Tax Analysts Blog

If the Shoe Fits: Oregon Lawmakers Get Rolled

Posted on Dec 19, 2012

Nike, the sneaker giant, effectively blackmailed the Oregon political establishment last week. Nike demanded that the single sales factor apportionment formula used by Oregon never be changed. Actually, the company said it did not want it to change for 30 years. If the Oregon legislature and governor did not agree, the company said it would pick up and move. Of course, the Oregon politicians, not exactly the profile in courage types, agreed. For the uninitiated, the single sales factor apportionment formula is greatly beneficial to companies that manufacture or are headquartered in a state but make most of their sales in other states. It basically allows corporations to reduce their tax liability to zero.

It is not surprising that Nike would want to keep this system going for as along as it could. But here is the problem. The measure passed by the Oregon legislature will guarantee no change for Nike for three decades. Other companies are not so lucky. If it chooses, say because it needs money, the state can change the law for any other business. So once again, a state political establishment caves to pressure and violates every principal of sound tax policy. Other companies and the citizens of Oregon will pay for the privilege of having Nike and its executives stay in Oregon. And that is a shame.

Read Comments (3)

melvin fentonDec 18, 2012

It is a shame

West Coast OffenseDec 18, 2012

Why bother having a corporate income tax at the state level? At what point do
the compliance and/or enforcement burdens outweigh the pittance of revenue the
tax brings in?

Christopher BerginDec 19, 2012

I'm in agreement with the post and comments so far. David, you are absolutely
right: it is a shame and it's effectively blackmail. And, I believe that it's
time to get rid of the corporate income tax at the state level.

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