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The Senate Committee on Finance and Revenue conducted a hearing April 5 on a bill that would create a tax incentive Oregon needs to remain competitive for semiconductor and other manufacturing investment. SB 1084 would establish a meaningful research and development tax credit like those, as noted by the Oregon Semiconductor Competitive Task Force, “[f]ound in nearly all states.”

The fact that Oregon lacks such a credit places the state at a significant competitive disadvantage in attracting investments from manufacturers of semiconductors and other products. This is so despite the grant funding and land-use provisions contained in SB 4, which the Senate approved in late March.

SB 1084 would establish an R&D tax credit of up to $15 million for qualified activities, capping the program at $200 million per biennium. The credit would be largely refundable for companies with fewer than 150 employees. It also would be transferrable, increasing its flexibility and appeal as a development tool.

The bill’s components, OBI’s Scott Bruun explained to the committee, follow the recommendations of the semiconductor task force and “were specifically designed to make Oregon a top destination for investment capital.”

Importantly, Bruun noted, the bill “does not pick winners or losers.” It would incentivize research and development by a wide range of industries, not only those involved with the manufacture of semiconductors. Government, Bruun explained, “cannot know the best place to invest or what the future will hold as far as products, design, research processes, or emerging industries and technologies” are concerned. Only markets can do that.

Investment in manufacturing pays off, as it leads to the creation of lucrative jobs for Oregonians and significant tax revenue for state and local government.

According to the semiconductor competitiveness task force, every $1 billion in semiconductor capital investment generates $44 million in public revenue and 7,000 construction-related jobs. Every 2,000 permanent chip jobs create $57 million in government revenue annually.

As for manufacturing generally, research conducted for OBI has found that this sector contributed $33 billion to Oregon’s gross domestic product in 2020. The median earnings of full-time manufacturing workers are 17% higher than those of workers in other industries. And a 10% increase in Oregon’s manufacturing output – supported, perhaps, by a robust R&D tax credit – would support 66,000 new jobs and generate $800 million annually in state and local tax revenue.

SB 1084 is a part of OBI’s Growth and Innovation Roadmap.

Read Bruun’s full testimony here.