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Over the past year, state and local policymakers have been warned in report after report that Oregon is rapidly becoming a less desirable place for businesses to invest, innovate and create jobs. They’ve learned that the state is not as well positioned as it should be to capture semiconductor investment, that Oregon’s business tax burden has soared since 2019 and, most recently, that droves of Portland-area residents are heading across the river to Clark County, Wash., where taxes are lower. Oregon is in the midst of a competitiveness crisis.

On Feb. 21, the Senate Finance and Revenue Committee considered a bill that would ensure that lawmakers receive up-to-date information about the competitiveness of Oregon’s tax code. Receiving and acting on this information will be necessary to attract private sector investment, which is why Senate Bill 45 is a key piece of OBI’s Growth and Innovation Roadmap.

As OBI’s Scott Bruun explained to the committee, the bill would create a task force to examine important tax questions and report its findings to the Legislature along with policy recommendations that would enhance Oregon’s competitive position. The committee would consider Oregon’s tax rates, its tax structure, who pays and who doesn’t, how such factors affect the state’s business climate and, ultimately, how competitive Oregon’s tax regime is with those in other states.

Such a committee would not be new. During the 2007 session, the Legislature passed what was called the Revenue Restructuring Task Force. It was set up in a similar manner to what is prescribed by SB 45. The mission of that task force was to “promote a stable revenue flow to fund all levels of state and local government; create positive economic benefits for Oregon; and create a financial foundation that will increase Oregon′s ability to compete in a global economy.”

The objective of the Tax Competitiveness Task Force created by SB 45 would be a little narrower. The panel would educate legislators about areas of significant weakness. These could include corporate or pass-through rates or tax structure; corporate activities tax rates or exemption levels; perhaps even the state’s structure or rates for estate, capital gains and business property taxes.

The task force would tell legislators how the incentives Oregon does have compare with those elsewhere. Such incentives include the strategic investment program and enterprise zones. It also would note the competitive ramifications of incentives Oregon does not have, including a research and development tax credit and investment tax credit.

Ideally, the task force even would report on other factors that influence Oregon’s competitiveness such as the state’s regulatory environment, its education performance, livability and community safety.

Business taxes in Oregon are more complex in 2023 than they were in 2007. They are also significantly more burdensome, as Ernst & Young details in an October 2022 report commissioned by the OBI Research & Education Foundation. While Oregon is not the only state in which taxes have changed in recent years, this research indicates that it is decreasingly competitive, especially compared with the western states with which Oregon fights for jobs, investment, and business expansion and retention.

Whatever its findings, painful or reassuring, a Tax Competitiveness Task Force would ensure that legislators were well-informed about the competitive strength or weakness of Oregon’s tax code and well-armed to make critical decisions that would help dictate the opportunities available to current and future Oregonians.

Read Scott Bruun’s full testimony here.