HOUSE SPECIAL SESSION COMMITTEE ON

ECONOMIC GROWTH AND JOB DEVELOPMENT

 

September 04, 2002   Hearing Room 357

9:00 am Tapes 1 - 4

 

 

MEMBERS PRESENT:             Rep. Jeff  Kropf, Chair

Rep. Alan Brown

Rep. Elaine Hopson

Rep. Al King

Rep. Tim Knopp

Rep. Kathy Lowe

MEMBER EXCUSED:

Rep. Greg Smith

 

 

 

STAFF PRESENT:                  Jim Stembridge, Administrator

Nancy Massee, Administrative Support

 

 

MEASURE/ISSUES HEARD:            Committee Rules

                                                Adoption of LC

 

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

TAPE 01, A

005

Chair Kropf

Calls meeting to order at 10:35 a.m. Refers committee to the rules offered (EXHIBIT A).

026

Rep. King

MOTION:  Moves to ADOPT the proposed Committee Rules dated 09/04/02.

028

 

VOTE:  5-0

EXCUSED:  2 – Rep. Tim Knopp, Rep. Greg Smith

030

Chair Kropf

Hearing no objection, declares the motion CARRIED.

033

Chair Kropf

Refers to proposed LC 6 (EXHIBIT B).  Explains that the LC will be amended.  There will be a continuation of this meeting this afternoon.

055

Rep. Alan Brown

MOTION:  Moves LC 6 BE INTRODUCED as a committee bill.

056

 

VOTE:  5-0

EXCUSED:  2 – Rep. Tim Knopp, Rep. Greg Smith

058

Chair Kropf

Hearing no objection, declares the motion CARRIED.

060

Rep. Hopson

Supports the idea of LC 6.  Comments that there will be other ideas the committee should consider.

070

Rep. Lowe

Supports the idea of LC 6 but expects changes.

082

Rep. King

Shares some information on job incentives created in LC 6.

130

Rep. Brown

Comments on Freightliner layoffs.  States job creation is very important to recovery.  (Rep. Knopp arrives.)

147

Rep. Knopp

Comments on the importance of creating jobs and getting people to work.

156

Rep. Lowe

Asks if the Fiscal office could explain how LC 6 affects taxation.

187

Chair

Explains he wants LC 6 to be revenue neutral

206

Chair Kropf

Recesses meeting at 10:50 a.m. until this afternoon. Reconvenes meeting at 3:05 p.m.  Announces amendments to HB 4072.

220

Jim Stembridge

Committee Administrator. Explains HB 4072 and -1 amendments. (EXHIBIT  C, D)

236

Rep. King

Announces he has amendments also.

242

Chair Kropf

Asks the Department of Revenue to discuss the withholding tax aspect of HB 4072.

250

Deborah Buchanan

Department of Revenue. Explains concerns about HB 4072 based on the credit related to the withholding tax.  There is the possibility of adjusting the withholding to greater than it otherwise might be to maximize the credit.  There are other ways to do this such as basing on payroll.  Explains the December 31, 2002 date with fulltime employees as related to fulltime employees December 31, 2003, which could be adjusted to maximize benefit.  Average employment for the year might be a suggestion.

285

Buchanan

Continues presentation. 

347

Buchanan

Explains IRC 267 defining related parties.  Explains that using average payroll would be a better approach than withholding tax.

390

Rep. Lowe

Discusses average payroll, downsizing, and overhead. 

400

Buchanan

Suggests looking at average number of fulltime employees. 

424

Chair Kropf

Refers to Section 2 of HB 4702.  Asks for additional questions.  Asks if the credit were for six months instead of 40 weeks.

TAPE 2A

023

Buchanan

Suggests more than 26 weeks.

030

Rep. King

Discusses the agriculture and construction industry which have seasonal employment.

032

Chair Kropf

Asks if 52 weeks is better than 40 weeks.

036

Rep. King

Responds 52 weeks is too extreme.

050

Chair Kropf

Asks for Legislative Counsel clarification.

098

Rep. Donna Nelson

House District 24. Asks about the wage level jobs this bill addresses.  Asks if this bill will allow youth jobs.  Asks if this bill will benefit sheltered workshops for disabled people.  Expresses the need for funding for jobs for these types of employees. 

