Oregon Got Nothing from Kitzhaber-Intel Deal

Chuck Sheketoff

Nothing. Nada. Zip. That’s how much additional economic investment Oregon is getting out of the deal just inked between Intel and Governor Kitzhaber.

Using the "Nike legislation" (PDF) approved in a special session in late 2012, Governor Kitzhaber last week promised Intel that for 30 more years Oregon won't consider its property or payroll in Oregon when calculating state income taxes on their profits (PDF).

Intel got "tax certainty,” which doesn’t mean what you think it means. In this case, “tax certainty” means that for the next 30 years, despite billions in profits, Intel likely will pay next to nothing in corporate income taxes to the state.

For a few years in the late 1990s Intel disclosed and boasted that it paid $50 million a year in corporate income taxes and was Oregon’s number one corporate taxpayer.

Then Intel and others in the corporate loophole lobby got the legislature to change the formula for calculating the extent to which Oregon could tax the U.S. profits of multi-state corporations.

The loophole lobby convinced the legislature to look only at the percent of sales that are in Oregon for apportioning U.S. profits to the state. By no longer taking into account the share of their property or payroll in the state, as traditionally had been done in determining the share of U.S. profits that were subject to Oregon tax, Intel probably became a minimum tax taxpayer.

How do we know that Intel likely pays only the minimum? At least once since the changes went into effect Intel sold business energy tax credits it had accumulated. It only makes sense for corporations to sell tax credits when they don’t have any tax liability to use them against.

Just as when it used to pay $50 million a year in corporate income taxes, Intel today has thousands of workers and significant property in Oregon but little, if any, sales here. If it has no sales, its minimum tax is just $150 a year (or nothing each year, if it is taking advantage of the loophole created (PDF) by the Oregon Supreme Court’s Con-Way decision (PDF)).

So, Intel gains 30 more years of significant tax avoidance from the deal it signed with the governor.

And Oregon? The Oregonian noted that “the state isn't getting any additional economic investment as a result of Friday's 30-year deal.” (PDF). Indeed, the vice president of Intel's manufacturing group admitted “This is nothing new.”

Like I said, Oregon got nothing.

Chuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org.

By Chuck Sheketoff Dec. 09, 2013