Nike Tax Deal and the Killing of Entrepreneurship

Chuck Sheketoff

The Washington Post has been running an excellent series on what ails the middle class, called Liftoff & Letdown.

The fifth installment in the series, The great start-up slowdown, examines the decline of entrepreneurship — the start-up of new businesses — in our nation.

One of the key factors that the article cites for the decline in entrepreneurship is the fact that entrenched companies “are ramping up their efforts to win favors from the government — tax breaks, spending contracts or industry regulations that favor their firm over potential competitors.” This practice, which economist William Baumol calls “unproductive entrepreneurship,” diverts resources away from more productive uses — from practices that would create more jobs.

And what example of “unproductive entrepreneurship” does the article cite?

The Nike Tax Deal.

As The Washington Post explains:

Look at shoes, for example. In December 2012, state lawmakers in Oregon met for a one-day special session. They considered exactly one bill, which they passed and the governor signed. The bill allowed the governor to ink a contract with the state’s most iconic big company, the shoe and apparel giant Nike. The company agreed to create 500 new jobs. The governor agreed to lock in a favorable tax system for Nike for the next 30 years. Any new shoemakers that spring up in the state will need to contend with tax uncertainties that their largest rival won’t be sweating. (Only one other company reached a similar deal: tech giant Intel.)

The claim that the Nike Tax Deal would create jobs was laughable from the start, as the company was already moving forward with its expansion plans and refused to release its consultant's economic analysis report.

Nike is undoubtedly Oregon’s greatest story of successful entrepreneurship.

So it is particularly sad to see that the Nike Tax Deal now stands as a classic example of unproductive entrepreneurship, a legislative act that aids in the killing of entrepreneurship statewide.

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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. 19, 2014