Oregon’s governor, John Kitzhaber, has called the legislature into a special session on Friday in order to discuss the relationship that the state will maintain between its tax code and the corporations that operate there.
At least, ostensibly that’s what Kitzhaber and his legislature will debate. In reality, they are weighing a unique request from the world’s largest sneaker maker, Nike Inc. (NYSE:NKE), which was founded in the state and is headquartered there. Nike wants the state legislature to legally guarantee that the method of determining corporate taxes will not change for a period of up to 40 years, and in return the company will expand its operations in the state with a $150 million investment over five years, and create about 500 new jobs.
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As with pretty much any issue that has one foot in government and one foot in business, there is both vehement support and opposition for this proposal. The rate of unemployment in Oregon is 8.7 percent, coming in above the national rate of 7.7 percent. Oregon, as Kitzhaber argues, has to do something to attract business.
“We don’t have the magnitude of resources available to a state like New York or California with which to woo companies,” said the governor at a legislative hearing on Thursday, according to the Wall Street Journal. “Nike didn’t threaten to leave but said if you wanted to act right away we will commit to keeping the new expansion in Oregon.”
States have been fighting harder than ever before to attract jobs. On Tuesday, Michigan became the 24th state to enact “right to work” legislation. The legislation removes compulsory dues from unions — and is also a divisive issue because of its impact on collective bargaining and a state’s appeal to corporations.
“Nike put an economic gun to the governor’s head and said you either guarantee the law won’t change or we’ll go elsewhere,” said Chuck Sheketoff, executive director of the Oregon Center for Public Policy, according to the WSJ. “As it is Nike is paying less than 90% of its fair-share in taxes.”
“It’s blatant extortion,” adds Shamus Cook, an organizer for the People’s Budget Project in Oregon. “Keep feeding us tax subsidies or we’re leaving.”
Nike is Oregon’s second-largest employer behind Intel (NASDAQ:INTC), which is reportedly furious that it was not told about or involved in the talks. The legislation that Nike proposed is so specific that it pretty much only applies to Nike and no one else. Not Intel, not Portland General Electric (NYSE:POR), and not Hewlett-Packard (NYSE:HPQ), which has 5,500 employees in the state.
A vote is expected late Friday afternoon or early in the evening.