Oregon State Capitol becomes Niketown for a day
B Y DON M C INTOSH
Associate Editor
SALEM — To give Nike assurance
that its taxes won’t go up, Oregon Gov.
John Kitzhaber summoned the Oregon
Legislature into a special one-day ses-
sion Dec. 14. The $24-billion-a-year
nonunion apparel brand is ready to an-
nounce a $2 billion expansion of its
headquarters in unincorporated Wash-
ington County, but it wanted lawmak-
ers to first guarantee no change to how
its taxes are calculated.
The bill to do that passed 50-to-5 in
the House, and 22-to-6 in the Senate.
Known as the “Economic Impact In-
vestment Act,” it gives the governor
what he called “a new economic de-
K nOW Y Our r ightS
velopment tool” — the ability to sign a
five-to-30-year contract guaranteeing
continuation of the “single sales factor
method” for any company willing to
invest more than $150 million and cre-
ate 500 new jobs.
In his Dec. 10 press conference an-
nouncing the special session,
Kitzhaber said “sideboards” to any
such contracts would include promises
that the jobs created would not be low
paying.
Nike’s build-out plans would create
12,000 new jobs, Kitzhaber said. That
figure includes “indirect and induced”
jobs as well as workers directly em-
ployed by Nike. The expansion would
be completed by 2020, Kitzhaber said,
and construction would account for
$440 million and 2,900 jobs.
The bill had strong support from the
Oregon State Building and Construc-
tion Trades Council and qualified sup-
port from the Oregon AFL-CIO.
Building Trades Executive Secre-
tary John Mohlis said he learned of the
governor’s plans a day before they
were publicly announced. During the
announcement, Mohlis stood behind
the governor alongside Oregon Busi-
ness Association President Ryan Deck-
ert and Oregon Business Council Pres-
ident Duncan Wyse.
Nike has employed overwhelm-
ingly union labor in past construction
projects, Mohlis said. Though the
company provided no assurance it will
use union labor in its expansion,
Mohlis said union building trades
workers would likely do most of the
work.
The piece of Oregon’s tax code that
the contracts would preserve is known
as the “single sales factor.” It’s a 2001
change to the tax law which reduced
Nike’s state corporate income tax as
much as 95 percent, according to esti-
mates by the union-backed Oregon
Center for Public Policy. The change
has to do with how much of a multi-
state corporation’s profits are attributed
to Oregon for the purpose of the state’s
corporate income tax. Before 1991,
Oregon considered property, payroll,
and sales equally in making that calcu-
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Editor: Michael Gutwig
Staff: Don McIntosh, Cheri Rice
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DECEMBER 21, 2012
NORTHWEST LABOR PRESS
lation. Under those old rules, if a shoe-
maker had 80 percent of its property in
Oregon, 80 percent of its payroll in
Oregon, and 1 percent of its sales in
Oregon, the state would average those
three percentages, and the company
would pay state income tax on about
54 percent of its profit. But lawmakers
in 1991 doubled the sales factor, and
then in 2003 they passed a phase-in,
and later sped up, to counting only
sales. Thus since 2005, the hypotheti-
cal shoemaker pays Oregon’s 6.6 per-
cent corporate income tax on only 1
percent of its income — if Oregon
sales are 1 percent of its total sales.
The actual amounts paid are not
publicly disclosed. But the tax law
change means a company like Nike
gets the same corporate income tax
treatment as a company that has no
property or employees in Oregon.
In July, Health Net, a California-
headquartered insurance company,
filed suit seeking to overturn the
change, saying it violates a multi-state
tax compact that Oregon signed
decades ago harmonizing how states
calculate taxes. The suit is still pend-
ing.
For now, however, the Economic
Impact Investment Act has no price
tag, since it promises to keep the sta-
tus quo.
“It doesn’t create new tax breaks,”
Mohlis told the Labor Press, “and it
won’t cost the state a penny.”
In a hearing on the bill the day be-
fore the legislative special session,
Mohlis testified in support of the bill.
“The impact on business expansion
and job creation, especially in the con-
struction industry, is significant,”
Mohlis explained in a Dec. 13 press
statement. “A $441 million investment
that creates 2,900 construction jobs is
huge for the building trades. What a
boost this would mean for many of our
members whose families have experi-
enced economic challenges or unem-
ployment.”
Meanwhile, Oregon AFL-CIO Po-
litical Director Graham Trainor asked
lawmakers to make three amendments
to the bill: a requirement that the jobs
created pay at or above the state aver-
age wage, a requirement that compa-
nies reimburse the state if they don’t
uphold their end of a contract; and
shortening the potential contracts from
maximum of 40 years that was initially
proposed. Lawmakers declined to
make the first two amendments, but
did reduce the maximum length to 30
years.
The day of the vote, the state labor
federation sent legislators a letter of
support for the bill, calling it “one of
the better tools for recruiting invest-
ment in Oregon jobs that we could
have.”
The bill takes effect 91 days after
passage — March 15 — at which point
the governor could sign a contract
freezing the method of calculation
with Nike, or any other company will-
ing to commit to $150 million invest-
ment and 500 jobs over 20 years.
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