147

Rep. Nelson

Discusses chart from Oregon Economic and Community Development Department (OECD).  Suggests funding the program imposed by the bill by taking the $88 million from OECD. (EXHIBIT  D)

220

Chair Kropf

Responds to Rep. Nelson’s questions. Explains this bill is meant for small businesses.

240

Stembridge

Explains how this bill would not apply to government agencies.

247

Rep. Nelson

Asks about contractors who work for the government.

258

Stembridge

Explains a contracting employer would be eligible.

270

Chair Kropf

States a nonprofit organization would be ineligible.

277

Dexter Johnson

Legislative Counsel (LC).  Employers who are subject to income tax would benefit from this bill. 

268

Rep. Nelson

Asks about nonprofit organizations exclusions.

288

Johnson

Reads lines 14 and 15.  Nonprofit does not have taxes due.

292

Rep. Nelson

Asks about a temporary employment agency.

300

Johnson

Responds temporary agency would have employers subject to income tax.

320

Chair Kropf

Discusses nonprofit agencies competing with private businesses.

360

Johnson

Explains there is no specific definition for fulltime employment for legal purposes.  This bill defines it as 37.5 hours for 40 consecutive weeks.  A different definition could be adopted.

365

Rep. Nelson

Supports not having specified time length.  Total number of hours is more important than number of hours per week.  Explains some work goes much longer than 37.5 hours per week.

397

Chair Kropf

Comments this does not really apply to seasonal labor.  Looking to long-term and fulltime employment. 

430

Chair Kropf

Asks LC about technicalities in seasonal employment.

451

Johnson

Responds on specifying time length policies.

45l

Rep. Brown

Asks about line 17 of bill.

500

Johnson

Responds if you had just one employee it would discriminate but over a net basis, it would not.

522

Brown

The amount of withholding is based on the number of dependents.

526

Johnson

But ultimately the withholding is based on the amount of tax that the employee is likely to pay.

TAPE 1,B

062

Rep. King

Discusses how number of deductions might not relate to actual tax filing.

076

Chair Kropf

Says the concept was to be based on what the employee paid in taxes.

082

Rep. King

Says payroll basis is probably better than withholding number.

084

Chair Kropf

Asks if average payroll is used instead of withholding tax, is concept changed.

091

Johnson

Replies the concept is similar.  Comparing average payroll before and after a period.

090

Chair Kropf

Asks how the calculation would be made. To create a job that pays taxes to the state.  As an incentive to supplying that job, the tax credit would be applied to the employer.

104

Johnson

Responds to Chair’s comments.

110

Chair Kropf

Asks if that can be achieved realistically by using average payroll?

133

Johnson

Responds yes.  Discusses aspects of the bill from employer’s standpoint.  Limiting number of employees per employer versus the location concept is less problematic.

180

Chair Kropf

Asks if this bill would fall on the 91st day requirement.

187

Johnson

Answers that is correct, it could not be enacted upon passage. 

198

Rep. Hopson

Agrees with jobs for fulltime workers rather than seasonal workers.  Discusses using this bill to add new employees to generate more income.

230

Rep. Nelson

Comments on businesses reorganizing, relocating, and buyouts that would create situations that would allow misuse of the intention of the bill.

260

Chair Kropf

Answers that is a good point.

262

Johnson

Comments on line 30, page 1, which prohibits wages from a relation of the employer being qualified for this credit.  That includes subsidiary corporations and partnerships.

300

Chair Kropf

Asks if the committee has any questions for Mr. Johnson.

305

Mike Burton

Assistant Director, Oregon Economic and Community Development Department (OECD).  Discusses the possibilities of short term investments that would lead to long term benefits. Discusses potential investment benefits from tax credit incentives. 

442

Burton

Continues discussing possible program procedures. Says this is a new idea to OECD.

TAPE 2,B

 

 

 

044

Burton

Continues giving examples that could cause more concerns in new businesses.

076

Rep. King

Responds with an example of equipment as a down payment. 

095

Burton

Discusses how payroll increases can earn tax credits.    

127

Rep. Brown

Comments earning a tax credit based on living wage jobs. 

150

Burton

Describes markets in Oregon where there are not living wage jobs.  Likes the payroll approach, which shows a payroll increase. 

197

Rep. Brown

Discusses that a way is needed to determine how many dollars in payroll increase equals how many tax credits.

