IT investments in the US threatened by "economic macro forces", says Oregon Senator

Hillsboro (OR) - With countries in Asia-Pacific leveraging huge tax incentives to convince chip manufacturers to build plants in their countries, it is not a secret that such investments are getting less attractive in the US. Oregon Senator Gordon Smith today said that the US needs to "get its act together" quickly - and Governor Ted Kulongoski even conceded that his State "can't compete with China or Singapore" on a financial basis.

Technology firms have been complaining about a lacking vision of the US government in education, immigration and taxation topics for years. Especially Intel uses every opportunity to explain its concerns - and it was no surprise that it found supporters to speak during its "Strategic Summit" on Wednesday.

These supporters were Senator Gordon Smith (R-OR) and Oregon Governor Ted Kulongoski, which echoed the concerns we heard in the past, but very openly told analysts that the US government will have to quickly adjust its view on global economics to protect the US from losing its leadership position in IT research, technology development and manufacturing. Speaking in the rooms of a company that employs roughly 16,000 people living in Oregon, supportive comments were expected, but the dramatic phrases chosen by Smith and Kulongoski surprised.

"The US needs to get its act together quickly and recommit to science," said Smith in his speech that called for a US turnaround on issues that he feels may become barriers for IT industry investments and may lead to offshoring of employment. He focused on the need to increase government spending in physical sciences, math and science education, revised immigration laws with an incentive of citizenship for foreign students after graduating from university, as well as tax policy.

"There are economic macro forces that pressure the Western world to remain competitive," he said. Ultimately, the US government would have to reform its "antiquated tax system" to keep firms such as Intel investing in the US: "I believe that we are moving from fairness taxation to a model of efficient taxation," he said. According to the Senator, the next session of congress will dedicate "considerable" time on the issue of tax policy.

Intel currently claims that building a fab abroad instead of the US will save the company about $1 billion - mainly because of advantages in depreciation. This argument already is strong enough to achieve some tax incentives or "tax efficiency" today: According Kulongoski, Intel committed to a $25 billion investment in Oregon over the next 15 years - in exchange for Oregon dropping the property tax that would have been involved in those investments. But Kulongoski does not believe that existing tax incentives will be enough to keep Intel happy in the long term.

"I cannot compete with China or Singapore on a financial basis," he told TG Daily. "But", he added, "the cheapest one will not win." Instead of increasing tax incentives he counts on creating "other" value. "In the end, it's a brainpower game," he said. He believes that government investments into education ultimately will pay off, create a qualified workforce and convince firms such as Intel to stay in Oregon and the US.