Oregon leads way on tax incentives

Statesman Journal
April 12, 2012

Pew report says Oregon leads way on evaluating effectiveness of tax incentives

Report: State does good job on testing effectiveness

Oregon is ahead of most states when it comes to evaluating how effective its tax incentives are, but there's still room for improvement, a report released Wednesday by the Pew Center on the States showed.

Researchers rated states based on how well they evaluated major tax incentives and how these results helped lawmakers make policy decisions. The nonprofit also looked at whether states examined the economic impact of its tax incentives and drew clear conclusions about whether the incentives achieved its goals. States were split into three categories: leading the way, mixed results and trailing behind.

Oregon is among 13 states rated as leading the way in evaluating its tax incentives for jobs and growth, according to the report. Other states that fared well included Washington, Arizona and Kansas. States that are trailing behind included Nevada, Utah and Colorado.

"Oregon is the only state that has performed at least some high-quality evaluations and instituted legislative review of all its major incentives," the report said. "However, Oregon has not linked these two elements — that is, the evaluations that lawmakers rely on are not always rigorous."

For example, the report praised Oregon for examining the controversial business energy tax credit, a state program that has provided tax subsidies for energy conservation and renewable energy projects since the 1970s. Lawmakers significantly scaled back the tax credit in 2010 after investments in large wind energy projects threatened to outrun budgeted estimates by at least $100 million. Consultants to the Oregon Department of Energy looked at whether the credit was encouraging energy projects that would not have happened without the incentives.

Chuck Sheketoff, executive director of the Oregon Center for Public Policy, noted the report singles out Oregon as doing a good job when it comes to evaluating its tax credits but there are still a number of other tax expenditures such as deferrals and preferential tax rates that aren't routinely evaluated.

"We look very good relative to the poor job most states do," said Sheketoff. "But we have only taken a small step forward frankly."

In the future, the state could have more in-depth or rigorous tax incentive evaluations like it did for the business energy tax credit, said Jeff Chapman, a senior researcher for the Pew Center on the States.

Oregon took a major step in 2009 when lawmakers passed a law that gave certain tax credits a six-year expiration date unless the Legislature voted to renew them.

Senate President Pro Tempore Ginny Burdick, D-Portland, said so far the process has been a huge success.

"Before we passed the bill, tax credits took their share off the top without any meaningful review," Burdick said. "We put the brakes on that in 2009. Now tax credits have to be out there competing with all the other budget priorities."

Oregon had 378 individual tax expenditures that amounted to $31.3 billion, according to the state 2011-13 tax expenditure report. Tax expenditures include tax exclusions, deferrals, tax credits and other incentives.

Some lawmakers agreed that Oregon could have more rigorous evaluations of its tax credits.

"Give us time, we'll improve our rigor," said Rep. Vicki Berger, R-Salem, and co-chair of the Joint Committee on Tax Credits.

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