200

Burton

Agrees that would be good. There is potential here but there are a lot of issues to resolve. 

235

Tim Nesbitt

President, AFL-CIO Oregon.  Expresses concern of the bill.  The bill has a central problem of creating incentives for a certain behavior.  Problems of rewarding actions that are likely to occur without the incentives. Says it may be cost ineffective. Discusses unintended consequences.  

276

Nesbitt

Discusses the program may prove too expensive and not justifiable.  Jobs will evolve anyway.  Discusses possible manipulation by employers.

320

Chair Kropf

Asks about targeting small employers.  Wants incentive for a new job, not just a job they were going to rehire or hire anyway. 

380

Rep. Lowe

Asks what can be done to stimulate job creation. 

395

Nesbitt

Answers there are compelling projects such as rebuilding the infrastructure that would enable businesses and stimulate the economy and be ready when the economy begins to turn around.  Bridges and construction jobs are an example.  Borrowing funds makes sense.  Increasing fees in vehicle registration is needed.

450

Chair Kropf

Discusses the need for infrastructure rebuilding.  Comments that ODOT is becoming more efficient and responsive.

477

Harvey Mathews

Associated Oregon Industries (AOI). Describes layoffs in business, and high unemployment rates in Oregon. 

TAPE 3,A

059

Mathews

States that many jobs will not come back. Supports the tax credit incentive idea. Supports developing a bill that will minimize possibilities of manipulating the tax credit incentive. 

088

Joe Gilliam

Oregon Grocery Association.  Payroll tax and income tax need to be separated. Explains how nonprofit businesses can still take advantage of this bill because they are paying a payroll tax on their employees.     

105

Gilliam

Continues discussing issues in the tax credit program.  Discusses possible giving away tax incentive dollars to jobs that are going to appear anyway.  Capital expansion in discount stores such as Wal-Mart will hire many people without this bill.  The issue is a matter of capital.  What profit a business has to spend determines how much it can expand and hire employees. Emphasizes the importance of not increasing taxes so that businesses can expand.  Emphasizes that with low interest rates at this time, it is a good time to borrow.    

174

Rep. King

Agrees with Mr. Gilliam. 

230

Gilliam

Explains the grocery business turnover has been very low in the late 1990s. It has been higher lately. How a business delivers capital for expansion is the incentive needed.

266

Chair Kropf

 Compares increasing capital to creation of jobs.  Asks what is most advantageous for business, a year-end credit or deducting on tbe quarterly payroll tax payment.

283

Gilliam

Responds on quarterly payroll tax and at the end of the period.  When a business stabilizes the business would get the break.

300

Chair Kropf

Comments in six months there would have to be an audit for the next six months.  The bill is intended to be for one year.

338

JL Wilson

NFIB.  Supports the proposal. Thinks it will have a positive effect on creating jobs.

344

Chair Kropf

Asks about capping the amount of money that could be rebated to employer. 

354

Wilson

Responds that the cap would be practical.

360

Gilliam

Agrees. 

370

Chair Kropf

Asks if an expansion of employees would be limited by capping.

410

JL Wilson

Suggests a cap number based on prior year.  For example, if a business had fewer than 100 employees in 2002, it could go up to 105 in 2003 without penalty.

419

Gilliam

Comments the total growth could be capped by a percentage.

TAPE 4,A

005

Chair Kropf

Discusses expansion efforts of small businesses. 

013

Buchanan

Explains the credit is set up as an income tax credit available to individuals or corporations in this bill.  The measure of the tax is the withholding paid to the state by the employer.  The withholding amount is the basis of the credit.   

038

Chair Kropf

Asks what changes if the plan goes from withholding to total payroll.

043

Buchanan

Answers that payroll is simpler and less susceptible to changes.

069

Chair Kropf

Adjourns meeting at 5:10 p.m. 

 

Submitted By,                        Reviewed By,

 

 

 

Nancy Massee,                        Jim Stembridge,

Administrative Support                        Administrator

 

EXHIBIT SUMMARY

 

A – Committee Rules, staff, 1 p

B – LC 6, staff, 4 pp

C – HB 4072, staff, 3 pp

D -  HB 4072 -1, staff, 2 pp

E – ECDD Chart, Rep. Donna Nelson, 1 p