Troubling Tax Breaks for Data Centers

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One.

That’s how many jobs LinkedIn had to promise it would create to get five years of big property tax breaks for its new data center in Hillsboro that opened in mid-November.

LinkedIn told DatacenterDynamics that the major reasons it chose Hillsboro were: (1) access to green energy resources; (2) access to good global communications networks; (3) mild temperatures; and (4) tax exemptions in Oregon’s Enterprise Zones.

The reasons may be right, but don’t believe the order LinkedIn gave. “It is doubtful if this was the real decision-making hierarchy since taxes would be the data center’s biggest operating cost,” DatacenterDynamics said.

In other words, the property tax exemption under Oregon’s Enterprise Zone program, which can be worth millions to qualifying companies, was the major lure.

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LinkedIn’s new data center in Hillsboro

Oregon’s Enterprise Zones are designed to attract investments by exempting businesses from 100 percent of local property taxes on new plant and equipment investments for up to two years while construction is in process and up to five years after that if they are growing employment in the zone.

Enterprise Zone contracts require that if a data center already operates inside the Zone and applies for benefits or renewal, it is required to increase employment by just ten percent. If a firm locates a new data center in the Zone it only needs to add one employee to be in compliance.

Because IT equipment in a data center must usually be refreshed within 5 years, the net effect is that there is no tax in Enterprise Zones.

But is the tax break justified?

Hillsboro’s aggressive marketing of the tax exemption has drawn multiple data centers to the city, all gobbling up valuable land within the urban growth boundary and generating a minuscule number of jobs. Current data center operators  include Infomart, ViaWest, Telx, NetApp and T5. LinkedIn’s data center is located in property leased from Infomart.

Infomart says its Hillsboro site benefits from a combination of energy efficiency, inexpensive power, abundant domestic and Trans-Pacific network choices. The most important benefit, however, is the five-year real and business property tax exemption for new equipment and construction. “Since IT equipment is typically refreshed within 5 years, the net effect is that there is no tax, neither sales nor property, on IT equipment in these Enterprise Zones,” Infomart highlights on its website.

That “translates to massive cost-savings for our customers,” Infomart says, and makes Oregon “… the lowest cost state for leased data center operations in the United States.”

Thankfully, Hillsboro taxpayers can easily find out the value of the tax abatement each of the multi-million dollar data centers is getting from the city. That way the public can judge whether the foregone taxes are worth it in terms of investments made and jobs created. Right?

Sorry.

The Washington County tax assessor’s office has determined that the amount the Enterprise Zone property tax exemptions save each data center annually is confidential and exempt from disclosure.

So before everybody gets carried away celebrating LinkedIn’s new data center, and heralding all the other data centers taking advantage of Enterprise Zone tax breaks, a harder look at what’s being given away to all these companies, for not much in return, is in order, particularly given the state’s budget situation.

Maybe this is something the Our Oregon folks could look at now that they’re not so busy after the defeat of Measure 97.

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Brad Avakian and his party are worried

With polls showing Republican Dennis Richardson leading Democrat Brad Avakian in the Oregon Secretary of State race, it looks like Avakian’s supporters are worried.

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Why isn’t this man smiling?

Just in the first three days of this month they pumped $398,915 into his campaign, according to state filings.

Although union members account for just 14.8 percent of wage and salary workers in Oregon, they play a big role in Avakian’s campaign. Union donations in the first three days of November included:

  • The NEA Fund for Children and Public Education – $50,000
  • AFSCME – $30,000
  • Local 48 Electricians PAC (4572) – $15,000
  • American Federation of Teachers-Oregon Candidate PAC (113) – $10,000
  • Ironworkers Political Action League Muti Candidate Committee – $5,000
  • Our Oregon – $5,000
  • Oregon AFSCME Council 75 – $4,000

Some donors to other Democratic candidates may be surprised to learn that another significant source of recent donations to Avakian is the campaign committees of fellow Democratic candidates. In a move that should be prohibited, those committees simply took contributions to them and, in effect, passed them on to Avakian.

These donors include:

  • Friends of Tobias Read – $5,000
  • Sara Gelser for State Senate (4680) – $1,000
  • Blumenauer for Congress – $2,000
  • Friends of Mark Hass (11487) – $1,000
  • Rosenbaum for Senate (Diane) (1430) – $1,000
  • Friends of Lee Beyer (14049) – $5,000
  • Friends of Tina Kotek (4792) – $5,000
  • Reardon for Oregon (15621) – $3,000
  • Kurt Schrader for Congress – $5,000
  • Elect Ellen Rosenblum for Attorney General (15406) – $5,000
  • Friends of Jeff Barker (4270) – $2,000
  • Friends of Jennifer Williamson (15145) – $2,500

Other large contributors to Avakian’s campaign in early November included the Cow Creek Band of Umpqua Tribe of Indians ($10,000) , the Oregon Health Care Association PAC (275), $5,000) , Cain Petroleum ($5,000) and James D. Fuiten, President of Metro West Ambulance ($5,000).

