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Beware Tax Certainty

“Tax certainty.”

That’s the justification given by the Nike, Governor Kitzhaber and others for ramming through a law that would allow the Governor to cut a deal with Nike to lock in place the current formula for calculating how much of a multistate corporation’s profits Oregon is allowed to tax. In exchange for such a deal, Nike would commit to create a certain amount of jobs and make certain capital investments.

It has the nice ring of a bumper sticker, but “tax certainty” is simply misleading.

Related materials:

Jeld-Wen’s HQ Decision: Proof that Taxes Don’t Matter and Nike Deal is Foolish, December 14, 2012

It’s not tax certainty that corporations like Nike seek. After all, the Corporate Loophole Lobby has long been in the business of making the tax code more opaque and complicated. At both the federal and state level, corporate lobbying efforts have succeeded in rigging the tax code with tax exemptions, adjustments, deductions, subtractions, credits and other forms of tax breaks. The more convoluted and uncertain the tax code, the more corporate accountants and lawyers are able devise clever ways of avoiding taxation. The Corporate Loophole Lobby never comes to the legislature and says, “Make no changes to the tax code.”

If corporations really wanted tax certainty, they would stop fiddling with the tax code and they would help clean it up by getting rid of the tax loopholes they enjoy.

So when Nike and other corporations say they want “tax certainty,” what they really mean is: “we want promises that our taxes will only go down, not up.”

Some lawmakers apparently take the bumper sticker at face value and believe that Nike really needs to know that its taxes won’t go up in order for it to be able to grow its business.

But Nike’s own history shows that corporations can grow and conduct their business without any such guarantees (“tax certainty”). Nike grew from making a shoe with a waffle iron into a corporate behemoth here in Oregon without any deal promising that the tax structure would not change.

And that is no surprise. As Paul O’Neill, a former Alcoa executive and former U.S. Treasury Secretary under President George W. Bush, put it: “I never made an investment decision based on the tax code . . . If you are giving money away I will take it. If you want to give me inducements for something I am going to do anyway, I will take it. But good business people do not do things because of inducements.”

That’s right. Good business people “just do it.”

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Avatar of magix Posted by on December 15, 2012. Filed under Oregon. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry
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