--- kind: section source_pdf: oregon-prosperity-council-report-june-2026.pdf fingerprint: 8ac9aef8ca1b page_range: [215, 222] breadcrumb: ["Appendix E: Submissions & Feedback", "18. Oregon Tech Entrepreneurs & Investors"] source_links: pdf: "https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=215" raw_pages: - "../../.extracted/pages/page-0215.txt" - "../../.extracted/pages/page-0216.txt" - "../../.extracted/pages/page-0217.txt" - "../../.extracted/pages/page-0218.txt" - "../../.extracted/pages/page-0219.txt" - "../../.extracted/pages/page-0220.txt" - "../../.extracted/pages/page-0221.txt" - "../../.extracted/pages/page-0222.txt" --- # 18. Oregon Tech Entrepreneurs & Investors ## TL;DR *(generated · confidence: high)* Oregon tech entrepreneurs, investors, and venture leaders oppose SB 1507's elimination of the QSBS exclusion, arguing it will cause far greater tax losses than the Legislative Revenue Office's $19.45M annual projection. They contend that departing entrepreneurs, lost startups, exiting investors, and relocated founders will cost Oregon hundreds of millions in cumulative tax revenue over five years. The letter urges Governor Kotek to veto the bill or issue a public commitment to restore QSBS at a special session. **Key points** *(each cites a PDF page)*: - Legislative Revenue Office projects $19.45 million in new annual revenue from eliminating QSBS exclusion, but letter argues this ignores behavioral responses and compounding losses from business departures ([p. 215](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=215)) - Approximately 500 Oregon taxpayers claim QSBS annually; top 50 claimants account for roughly 80% of total exclusion amount ([p. 217](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=217)) - Oregon ranked 49th nationally for corporate tax structure competitiveness (Tax Foundation 2026 Index) and 39th for business environment in 2025, down from top 20 less than a decade ago (CNBC) ([p. 217](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=217)) - New Jersey brought itself into federal QSBS conformity on June 30, 2025, after watching capital flow to QSBS-friendly states; Oregon would become the only Pacific Northwest state actively taxing QSBS gains ([p. 217](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=217)) - Oregon venture capital funding collapsed from $2.8 billion in 2021 to approximately $586 million in 2024 ([p. 218](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=218)) - Three named Oregon founders relocated: Ganesh Shankar (Responsive) to Texas, Steve Marsh (Smarsh) to Florida, Jessica Gomez (Rogue Valley Microdevices) to Florida ([p. 216](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=216)) - Each departing company in the 400–600 employee range estimated to cost state approximately $15 million in direct annual tax revenue; one departure per year results in $75 million annual loss by year 5 ([p. 218](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=218)) - Five-year cumulative loss scenarios range from $225M (low case) to $1.125B (high case) when modeling company departures, startup formation loss, investor exits, and founder relocations ([p. 218](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=218)) - Crescendo (Oregon-founded, $50 million fundraise) hired over 500 employees in other U.S. states in the past year rather than Oregon, representing approximately $30 million in annual payroll ([p. 220](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=220)) - Income taxes represent 80%+ of Oregon's general fund; letter argues SB 1507 pulls only the rate-increase lever while working against taxpayer and income growth ([p. 221](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=221)) Amounts: $19.45 million · $38.9 million · $2.8 billion · $586 million · 49th · 39th · roughly 80% · 74% · Dates/FTE: March 19, 2026 · June 30, 2025 · 2021 · 2024 · Programs: SB 1507 · QSBS (Qualified Small Business Stock exclusion) · Prosperity Council · CHIPS Act · Parties: Governor Tina Kotek · Legislative Revenue Office · Tax Foundation · CNBC > **Source:** PDF [pp. 215-222](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=215) · raw: [215](../../.extracted/pages/page-0215.txt) · [216](../../.extracted/pages/page-0216.txt) · [217](../../.extracted/pages/page-0217.txt) · [218](../../.extracted/pages/page-0218.txt) · [219](../../.extracted/pages/page-0219.txt) · [220](../../.extracted/pages/page-0220.txt) · [221](../../.extracted/pages/page-0221.txt) · [222](../../.extracted/pages/page-0222.txt) Breadcrumb: Appendix E: Submissions & Feedback > 18. Oregon Tech Entrepreneurs & Investors --- March 19, 2026 The Honorable Tina Kotek Governor of Oregon 254 State Capitol 900 Court Street NE Salem, OR 97301 Re: The Math on SB 1507 and the Elimination of Oregon’s QSBS Exclusion Dear Governor Kotek, We understand you are currently evaluating SB 1507, which would decouple Oregon from the federal tax system in several critical ways. In particular, we write to share our perspective on the provision to eliminate the Qualified Small Business Stock exclusion (referred to throughout this letter as "QSBS"). We recognize that the state is facing a serious financial situation and a challenging economic environment, requiring difficult tradeoffs to balance both revenue and investments in important services such as housing, education, and economic equity. We love Oregon and want to see it thrive, and we want to improve the long-term fiscal health of the state to ensure that we can deliver the services that we value for all Oregonians. This level of investment requires a stable and growing tax base. We fear that SB 1507, and specifically the elimination of the QSBS exclusion, will do the opposite. The Legislative Revenue Office (“LRO”) projects just $19.45 million in new annual revenue from taxes on those Oregonians who qualify for QSBS this year