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Among the early themes of the 2023 legislative session is a growing recognition that Oregon, owing to rising taxes, regulatory complexity and land scarcity, is steadily becoming less economically competitive. This recognition has sped the passage of Senate Bill 4, a semiconductor and advanced manufacturing package. It also has earned committee hearings for several proposals contained in OBI’s Growth and Innovation Roadmap.

But even as many legislators work to make Oregon more competitive, recognizing the value of the jobs and tax revenue that come with business investment, others would push the state in the opposite direction. On March 21, the House Committee on Revenue held a public hearing on a bill that would erode incentives to invest in Opportunity Zones, which spur economic growth and create jobs in high-poverty areas.

Opportunity Zones were established by the federal Tax Cuts and Jobs Act of 2017. To encourage individuals and businesses to invest, the law allows them to defer taxes on capital gains that are directed to Opportunity Zone projects.

House Bill 3039 would take part of that incentive away, as OBI’s Scott Bruun explained to the House Revenue Committee March 21. Oregon taxes capital gains, too, and these taxes are deferred along with federal taxes under the program. HB 3039 would deny Opportunity Zone investors an exemption from state capital gains taxes, effectively making Opportunity Zone investment less attractive.

As Bruun notes in his testimony, the bill would add a 9.9% marginal tax on opportunity zone investments, which would have the effect of curtailing them. This makes HB 3039 a poor public policy choice, at least if legislators are intent on making Oregon more competitive and helping people who live in high-poverty areas.

Read Bruun’s full testimony here.