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Wednesday, August 25, 2010

In defense of Oregon's business climate

Here are some smart people, with business smarts and actual lives, who think Oregon's not such a bad place for businesses:

Those who want to knock our business environment selectively focus on tax policies that put us at a disadvantage to other states. Yes, our income tax rate is high and our Kicker is just insane. However, our critics often overlook the fact that we do not have a sales tax or high payroll or gross receipts taxes and as a result our overall business taxes are the lowest in the region.

Frankly our fellow businessmen in the other states feel just as strongly about the problems they face as we do about ours. Businesspeople in every state of the region make statements similar to the quote from the owner of Becker Trucking, on page 4 of this report, about how the Washington legislature has not been friendly to business.

When looked at in this context, where are the jobs and businesses supposed to go? California with its near total fiscal collapse? Business people claim that they want to move to Nevada to avoid income taxes, but will they still want to do that after Nevada resolves its 50% cut in state revenues with new taxes and massive cuts in services? How about moving to Washington to escape income taxes with a ballot measure likely to add income taxes to their high gross receipts and sales taxes?

Arizona just added close to a billion dollars in new taxes, and the state is in turmoil due to its anti-immigration policies—a dynamic which will certainly make it difficult to recruit needed talent. Idaho claims that they offer advantages to Oregon business, but they have a corporate tax rate equivalent to Oregon’s, plus they have a 6% sales tax. Idaho also suffers from a small market and limited industrial infrastructure. Frankly, the closer one looks at the other states in the region, the better Oregon looks.

The whole thing is here.

Comments (28)

Right, they're right. What are business thinking? From government looting to citizen persecution of ESCO - business want to come here...

The Oregon progressives stand on those walls and have a a greater responsibility than business could possibly fathom.... Businesses have the luxury of not knowing what they know. That economic death, while tragic, probably saves lives. And that progressive's existence, while grotesque and incomprehensible to business, saves lives. Business doesn't want the truth because deep down in places business doesn't talk about at parties, business wants them on that wall, business needs them on that wall.

I don't know what the polls are showing but I'll be surprised if Washington voters actually pass an income tax.

The basic argument in the above excerpt is that Oregon is better than the surrounding states might be after hypothetical changes.

Sounds like an attempt to put lipstick on a pig.


JK - That is exactly how I read it. Oregon would not be as bad as these other states, assuming all these hypothetical situations come to fruition. Very weird analysis that reeks of desperation.

Well, since that problem is solved, how come our unemployment is always somewhere in the top 10?

Boeing used to claim that Washington was a horrible place for them to do business. Eventually they moved their headquarters. Last year they decided to site one of their plants in SC instead of Seattle.

The state of Washington is not competitive. . . . So to answer your question, in every one of those areas [transportation, taxes, energy, education, unemployment insurance, and regulations], the state of Washington is not competitive. Let me say it again. In every one of these areas, the state of Washington is not competitive. Meaning it costs us more to operate in the state of Washington.

--former Boeing CEO Alan Mulally to the Washington House Labor Committee, 2002

Boeing used to rank Oregon as a better business climate than Washington.

So all those empty shops and store fronts along upper Fremont and Sandy Blvd. are there because we're a good place to do business?

Hey Mac...this is Detroit West and falling.

Our unemployment's always high because we're geographically isolated and we've never had a wide range of industry. Pretty simple, really.

It's the same reason you get high unemployment in rural towns when a major employer goes bust.

I would like to know how the study was funded. Did the six authors pay for it themselves? Are they the sole funders of Greener Pastures?

They make a lot of good points and add a useful perspective, but perception often matters more than facts. If business owners and investors feel like Oregon is unfriendly to business, then it doesn't matter if it's true or not; they're going to take their money and jobs elsewhere. And that's a message some owners and investors have gotten (wrongly or not) into the recent passage of 66 & 67.

