Sunday, January 25, 2009

Intel’s Layoffs and Dividends

On Wednesday, January 21, Intel announced that it was halting production at five factories, including Fab 20 in Oregon. “The actions” it said, “when combined with associated support functions, are expected to affect between 5,000 and 6,000 employees worldwide.” In Oregon, 1,000 Intel employees will be “affected” according to news reports.

So, even though Oregon changed its corporate income tax so that Intel is probably now paying just $10 a year (Intel used to pay $50 million a year and was Oregon’s top corporate taxpayer), Intel is now closing a facility here and not in other states that still better tax Intel by apportioning Intel’s profits by considering more than just sales.

Intel’s decision to close one facility in Oregon and not in a state with higher corporate income taxes demonstrates businesses will do what the fundamental economics of their businesses demand and that Oregon’s efforts to alter those decisions by cutting precious tax revenues has been a fool's game. Taxes don’t matter; other factors do.

And while some politicians, lobbyists and editorial writers will point to the layoffs at Intel to argue “now’s not the time” to restore the income tax on corporate profits, BlueOregon readers shouldn’t be so easily led astray by the layoffs.

Two days after the layoff announcement, Intel announced a quarterly tax dividend of 14 cents per share. With about 5 billion shares of common stock outstanding, that’s not chump change.

There’s no reason Oregon’s income tax on profits shouldn’t be fixed so that Intel could once again proudly proclaim itself our best corporate income taxpayer. Unfortunately, the Governor’s plan for changes in the corporate income tax would preserve Intel’s status as just another corporate minimum tax taxpayer. I’d like to see the legislature enact a corporate tax structure that allows Intel to boast again that it is number one.


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