Feds make it clear for Oregon lawmakers: no race to the bottom to compete for CHIPS Act dollars

Feds make it clear for Oregon lawmakers: no race to the bottom to compete for CHIPS Act dollars

Feds make it clear for Oregon lawmakers: no race to the bottom to compete for CHIPS Act dollars

After Congress dedicated billions of dollars to semiconductor investments in the U.S., Oregon legislative leaders have lined up behind an effort to attract additional semiconductor investment to Oregon. This is an important industry that plays a pivotal role in Oregon, and its continued growth provides a tailwind driving Oregon’s economic success. Figuring out exactly how to lure funding from the federal CHIPS Act has been stymied by a lack of guidance from the Department of Commerce. That changed this week when the Notice of Funding Opportunity was released, and with it a variety of documents explaining exactly what the department is – and is not – looking for.

Importantly for Oregon lawmakers, the agency notes that “Applicants must be offered a state or local government incentive to be eligible for CHIPS Incentives.” But what investments would be the most favorable? For those who read our prior paper, “Oregon’s Semiconductor Incentives Package Should Focus on People and Place,” the types of investment will be familiar. The guidance explains:

The Department encourages projects that include state and local incentive packages capable of creating spillover benefits that improve regional economic resilience and support a robust semiconductor ecosystem, beyond assisting a single company. Such incentives might include investments in workforce, education, site preparation, or infrastructure (including transit or utilities) that are not limited to the applicant, but designed to benefit both the applicant and the broader community. Likewise, the Department will place less weight on incentives (such as direct tax abatements) with less potential for spillover benefits. (emphasis added)

Claims that Oregon must have a Research and Development Tax Credit to be competitive have no basis in the guidance provided. In fact, it even notes in an additional document that, “The CHIPS Program Office will accord less weight to incentives, such as direct tax abatements.” They go on to point out that, “the CHIPS Program Office will not facilitate or participate in a race-to-the-bottom to divert vital state and local revenues to corporate bottom-lines.” (emphasis added)

Giving tax credits to profitable corporations with a record of stock buybacks is exactly the kind of race-to-the-bottom waste of public resources Commerce wants to avoid. Furthermore, our research shows that Oregon’s prior R&D tax credit did not meaningfully help our standing as a national hub for research.

Oregon must heed the clear Commerce directives on how to attract CHIPS Act resources: avoid tax giveaways and invest in people and place – in Oregonians and shared infrastructure.

Daniel Hauser

Daniel Hauser

Daniel Hauser is the Deputy Director of the Oregon Center for Public Policy

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