factor apportionment formulas was among the top ten states for manufacturing employment growth during the late 1990s. Oregon, however, was in the top ten for manufacturing employment growth and had the fastest growing economy in the country in 1997.

“Oregon's economy has performed very well without a single sales factor,” said Thompson. “Oregon certainly doesn't need this bill, and by reducing public services, it could very possibly harm the economy.”

The bill would reduce corporate income taxes by over $100 million in future biennia, which would have implications for the funding of public services.

“You can't cut the state budget without impacting education, because education accounts for over half of the general fund budget,” said Charles Sheketoff, co-author of the report and executive director of the OCPP. Sheketoff noted that some of the tax cut's supporters are also seeking increased funding for higher education. “The supporters of the bill seem to want to have their cake and eat it too.”

Even without the tax cuts in HB 2281B, the state is facing a more difficult time financing state programs in the future than it had previously thought. The May Economic and Revenue Forecast scaled back revenue expectations for the 2003-05 and 2005-07 biennia.

Analysis of the distribution of the tax cut in HB 2281B shows that:

The study, House Bill 2281B and the Single Sales Factor: An Expensive, Ineffective, and Unnecessary Effort to Change the Business Climate, is available on the OCPP web site, www.ocpp.org/2001/es010601.htm.

The Oregon Center for Public Policy is a non-profit research organization that analyzes budget, tax, and economic issues important to low- and moderate-income Oregonians, the majority of Oregonians.

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