Finding solutions for Oregon's business struggles

The other side: "Despite a slower recovery from the pandemic, Oregon has a lot going for it," Gov. Tina Kotek tells Axios in an emailed statement.

• The governor points to the state's lack of a sales tax as one of its main competitive advantages, and says her economic development bill, HB 4084, which recently passed in the Legislature, will give local jurisdictions more tools to spur economic innovation.
• She also highlights her Prosperity Council — a group of business and civic leaders tasked with improving the state's national competitiveness rankings.

Zoom in: To better understand what the business community believes is needed to improve Oregon's competitiveness, Axios spoke with John Tapogna, president of the Oregon Business Council, the state's largest business advocacy group representing major employers.

• "We are in a dire situation," he says. "But we have to figure out our solutions to fit this particular time."

Regulatory reform

Oregon ranks No. 7 in the U.S. for the most regulatory restrictions — roughly 223,600 — according to George Mason's Mercatus Center.

• "That's an awful lot of deposits made into the regulatory bank without a whole lot of management," Tapogna said.
• He suggests Oregon go down the British Columbia route: For every regulation added to an agency, it must remove two with the aim of reducing the burden for businesses. "It turns agencies from regulatory writers into regulatory managers."

Land use recalibration

One of the biggest complaints Tapogna says he's heard from businesses looking to build and expand in Oregon is its land-use regulation system.

• While he doesn't advocate for it to be thrown out entirely, "the dials on the machine need to be adjusted."
• Oregon lacks large, infrastructure-ready industrial parcels, he argues, hindered by restrictive urban-growth boundary rules — a weakness that has cost the state millions in investment.

There are plenty of examples of such losses, he says:

• When the Biden administration rolled out incentives to spur clean-energy projects, Oregon wasn't a top contender.

• Similarly, when Daimler Trucks — one of the state's largest employers — was gearing up to build a $1.9 billion battery cell factory, it chose Mississippi instead.

The latest: Just this month, legislation to expand roughly 1,700 acres of industrial land in Hillsboro to support the semiconductor supply chain failed in the Legislature and may not move forward until 2027.

Tax structure modernization

Now for Tapogna's most controversial take: "We have to de-emphasize the use of the income tax," he says.

• Without a sales tax, the state is overly dependent on income taxes making up the bulk of the state's general fund, a vulnerability highlighted in this last legislative session. Personal income tax collections have fallen more than $40 million since the previous budget quarter, per the Oregon Capital Chronicle.

Zoom in: This has become another reason why businesses and high earners can (and do) relocate, Tapogna argues. The state will eventually need to explore "a broader mix of revenue sources" — including some form of consumption-based taxation — and revisit property tax limitations adopted in the 1990s.

The bottom line: Stopping Oregon's business bleed won't hinge on simple, one-time fixes like tax credits, recruitment packages or retention efforts, Tapogna says.

• "In order to make progress, you're gonna have to make some pretty big swings."

Go deeper:

• Oregon isn't just losing businesses, it's losing their growth
• How Portland's business challenges ripple across Oregon
• Portland small businesses feel squeeze of costs and bureaucracy