TRAIN OF PROSPERITY

By JACK ROBERTS, BOLI Commissioner

Oregonian IN MY OPINION

September 29, 1997

Abstract:

What is the source of the economic boom Oregon is currently enjoying? The answer to this question will tell us a lot about what we need to do if we are going to sustain and build on our current prosperity.

In his letter to the citizens of Oregon introducing his budget last year, Gov. John Kitzhaber gave us his reading of history: "Twenty years ago, Oregonians made some wise choices. We chose to invest in our state's future and we planned to manage its growth. As a result, today's economy is diversified, most of the state is thriving and Oregonians have an excellent quality of life."

1. Repeal of the Unitary Tax. In 1984, Gov. Vic Atiyeh called the Legislature into special session to repeal the unitary method of taxing foreign corporations. This method not only increased the tax many of these companies paid, it also required them to open up all of their global activities to scrutiny by Oregon tax authorities. Following a similar repeal in California, it was clear that any effort to attract foreign business into this state necessitated this action. Had this not been done, our recent high-tech boom would have been stillborn.

Full Text:

Summary: Use the right fuel in economic engine to keep it humming

What is the source of the economic boom Oregon is currently enjoying? The answer to this question will tell us a lot about what we need to do if we are going to sustain and build on our current prosperity.

In his letter to the citizens of Oregon introducing his budget last year, Gov. John Kitzhaber gave us his reading of history: "Twenty years ago, Oregonians made some wise choices. We chose to invest in our state's future and we planned to manage its growth. As a result, today's economy is diversified, most of the state is thriving and Oregonians have an excellent quality of life."

In other words, thanks to our past support of roads and schools and higher education, and thanks to the passage of Senate Bill 100 and our adoption of statewide land-use planning, Oregon's economy is booming.

He went on to say, "Today, even as we enjoy the fruits of those decisions and investments, we should continue to make the wise choices and sound investments that will provide for the years ahead."

Now it seems to me that you can be a strong supporter of education and transportation -- as I am -- and even a proponent of responsible statewide land-use planning -- as I also am -- without necessarily accepting the notion that it was government spending and government regulation in the 1970s that laid the foundation for our current prosperity.

In fact, I would like to suggest that four other actions taken by our government have contributed even more directly to our recent economic growth:

1. Repeal of the Unitary Tax. In 1984, Gov. Vic Atiyeh called the Legislature into special session to repeal the unitary method of taxing foreign corporations. This method not only increased the tax many of these companies paid, it also required them to open up all of their global activities to scrutiny by Oregon tax authorities. Following a similar repeal in California, it was clear that any effort to attract foreign business into this state necessitated this action. Had this not been done, our recent high-tech boom would have been stillborn.

2. Workers' compensation reform. In 1990, Gov. Neil Goldschmidt brought business, labor and legislative leaders together at Mahonia Hall to deal with the crisis in worker's compensation insurance rates, then among the highest in the country and regularly cited as one of the greatest impediments to attracting and promoting business in the state. After the reform was adopted, workers' comp rates began to fall and have kept falling. Today, our workers' comp rates are among the lowest in the nation and are regularly cited as one of the greatest attractions for businesses looking to locate here.

3. Authorization of the SIP. In 1993, the Oregon Legislature adopted the Strategic Investment Program authorizing cities and counties to cap the property tax value of certain new investments at $100 million, exempting the balance from property tax for a limited number of years. This program was directly tailored for the high-tech industry and has been a major impetus in attracting tremendous capital investment into the state.

4. Passage of Measure 5. In 1990, government at its most basic level -- "government of the people, by the people and for the people" -- voted a limitation on the state's property taxes. They did so over the opposition of most elected officeholders -- myself included -- who argued this was not the right way to address this problem. We even warned that businesses might avoid Oregon because of the uncertainty created by this unsound tax scheme. Whatever else can be said about Measure 5, it has hardly kept businesses from coming to, or growing in, Oregon.

What do all four of these actions have in common? They were all positive, affirmative steps by government to lower the cost of doing business in this state. They were steps taken to improve the climate for business. And, at least in that objective, they were successful.

Now there are some who believe the time has come to put the screws to business, to redress any fiscal shortfall, real or perceived, in state or local government by increasing the cost of doing business in this state. Experience suggests this would be a very shortsighted, even counterproductive, response.

I believe strongly that we must maintain and improve our roads, our schools and our institutions of higher learning. I am absolutely convinced that we must manage growth and protect our physical environment. And we should provide the resources necessary for adequate law enforcement on the one hand and social services on the other. But I am equally certain that the engine driving our economic prosperity is, and will continue to be, capital investment and economic activity generated by the private sector.

A balanced program to build on our prosperity must be one that continues to seek ways to reduce the cost of doing business in this state, while at the same time striving to preserve those things that make Oregon unique, and that keep us healthy, safe and productive as a people.

Perhaps by recognizing the true source of our current prosperity, we will be better prepared to make the right choices in the future.

Jack Roberts is commissioner of the Oregon Bureau of Labor and Industries.