Sunsetting tax loopholes

The relationship of a big employer and state government is often like a high-powered spouse threatening infidelity. We cringe as the might-be-cheated-upon goes to humiliating extremes to preserve the marriage.

When Boeing abruptly moved its corporate headquarters to Chicago in 2001, the late writer and historian Walt Crowley captured the sense of betrayal. “Chicago, that old floozy,” Crowley said.

In 2003, then-Gov. Gary Locke, chastened by the uprooting of the headquarters of the consummate Northwest manufacturer, called a special legislative session to offer $3.2 billion in tax breaks to Boeing and its contractors if the 7E7 Dreamliner was assembled in Washington (the session also chopped unemployment benefits and workers comp). It was kowtowing — and Boeing began an unnerving fling with Charleston, S.C.—but Washingtonians were relieved that a critical economic relationship was saved.

In Oregon, Nike is the Boeing analogue, the deep-pocketed mega employer with equally sizeable political muscle. On Friday, Oregon Gov. John Kitzhaber finessed a special session to keep an ever-expanding Nike content, pledging not to fiddle with the state’s corporate tax structure.

“There’s a reason that legislators and Gov. Kitzhaber jumped last week to fill Nike’s request for tax certainty,” The Oregonian’s Brent Hunsberger writes. “They don’t make ‘em that big anymore. And the big ones spawn lots of little ones.”

The Boeing and Nike examples bring into focus what is derisively termed “corporate welfare” and the appropriate role of state government in stoking business growth. As the New York Times reported early this month, states often pay an enormous price for well-intentioned tax sweeteners that ultimately come up short (the universal draw will continue to be the quality of education). The challenge is to separate the wheat from the pointless-giveaway chaff, flagging what spurs jobs and aligns with the public interest.

In light of anemic revenues and the state Supreme Court’s McCleary decision mandating additional resources for K-12, a prudent approach would revisit the tax breaks and loopholes that already exist. That was the mission of a bipartisan proposal this past year that will hopefully find life again in the 2013 session. Co-sponsored by Rep. Reuven Carlyle, a Democrat, and Glenn Anderson, a Republican, HB 2762 would have put an expiration date on hundreds of loopholes — many that should continue, and many that should be pitched.

“Exemptions and credits should be required at least every 10 years to show a return on investment, a financial metric based upon sound data and clear criteria,” Carlyle said. “They should expire, in my view, and be forced to prove to future legislatures that they actually achieve their objectives for taxpayers.”

Amen to prudence and putting taxpayers first.

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