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Editor's Notes: Portland takes on Chicago

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Robin Doussard
Friday, February 05, 2010
I don't usually cede my blog to public officials (in fact, never), but this missive I just got today from the desk of Tim McCabe, chief of the state's economic development agency, challenging Chicago Mayor Richard Daley to an economic duel was just too fun:

Dear Honorable Mayor Daley:

On behalf of all Oregonians, and in particular state business development officials such as myself, I want to thank you for your recent remarks about Oregon's business climate. We truly appreciate your good sportsmanship and sense of humor when you said the recent vote by Oregonians to raise business and certain income taxes was good news for the Windy City. In fact, you went as far as to vow to visit our state to snag a few unhappy Oregon companies and bring them back to the Land of Lincoln.

Let me welcome you by letting you know about a few things you might find upon your arrival. First, in case you have forgotten, we have no sales tax here in Oregon. Second, our property taxes, in particular those on commercial properties, are some of the lowest in the nation. Finally, I am sure you know that the Tax Foundation's recent 2010 Business Tax Climate report found Oregon to be the 14th best state in the nation in which to do business. And, yes, that was after our voters passed the tax increases.

Before you arrive, perhaps you can verify for me some facts about the business climate in your neck of the woods. Illinois ranks 30th in the same 2010 Business Tax Climate report, correct? You have some of the highest property taxes in the nation (12th) and a state sales tax (6.25%) that ranks as the 10th highest in the nation. Of course, Chicago has the highest sales tax (10.25%) of any major U.S. city and parts of Cook County levy an 11.5% sales tax. Illinois also has the 5th highest unemployment insurance tax in the U.S. I just want to make very sure I have my facts straight when Oregon business leaders ask me about the advantages they will enjoy when they join you in Illinois.

We here in Oregon want to thank you for highlighting our state's positive business climate. Did you think Oregon business owners would not realize how much more expensive it would be to operate in Chicago? We are happy to have you draw even more attention to the fact that Oregon is home to more solar manufacturers than any place in North America and was 4th in the nation last year in adding new wind energy capacity.

I look forward to meeting you and buying you a tasty Oregon beer during your visit (yes, the Portland metro area has more breweries than any place in the world) and telling you more of the many reasons why Oregon is a great place to live and to do business.

All the best,
Tim McCabe, Director
Oregon Business Development Department - Business Oregon



0 #1 Well done!Chris 2010-02-05 11:25:03
Nice rebuttal. Daley clearly was looking for a little PR, rather than relying on any facts to back up his little stunt.
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Bill Hersh
0 #2 Can someone make sure Lars Larson sees this?Bill Hersh 2010-02-05 12:17:30
And stop his misinformed diatribes?
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Charlie Mitchell
0 #3 Nice Job, Tim!Charlie Mitchell 2010-02-05 15:44:23
Nothing like the facts, and you didn't even mention the utility rates.
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0 #4 Taking this a bit personal?Thom 2010-02-05 20:30:38
The fact is Daley is unlikely to snag any Oregon businesses. However, he is smart to try. Oregon is one of the best states in this country but there are others that are great as well. Smart city and state leaders will be doing some fishing in our state. Some of them will be successful.

I've read a number of commentaries about Daley and each one brags about Oregon being the 14th best state for businesses. When did 14th place become something to brag about?

It is a mistake to be so smug. Some businesses will probably move to the top 13. Let's just hope for, and support others that could replace those we lose.
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0 #5 Ted 2010-02-08 13:32:55
Tit-for-tat aside, a tax increase from 6.6% to 7.9% (a net increase of 1.3%) on Gross sales over $250,000 discriminates against low margin businesses and most likely puts many out of business regadless of Gross sales. The first order of business for survival would be to cut labor costs. Larger Gross income businesses should move depending on the marginal cost savings versus the costs to move. Added to the "move or not move" equation would be the personal tax rate savings to the owners of these businesses.

Low margin businesses are typically in highly competitive industries and International market competitors are only compounding the issue. Taxes, tariffs and protectionism have never worked in sustainable terms but we pass these at will.

The good news for Oregon, is that most decisions are not made on pure economics but we are moving closer to the edge . . . if not already there.

Sarcastically, who cares about low margin businesses anyway? We want to foster, attract and grow high margin, green, high paying service oriented businesses and jobs . . . oops, isn't that uh, Government?
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0 #6 PCJ 2010-02-10 09:06:11
While it's true the aggregate tax on business is still rated among the lowest in the nation, Measure 66 and 67 will likely have 2 unintended consequences:

Most small businesses are eithere LLC's or S-corps, meaning the income of the business flows through directly to the owner. I don't know the exact statistics, yet would venture to guess that most people with taxable income over $250k are small business owners. This means the extra 2% income tax really becomes a tax on small business. Owners of small businesses will need to determine how to compensate for additional taxes (hire fewer people? not purchase equipment?)

The $10 minimum tax was crazy and increasing it made sense. However, to attack larger companies who aren't making money with a significant gross consumption tax will cause them to consider other options...like shut down plants in Oregon that aren't performing instead of investing in them. Again, more job losses.
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Chuck Sheketoff
0 #7 Wrong Measure of Biz Climate FactorsChuck Sheketoff 2010-02-10 09:59:28
It is too bad that Oregon's economic development guy thinks Oregon's business climate is shaped by taxes. It will be a great day when we have someone at that post who will extol our quality public services that support successful businesses and our quality of life as better barometers of Oregon's business climate. And... why didn't he tell the mayor about how when the national economy does well Oregon does very, very well? The best thing we could do for our business climate is build a better budget reserve so we can keep Oregon moving forward during the next downturn. It would have been nice to see McCabe support the Governor on that.
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John A. Ward
0 #8 Portland takes on ChicagoJohn A. Ward 2010-02-10 13:53:38
Nice rebuttal, to bad there is no link to 'the Tax Foundation' report quoted in the overview. I have found a report by the Small Business e& Entrepreneurshi p Council, www.sbecouncil.org that measures 16 taxes the affect small businesses. In that report, done BEFORE the consumption tax increases has Oregon at 34th and now lower NOT in the top 14 best states. I suppose it is easier to quote a study that helps your argument, but I don't think it was an effective rebuttal, since by the Small Business Council Illinois is ranked much more friendly to small business than Oregon.
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More Support for Local Taxes
0 #9 No real estate conveyance tax in all but one or two counties in OregonMore Support for Local Taxes 2010-02-10 14:14:30
Business owners from out-of-state are plesasantly shocked to find that they do not have to fork over money to the locality in which they buy buildings. When will Oregon change that? That is low-hanging fruit. A conveyance tax has existed in Washington County for about 30 years and it certainly didn't restrict sales. Just because the real estate sales trade doesn't like it and has been able to stop expanding the conveyance tax to other counties, does NOT mean it shouldn't be done.
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Paul Reise
0 #10 Link to Tax Foundation report quoted in articlePaul Reise 2010-02-11 12:40:00
Here's a link to the 2010 State Business Tax Climate Index,
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