These recent contributions brought Avakian’s campaign committee total to $2,216,482.79 as of Nov. 3, 2016, substantially more than the $1,490,837.52 raised by Richardson, as of Nov. 4.

We’ll see whether all this loot can pull Avakian ahead.

 

Hear that sucking sound? That’s Oregon tax Initiative Petition 28

Democrats and their union allies want to suck more money out of Oregon businesses than we thought.

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Oregon’s Legislative Revenue Office predicted today (May 23, 2016) that Initiative Petition 28, if approved in November, would generate $6.1 billion in new revenue by the 2017-19 biennium. That’s almost $1 billion more than the $5.3 billion initially predicted.

Talk about greed!

The Revenue Office’s report also estimated that 38,220 private sector jobs would be lost by 2022 if the initiative passed. Meanwhile, in an odd twist, the public sector would add 17,700 jobs.

Talk about an absurd outcome!

And Gov. Kate Brown’s thoughtful response?  “I greatly appreciate the analysis provided by the Legislative Revenue Office, which helps inform our understanding of the impacts of IP-28,” Brown said. “As I have said previously, the problem I remain focused on is how to improve our graduation rate and fund essential services while sustaining economic growth and protecting Oregon jobs. I will begin discussions with my legislative colleagues about a way forward that, should the measure pass, would safeguard new revenue for education while sustaining economic growth and protecting Oregon jobs.”

Whew! Makes you wonder if the governor is being paid by the word.

Initiative Petition 28 is being promoted by A Better Oregon, a campaign organization operating under the umbrella of Portland-based Our Oregon, a coalition of unions and progressive groups.

The measure would raise the corporate minimum tax on Oregon sales of more than $25 million a year from the current minimum of $50,000 to $30,001 plus 2.5 percent of the excess over $25 million. The tax would be based solely on sales, not profit.

Corporate taxes during the 2017-2019 biennium under the current system are projected to reach about $1.1 billion.

In other words, the passage of Initiative petition 28 would increase corporate tax collections per biennium by almost 600 percent in one fell swoop.

Rep. Mitch Greenlick (D-Portland), when endorsing the measure, said it would eliminate much of the constant need to choose between funding critical budget concerns each legislative session. “If that passes, we’ll have a lot of money to pay for stuff,” Greenlick said.

Otherwise, Greenlick said, most of the additional revenue in the economic forecast for the 2017-2019 budget would go to cover increased PERS liabilities and the state’s increased share of Medicaid funding, leaving little additional revenue for new stuff.

“This measure will make sure that large and out-of-state corporations do their part to fund the schools and services that will make Oregon thrive,” Our Oregon says.

As long ago as I can remember advocates for higher taxes in Oregon have been making “out-of-state corporations” the bogeyman, the malignant beast that’s doing Oregonians wrong and needs to pay.

But as attractive a target as these corporations are, they’re not fools. They will find a way to avoid paying the taxes or they’ll pass on the added taxes to Oregon consumers.

Then we’d all pay.

The liberal coalition behind Initiative petition 28, recalling their success in a tax increase battle in 2010, may be figuring they have a sure thing again with another measure targeting big business, but hopefully Oregonians in their wisdom will see this proposal is a reach too far.

 

 

Sock it to ’em: Hales and the left long for more taxes

More taxes. That’s the left’s answer for everything. Usually, they try to spread out the tax increases so you won’t notice how the total is escalating. But this year, they’re going whole hog.

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On Tuesday, Portland Mayor Charlie Hales proposed an $8.7 million increase in the Business License Fee. Now 2.2 percent of a business’ net profit, the fee would increase to 2.5 percent for 25,200 Portland businesses.

“We need to be responsible leaders by providing enough revenue to deliver basic City services and invest in making lasting progress on our challenges,” Hales said. “A slightly larger fee on business’ profits will have a far-reaching, positive impact on the city as a whole.”

Meanwhile, Our Oregon, a coalition of unions and progressive groups, is promoting Initiative Petition 28 for the November 2016 ballot.

The measure would raise the corporate minimum tax on Oregon sales of more than $25 million a year from the current minimum of $50,000 to $30,001 plus 2.5 percent of the excess over $25 million. The tax would be based solely on sales, not profit.

The Legislative Revenue Office estimates the corporate tax measure would raise $5.3 billion during the 2017-2019 biennium. Corporate taxes during that biennium under the current system are projected to reach about $1.1 billion.

In other words, the measure would increase corporate tax collections per biennium by a whopping 400 percent in one fell swoop.

“If that passes, we’ll have a lot of money to pay for stuff,” said Rep. Mitch Greenlick (D-Portland).

All this would be on top of Portland’s much-maligned Arts Tax, which a large swath of the city’s liberal population isn’t paying, and an additional 10 cents a gallon gas tax in Portland, the brainchild of Portland Commissioner Steve Novick, that would generate $64 million over the next four years if voters approve it on May 17.

