Oregon's New Nike Tax Law Suggests Maybe You Can't Just Do It

“The very first action required of every Oregon Legislature is to swear or affirm to uphold the Oregon Constitution” - Rep. Doug Whitsett, R-Klamath Falls

“SWOOSH”? That’s the sound of Nike’s tax assistance speeding through the Oregon legislature.

(PORTLAND, OR Northwest Watchdog) - Elementary school maps of the United States that depict each state by its major product — cars for Michigan, corn for Kansas, coal for West Virginia — might reasonably show Nike’s swoosh symbol for Oregon.

But there are signs the company’s authority over Oregon politics is incomplete.

On the one hand, there’s Gov. John Kitzhaber‘s willingness call a special session of the Legislature, and that Legislature’s willingness to approve quickly a bill to grant the sports-equipment giant tax certainty for 30 years.

On the other, that bill — now law — is suddenly, quietly generating serious constitutional questions.

No one has challenged the law, passed Friday and signed by the governor on Tuesday. But there is criticism, much of it focused on the fact that the new law allows the governor to enter into tax-certainty agreements with companies creating 500 or more jobs and making a $150 million capital investment — and whether the governor can unilaterally change the tax code.

“I frankly would be surprised if someone doesn’t (challenge the law),” said state Rep. Doug Whitsett, R-Klamath Falls, one of just five state Representatives to vote against the bill. “I strongly believe that it’s not government’s position or government’s task to choose which companies flourish and which ones don’t. That is up to the free market.”

Whitsett and other critics were clearly in the minority. The House passed the bill 50 to 5 and the Senate 22 to 6 in a rushed special session called by the governor. The new law ensures the corporate tax structure doesn’t change for the global company in exchange for its promise to expand in Oregon.

Nike officials said they were most interested in keeping Oregon’s Single Sales Factor tax, which means corporations that do business outside the state pay only corporate income taxes on sales transactions inside Oregon.

Whitsett said part of his reason for voting against the bill was the potential of constitutional challenges.

“The very first action required of every Oregon Legislature is to swear or affirm to uphold the Oregon Constitution,” he said in a statement after the vote.

State Sen. Jeff Kruse, R-Roseburg, said he agrees with Whitsett. He had heartburn over the rushed special session, which the governor called for on Monday and took place on Friday.

“It should be the responsibility of the governor and the Legislature to do what is right, not what is politically expedient. In this case we are not doing our job,” he said in an emailed statement.

Proponents of the new law and the governor say this does not keep them from expanding tax certainty to other businesses in the 2013 legislature, and that a large Nike expansion that will bring serious jobs and investment was worth the rushed session.

Opposition to the legislation came from both sides of the aisle with four Democrats and one Republican voting against it in the House.  The list of no votes in the Senate was not available on Thursday.

State Rep. Kim Thatcher was the lone dissenting Republican in the House. She agreed with others that whats’s good for Nike is good policy for everybody.

“All investments and any hiring done in this state is important. Why not encourage smaller businesses that might be likely to locate in more rural areas,” she said.“It’s really bad when it gets to other parts of Oregon. I just kind of question these economic development programs in general. Not that I’m opposed to all of them , but I just feel like it’s too politicized.  It’s not free market.”

She said increasing competition to offer subsidies between states causes an uneven playing field for small businesses.

“We’ve got to stop this little gerbil wheel we’re on, trying to beat the next guy in carve out policies,” she said.

James Huffman, dean emeritus of Lewis and Clark Law School in Portland, said if the new law binds future legislatures from being able to change the tax code, that would be a violation of the law.

Huffman said the new law could also violate the constitutional provision requiring uniform and equitable taxation. He says the risks for the state are higher with this potential legal challenge because a small business or someone else with standing could seek damages.

“If that’s the way it ends up being interpreted,” he said, “then it’s clearly unconstitutional.”

Thatcher said on the constitutional issues, she doesn’t know if small businesses – the ones missing out – would have the wherewithal to sue. But she expects to see legislation introduced next session looking at tax certainty for all business. Whether they pass remains to be seen.

Contact Shelby Sebens at Shelby@NorthwestWatchdog.org, or follow her on Twitter @ShelbySebens. For more Northwest Watchdog updates, visit NWWatchdog on Facebook and Twitter.

Source: watchdog.org