It's also worth considering that it could be true that Oregon generally may not be too business-unfriendly compared to neighboring states but that particular locales within it -- namely, Portland -- can be. Some serious research into the migration of businesses large and small out of downtown and Portland proper to the 'Couv and west-side suburbs is sorely needed. Maybe it's only a trickle, maybe it's a deluge; either way it would be a useful complement to this report.

You're kidding yourself if you think this is anywhere near as bad as Detroit. It's not even as bad as Lane County was in the early '80s during the Reagan Recession when we had 15% unemployment. That was some empty storefront.

There are other factors aside from the state's business climate at work as to why there's empty storefront space. I heard that some dudes crashed the economy, that there are a lot of people out of work, that the banks aren't lending a lot of money to startups, and that there was a huge amount of overbuilding in the commercial real estate market. All those things may have something to do with the empty fronts on Fremont and Sandy, too.

There do seem to be a plethora of poker rooms starting up, though.

Oregon does make it hard to do business. And aside from taxes, don't forget all the fees city of Portland charges. Not to mention the environmental concerns raised. We want clean energy! Oh, you have to remove the dams though to save the salmon. You can't have windmills because of the sage grouse, etc etc. .

The following states do not have fortune 500 companies:

Alaska, Hawaii, Maine, Mississippi, Montana, New Hampshire, New Mexico, South Dakota, Vermont, West Virginia and Wyoming.

Those states with fortune 500 companies and the number next to them is the number of fortune 500 companies per million people, starting with the worst first, Alabama. Oregon is 3rd worse of any states with fortune 500 companies.

Alabama .21
Utah .36
Oregon .52
Idaho .64

California has 1.54, Nevada has 1.14, and Washington has 1.05

We're in great company with Alabama and Utah. Louisiana even beats us.

Given that Oregon is THE place to be for young, educated folks, with super smarts and talent, why isn't this the place where the big companies want to be? Great lifestyle, ease of commuting, wonderful surrounds, no pollution, great natural resources, access to other major cities, ports, etc. What is it about Oregon then?

"What is it about Oregon then?"

Distance from markets. Relatively small local markets. Mediocre business climate. Mediocre K/12 school system. Mediocre higher education system.

Hint, we can't do anything about the first two.

As others have stated, taxes are only one part of the equation. Land use laws, EPA, rabid greenies, liberal courts(this matters because they side with rabid greenies), tons of NIMBY's running around, state/county/city policies, etc all factor into Oregons business status.

Since a recent poll of CEO's said Oregon is not business friendly I think we are not.

I can't help but be skeptical and cynical when they have quotes from a Portland Development Commission video.
Might as well be from a Sam Adams video.

And any comparison that has to use this kind of "as a share of" method wreaks.

"Business Taxes as a Share of Gross State Product"

Ben, isn't that a useful frame to look at taxes as a share of gross state product? It's certainly more accurate than the articles a few days ago that just looked at income taxes and declared Oregon one of the worst for business. That's kind of like comparing property tax bills without comparing the underlying assessed value of the land. It doesn't give you a complete picture.

But Eric is right that perception matters more than facts. So I'm glad to see some business owners making it clear what the facts are in an attempt to change perceptions.

Darrelplant...when you get back from Detroit we'll have a conversation. It's a ghost town as we are becoming. Try to keep up. Glib comments don't make an argument.

The more we let our schools go down hill, the more we doom our state's ability to compete. We also need hot and cold running substance abuse treatment and prevention programs for kids. Socially and ecologically positive businesses would love to come here if they could get educated, clean and sober workers, and their worker's kids could hope to get a decent education.

Our schools have been going down hill for two decades because of wasted resources spent on the perpertual meddling with failed programs.

From CIMCAM to ESL to lousy math and language methods it's one after another.

Meanwhile the drop out rate and all around student performance suffers wihotu any consequences for those running the system.

Let's look at the authors:

Dave Vernier has given more than a third of a million dollars to Democratic candidates and organizations in the last 16 years, a third of that in the last two years.