Yesterday, May 3, an Oregon judge approved ballot language for another tax, a payroll tax that would support Portland State University. Supporters will now begin collecting signatures to get the tax on the ballot in November. The proposed one-tenth of 1 percent payroll tax on wages paid by Portland-area businesses would generate about $40 million annually for PSU.

And if all these new taxes aren’t enough, the increases in the minimum wage that the Democrats in the state Legislature just pushed through will start in July.

Meanwhile, Gov. Brown is meeting in Portland today with lawmakers and business executives to start the process of crafting a multi-billion dollar funding package for state roads. The package would likely involve higher gas taxes and vehicle registration and driver license fees.

Hold on  to your wallets, folks.

 

 

 

Our Oregon: shooting Oregon in the foot – Dems and unions want more money to spend on more “stuff”

 

Tax big business. “Yeah.. that’s the ticket! Yeah, you betcha!,” SNL’s Tommy Flanagan would say.

bloated-government-cartoon

A Better Oregon, a campaign organization operating under the umbrella of Portland-based Our Oregon, a coalition of unions and progressive groups, agrees.

A Better Oregon is promoting Initiative Petition 28 for the November 2016 ballot. The measure would raise the corporate minimum tax on Oregon sales of more than $25 million a year from the current minimum of $50,000 to $30,001 plus 2.5 percent of the excess over $25 million. The tax would be based solely on sales, not profit.

The Legislative Revenue Office estimates the corporate tax measure would raise $5.3 billion during the 2017-2019 biennium. Corporate taxes during that biennium under the current system are projected to reach about $1.1 billion.

In other words, the measure would increase corporate tax collections per biennium by a whopping 400 percent in one fell swoop.

Rep. Mitch Greenlick (D-Portland), when endorsing the measure, said it would eliminate much of the constant need to choose between funding critical budget concerns each legislative session. “If that passes, we’ll have a lot of money to pay for stuff,” Greenlick said.

Otherwise, Greenlick said, most of the additional revenue in the economic forecast for the 2017-2019 budget would go to cover increased PERS liabilities and the state’s increased share of Medicaid funding, leaving little additional revenue for new stuff.

But not to worry, says Ben Unger, executive director of Our Oregon. The extra money won’t come out of your pocket. It will come mostly from large out-of-state corporations.

About 1,000 corporations doing business in Oregon, mostly multi-state corporations, would be affected by the higher taxes.

“This measure will make sure that large and out-of-state corporations do their part to fund the schools and services that will make Oregon thrive,” Our Oregon says on its website.

As long ago as I can remember advocates for higher taxes in Oregon have been making “out-of-state corporations” the bogeyman, the malignant beast that’s doing Oregonians wrong and needs to pay.

But as attractive a target as these corporations are, they’re not fools. They will find a way to avoid paying the taxes or they’ll pass on the added taxes to Oregon consumers as a stealth sales tax.

Moving a company’s headquarters to another state with a more congenial tax environment, as GE is doing with its recently announced shift from Connecticut to Massachusetts, won’t solve the problem, but there are always run-arounds.

Maybe some businesses will change their ownership form to get sales in Oregon under the $25 million trigger. Others may institute some special, higher regional pricing.

Some creative companies may become benefit corporations. Our Oregon thought it was being clever and supportive of the “good guys” when it inserted a provision in its initiative to exclude benefit companies under ORS 60.754 from the higher taxes. But this opened a loophole ripe for exploitation.

The liberal coalition behind Initiative petition 28, recalling their success in a tax increase battle in 2010, may be figuring they have a sure thing again with another measure targeting big business, but hopefully Oregonians in their wisdom will see this  proposal is a reach too far.

 

 

Want to avoid paying Our Oregon’s new taxes? Here’s how.

In its effort to punish Oregon businesses with higher taxes,  Our Oregon got a little too clever in its supposed push for “fairness”.

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The group, an alliance of unions and other progressive groups, filed initiative measures that would substantially raise corporate taxes. It has to gather 88,184 signatures ahead of a July deadline to get the measure on the November 2016 ballot.

The measure would increase the state’s minimum income tax for larger corporations, requiring them to pay a gross receipts tax of 2.5 percent on their Oregon sales above $25 million. The state currently anticipates collecting $500 million in corporate income taxes in each of the next two years. The Our Oregon measures would raise corporate taxes by an estimated $2.6 billion annually.

But there’s a loophole. Want to make sure your company won’t be hit with the new taxes if they become law? Declare it a benefit company under ORS 60.754. There are already 740 registered benefit companies in Oregon. No reason not to keep them coming.

Good Clean Love is one of Oregon's first registered benefit companies.

Good Clean Love is one of Oregon’s first registered benefit companies.

And a business that registers as a benefit company really doesn’t add much of a burden. All it has to do is designate at least one “benefit governor” on its board, choose a third-party standard to follow, publish an annual report on its website showing how the business met the standards that year.

If Good Clean Love, an Oregon maker of organic sexual lubricants and oils, and Sweet Leaf Cannibis of Springfield can do it, surely a lot of other businesses can.