The State of Oregon Will Auction Off Dollars Dec. 5, Probably at a Discount

The Higher Education Coordinating Commission will sell tax credits to fund scholarships.

The state of Oregon has phased out some its most controversial tax credit programs. Business energy tax credits, which led to widespread scandal and at least a couple of prison sentences, are long gone. And as of 2022, the bovine manure tax credit program (not making this up) is gone.

But like the holiday binge-eater sneaking just one more Oreo, the state can’t quite kick its reliance on tax credits as means of creating incentives or funding services.

Here’s the way it works: Oregonians, including businesses, with income tax obligations to the state can offset their obligations by purchasing tax credits. The credits are like grocery store coupons: attractive if they offer a discount from face value.

Part of the reason state tax credit programs have been controversial is that tax credit auctions in the past allowed well-heeled taxpayers to buy credits at a substantial discount. In effect, they were buying dollar bills for 90 or 95 cents—and sometimes far less—thus depriving the state of future tax revenue it otherwise would have collected.

As recently as 2015, as WW reported, buyers could obtain some energy tax credits at 75 cents on the dollar.

Lawmakers put an end to deep discounts, but on Dec. 5, the Higher Education Coordinating Commission will auction $14 million worth of tax credits to help fund Oregon Opportunity Grants for needy students. The HECC will sell the credits in $500 increments, with a minimum bid of $450.

The agency holds a similar auction every year, and according to Oregon Department of Revenue figures, the credits have traded at a discount to face value in three of the past four years.

Average Bid per $500 Certificate Issued in HECC Auction

2018 $520.66

2019 $455.03

2020 $464.71

2021 $482.00

In a statement announcing the auction, the agency outlined its rationale.

The Oregon Opportunity Grant “is critical to supporting college affordability for more than 30,000 students a year, but state funding for the OOG has been insufficient to support the college costs of all eligible students,” the HECC statement said.

Watchdog groups, including the Oregon Center for Public Policy, have long been critical of what was once the state’s profligate use of tax credits and the continuing practice of selling them at a discount. The rub: Credits cost nothing today and are therefore easier to dole out than allocating general fund dollars from a current budget. But the discount actually means the state ends up incurring the underlying costs in the future—just less efficiently.

OCPP spokesman Juan Carlos Ordóñez says his organization supports the state putting more money into scholarships—but not through tax credits.

“In a tax credit auction, the state loses money on each tax credit sold, while giving a tax break to those who buy the tax credit—most likely rich Oregonians,” Ordóñez says. “It’s high time the Legislature stops using inefficient funding gimmicks and directly appropriates money to fund essential needs.”

Here’s more information about the auction, which begins Monday morning at 9 am and closes Dec. 9 at 5 pm.