taxes small

By Angela Wilhelms

Oregon is at an economic inflection point. The state historically has welcomed entrepreneurs and employers, and Oregonians have enjoyed the benefits, including good jobs, thriving communities and critical public services supported by tax revenue. Oregon’s business climate has suffered in recent years, however, as state and local taxes have soared and complex regulations have proliferated too quickly for businesses to adjust.

Businesses in Oregon are keenly aware of this trend, and so are businesses outside of Oregon. Unless the governor, legislators and other elected leaders resolve to make things better, business investment in Oregon will plummet, and more employers will simply close their doors. Oregonians will suffer as job opportunities, community vitality and tax revenue decline.

No trend has eroded Oregon’s competitiveness more than the recent escalation in state and local taxes. Since 2019, the business tax burden imposed by the state has increased by almost 45%, according to national accounting firm Ernst & Young. In 2019, Oregon’s statewide business taxes were the nation’s 38th highest. They’re now the 21st highest, a leap of 17 places in a few short and challenging years.

The tax burden shouldered by employers is even higher in the Portland area thanks to a collection of city, county and regional taxes. Local taxes paid by Portland businesses have increased by 32% since 2019.

Oregon sticker shock is real.

Changing course on taxation will require work, but it isn’t complicated. Above all, policymakers must say “no” to new and higher business taxes. But maintaining the status quo won’t be enough. Lawmakers also must encourage employers to invest in Oregon, to which end they must create a research and development tax credit. Most states have R&D credits, and until a few years ago Oregon did as well. It’s time to look to our past to bolster our future.

To leverage the state’s strength as a producer of semiconductors, legislators must leverage the billions of dollars Congress has made available through the CHIPS Act. Even as they position Oregon for semiconductor investment, however, lawmakers must seek to support businesses of all kinds in all parts of Oregon. Innovation happens in many industries and in many places. The important policies and incentives contemplated for the semiconductor industry should be extended throughout Oregon’s critical economic sectors.

And because the competitive landscape changes constantly, legislators should establish a council on tax and regulatory competitiveness, which would monitor conditions here and in other states and recommend changes focused best practices and growing our economy.

Regulations and mandates have exploded in recent years. Urban planning and development, employee commute options, emission-free cars and trucks, recycling and landfills, and a host of other issues affecting businesses have been part of rulemaking in just the last year. And just this month, the state began collecting taxes from employers and employees for a new paid-leave law that is not well-aligned with existing leave laws. Employers are bracing for confusion.

If a more competitive Oregon is to emerge from this inflection point, state agencies must be accountable for rulemaking that is authorized, transparent and effective.

Another significant issue: Employers that do choose to invest in Oregon often can’t find land on which to grow. Likewise, workers often can’t afford housing near their jobs. Oregon’s land use system has produced scarcity and must be adjusted to better balance growth and preservation. The Legislature should consider a range of measures, including site-readiness programs, tax incentives for middle-market and affordable housing and a task force on land use reform that will make recommendations for long-term solutions.

Finally, lawmakers must ensure that the Interstate 5 bridge replacement can move forward with increased vehicle capacity and funding that is dedicated to this project. Further delay will jeopardize access to the federal dollars necessary to complete this project.

Legislators have a lot of work ahead of them, and we’ve only scratched the surface here. More can be found in OBI’s Growth and Innovation Roadmap. The direction set by state leaders over the next several months will chart the state’s path for years to come. It is imperative that this direction is one that propels us toward restored competitiveness and a healthy, prosperous economy.

Angela Wilhelms is president and CEO of Oregon Business & Industry. This op-ed originally appeared in the Portland Business Journal Jan. 19.