John Calhoun has given more than $26,000 to Democratic candidates and organizations in the last 14 years, almost half of that since 2008. He was the treasurer of Veterans in Action, which advocates for a "progressive economic and social agenda" along with its advocacy for veterans.

Tony Arnerich gave $5,000 to the Democratic Party of Oregon in 2000, and another $200 to Obama six weeks before the election.

Randolph Miller is the most balanced, having given $2,500 to Dems and $2,000 to Repubs (all but $250 to Gordon Smith).

Karen Jacobson has no contributions listed under her name, but is a founding member of the Willamette Women Democrats, and sits on the board of the Oregon Center for Public Policy, a liberal think tank.

John Jackson, who works at OregonLive.com, also has no contributions listed under his name.

With that kind of background, what other outcome would you expect?

I will point out that Freightliner nee Daimler Trucks threatened to totally relocate to So. Carolina. They relocated a bit of the company and quit. The schools and living conditions in that state are far worse than here and the labor pool is far worse.


You attacked the messengers but never once addressed their statements, data or conclusions.

These people are "smart" and they say that business taxes are lowest in the region because of no sales or gross receipts tax? Hogwash.

Look at the underlying Ernst and Young Report, by far the largest tax line item is property tax. And costs of regulation, development fees, give backs, density bonus requirements, litigation climate, licensing, green building codes, zoning and permitting processes, economic regulation, labor laws, payroll taxes, workers comp., unemployment insurance etc. can add up to as much or more than property taxes.

If these latter costs are high then businesses won't have much property in the state that's subject to taxation; so business taxes that are small as a percent of gross state product can then be a sign of a bad business climate. On the other end of the scale, look at Alaska which is the wild, wild west for business. By the Ernst and Young scale, Alaska is the worst business climate when we know instinctively and subjectively it's more likely the first.

Bottom line, the best way to determine whether the business climate is good or bad is to see how businesses are voting with their feet. Do they stay or go? Do they shuffle or grow?

If "prevailing wages" on government contracts were higher, the business climate would certainly improve for Democractic candidates.

mp -- you're right. My sole point is that there is a tremendous divide between those who think Oregon is a great, low-tax, business friendly state, and those who don't. And that divide is mirrored by those who vote Republican and those who vote Democrat. I'd simply like to see the same point made by conservatives (and maybe it has been).

The main reason there's still a Daimler/Freighliner presence at Swan Island is that they got a large order for military trucks last fall and expected more. Closing that plant on schedule last June would have meant a disruption in production capability, so they reversed course and kept part of it open to make the most of the contracts. They also postponed moving civilian Western Star production to Mexico.

I wouldn't expect those 650 jobs to stay long once the contracts are fulfilled.

I know people just love to whine about the bad Oregon business climate, but the truth of the matter is, there you've got a company that's planning to move production out of the country to a place where the workers make a fraction of what they make here. That's not something that's going to remedied by jiggering with sales taxes, business taxes, fees, capital gains, or anything else. The Mexican federal and state governments can do all that stuff, too.

Freightliner executives vowed to leave Oregon after the State of Oregon bought Volvo trucks instead of Freightliners (must have been about 8-10 years ago). Jim Hebe went down to talk to Kitz and said they "kept him waiting in a broom closet" before getting the bums rush from Kitzhaber who told him it was a competitive bid and Freightliner had lost. That's when they decided to close the Portland Plant (eventually) and transfer the executives to the Carolinas and (most) of the lost manufacturing capacity to Mexico.

The "Buy American" clause in the DoD contracts prevented them from building those trucks in Mexico, so they decided to work over the CoP for some game ending subsidies simply to add insult to injury.

Five years from now, there will be an I.T. department and a wind tunnel/testing presence on Swan Island. Most of the high paying jobs have already left.

darrelplant - I wasn't talking about the Daimler plant but thanks reading your own thoughts into my post. I have friends who work in the corporate offices... they were going to move corporate to SC. Most of the first group refused to move (the economy was still good then) because of the schools and general lack of livability. It's easy to find plant workers in SC. It's not so easy to find professionally skilled workers there.

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