Wednesday, August 12, 2015


Discussions about proposed hotels in Portland and Corvallis again draw our attention to the danger that unprincipled discrimination favoring selected businesses will undermine respect for government. 

The problem is not just with hotel developers scheming to get their fingers in the public cookie jar.  Several years ago Boeing got more than a dozen states into a tax-break bidding war before deciding where to locate a new plant.  More recently Governor Kitzhaber called a special session so the legislature could authorize him to lock in the state's current tax policy for Nike so it would build a new plant in Oregon.  

Then there is the scandalous use of public money and tax breaks in many parts of the U.S. to build stadiums for professional athletic teams. 

As Governor Kitzhaber pointed out,  the expansion that Nike had conditioned on a tax guarantee would increase Oregon’s tax collections and employment opportunities, and no doubt it did.  But legitimate taxes, like legitimate laws of all kinds, must apply the same rules to one and all.

The rule of law says that we cannot just reduce the tax rate for Boeing but must apply the reduction to all who pay the same type of tax.   We should not make tax guarantees to Nike that do not apply to all corporations in Oregon.  

As soon as we deviate from this principle, the door is opened to all kinds of corruption, influence-peddling, and favoritism. As soon as we deviate from this principle, we all lose the protection that is provided by the rule of law.

By way of analogy, imagine that Oregon were to offer to tax Microsoft's Bill Gates at only 2 percent if he would move from Washington to Oregon. This would be a substantial discount from the 9 percent income tax paid by other Oregonians, but would increase state tax revenues if Gates moved in, since 2 percent of something (a rather large something!)  comes to more than 9 percent of nothing.

Although it would make sense for Oregon to offer such a discount to Gates, everyone would recognize that doing this would be an outrage, a manifest violation of equal protection under the law.
Why then do we tolerate discriminatory taxation when rich corporations rather than individuals are the beneficiaries?

As a Corvallis resident I have studied the details of the proposed hotel here more than I have studied the convention center hotel in Portland.  Essentially the developers in Corvallis want property taxes and room taxes paid by the proposed hotel to count twice:  once, as the taxes they, like all other hotels in town, must pay,  and then again, to pay off city bonds that would contribute $4 million to their construction costs.   And the proposed deal is structured, according to the developers’ own estimates,   to save the hotel $39,445 per year in property taxes in 2016-2020 rising to a saving of $142,146 per year in 2046-2060. 

We cannot blame hotel developers,  athletic team owners,  and corporations for asking for tax breaks or financial support.  Often they offer up complicated economic arguments trying to convince people that their proposals are no-brainers.  But our public officials should not swallow these arguments uncritically.  Even on the rare occasions when such proposals might have actual merit they should reject them out of hand as a violation of the basic principle of good government:  genuine laws must apply the same rules to everyone. 

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