Failing the scratch-and-sniff test.

[April 30th, 2003] When it comes to the affairs of state, apparently the Nose is completely clueless.

The evidence?

Well, let's see:

Schools are broke.

There's not enough money to put car thieves on trial.

Thousands of poor Oregonians are losing health-care coverage.

And the Legislature's response?

It wants to eliminate the income tax for venture capitalists.

Really.

This little bit of pixie dust comes to you in the form of Senate Bill 362, which would give a tax break to venture capitalists who invest at least $2 million in start-up Oregon companies.

The argument that co-sponsor state Sen. Ryan Deckert (D-Beaverton) makes for SB362 goes like this: The economy is in the tank. Small business is the backbone of the state economy. So why not lure some venture capitalists (a fancy label given to those who invest in start-up companies) to Oregon?

Why not? Because this bill has less intelligence than the Blazers' marketing department. SB362 is not a targeted economic-development tool. It's a barrel of grease hurled at the creaky pistons of Oregon's economic engine.

For example, unlike other economic-development incentives, SB362 has no conditions on how many jobs must be created or any other measurable outcome.

The bill wouldn't just exempt the investor from state income taxes on profits from the investment, mind you. It would exempt the venture capitalist from all state taxes on any income that his venture investments generated. Including the exemption of income taxes on millions of dollars of investments that have nothing to do with Oregon companies.

This bill is less a piece of law than a loophole big enough to fly a Nike jet through. The legislative staffer who's analyzed SB362 concedes that there's nothing from preventing Oregon's existing millionaires, such as Phil Knight or the Rev. Dr. Bob Pamplin, from setting up a VC biz and seeking to shelter their income from the state revenuers.

And you thought the go-go days of Enron-style cowboy capitalism were over.

One other thing: SB362's tax break (which, in addition to Deckert, has the fingerprints of people like Scott Gibson, who invests in small companies, and State Treasurer Randall Edwards) is a solution in search of a problem. Oregon's dilemma is less a lack of cash for start-up companies than it is a lack of good companies and ideas to invest in.

Don't take the Nose's word for it. Consider instead the sentiments of Ralph Shaw, the legendary venture capitalist who spoke to one of the Nose's associates. "There is no shortage of venture capital," says Shaw. In fact, a number of local venture-capital funds in Oregon (including one, called Northwest Technology Ventures, that has received $14 million from the state lottery) are struggling to find local companies to invest in.

The Nose is no venture capitalist. To him, an entrepreneurial investment is a scratch-off ticket from the Plaid Pantry on Killingsworth. But even this schnozz can smell a rotten piece of legislation from a distance. And SB362 reeks like head cheese that has been left too long on the dashboard.