and will no longer be able to exclude those taxes in Oregon. It does not include the impact of any additional city, county or metro taxes (potentially 13.9% combined at the marginal rate) and the behavioral impact on taxpayers. We believe that calculation and its methodology are incorrect, and that Oregon will lose far more revenue than it gains, and fast. Ganesh Shankar built Responsive in Beaverton. Steve Marsh built Smarsh at the Pittock Block Building next to the food cart pods in downtown Portland. Jessica Gomez bootstrapped Rogue Valley Microdevices in Medford from credit card debt into a world-class semiconductor foundry, becoming the first woman and minority-owned business to receive CHIPS Act funding. All three hired Oregonians, paid Oregon taxes, and grew companies that became pillars of this state's technology ecosystem. All three are now gone. Ganesh to Texas. Steve and Jessica to Florida. Jessica is now building her next manufacturing facility in Palm Bay. The jobs, the taxes, and the economic lift of that Letter to the Governor on SB 1507 1 expansion belong to other states now, not Oregon. They did not leave because they stopped believing in what they were building. They left because other states offered them something Oregon could not: a supportive business climate. They are not outliers. They are the beginning of a pattern that, without intervention, becomes an exodus. We are aware of others at similar stages having the same conversation with their advisors right now, today, as this bill waits for your signature. Each one who leaves makes it easier for the next one to justify exploring what a move might look like for their family and their employees. The business community has been listening carefully and with optimism to your recent statements about improving the business climate in Oregon and the creation and commitment to The Prosperity Council. But SB 1507 sends exactly the opposite message. According to several prominent attorneys in Portland, the volume of calls from founders, investors, and executives to discuss a move should SB 1507 pass has increased sharply in just the last two weeks. People are not waiting to see what happens. They are already making plans. When they go, they will not just take a one-time capital gains event with them. Every entrepreneur who leaves takes future job creation with them, including years of payroll taxes, corporate taxes, and the entire economic ecosystem that grows around a thriving business. Every company that moves employees takes their spending (sales tax), housing budget (property tax), and charitable giving with them. We risk that the next great company they build will be built somewhere else. The employees they hire to write that story will live somewhere else. As we’ll show below, the SB 1507 math doesn’t pencil. The outflows will dwarf the $19.45 million of tax gain the LRO projects in the first year, and the gap will widen every year thereafter. It won’t balance the budget; it will dig a deeper hole. The history of QSBS is a story about how to grow an economy from the ground up. President Clinton created it in 1993 to spur innovation and economic growth in a moment of economic uncertainty. President Obama expanded it significantly in 2010 on the heels of the financial crisis. Both Presidents recognized the same thing: that new businesses are the engine of growth, they require capital and risk-taking to get off the ground, and the revenue they eventually generate in payroll, property, and corporate taxes far outweighs the capital gains waived along the way. This was a bet on compounding returns (a growing pool helps fund more of the things we care about), and it paid off. We can do the same here in Oregon, in a moment that calls for leadership to spur action. Letter to the Governor on SB 1507 2 What the Numbers Actually Say The LRO projects $19.45 million in new annual revenue, or $38.9 million in this biennium. We don't dispute their math. We dispute their assumptions on what’s factored into the calculation. In speaking with the LRO, we learned that their economists reviewed tax return data from Oregon taxpayers and estimated only those who qualified for QSBS each year, but now will not. The LRO's own economist confirmed that only about 500 Oregon taxpayers claim the QSBS exclusion in a given year, with roughly 80% of the total exclusion amount concentrated among the top 50 claimants. Oregon is proposing to raise $19.45 million annually by changing the tax treatment for fewer than 500 people, with most of the tax revenue coming from 50. They are the investors who fund Oregon's startups and the founders who build them. Losing even a fraction of them to Washington, Nevada, or simply to the decision never to come here in the first place, wipes out the projected gain entirely. And unlike a capital gains event, that loss compounds every year they are gone. The LRO model only captures people who are already here and treats them as stationary. The four analyses below model what happens when they aren't. 1. Decreased Company Relocations and Increased Company Departures Making Oregon an attractive place to build and relocate a company is arguably more important than ever before. The Tax Foundation's 2026 Index shows Oregon has fallen further in tax competitiveness than any other state since 2020, now ranking 49th for corporate tax structure. And last year, CNBC ranked Oregon 39th in the nation for business, down from the top 20 less than a decade ago. New Jersey was one of the last remaining states that did not conform to federal QSBS rules, leaving its founders and investors at a structural disadvantage. The competitiveness of the state to attract talent was important to that administration. On June 30, 2025, after years of watching capital flow to QSBS-friendly states, New Jersey's governor signed legislation bringing the state into full conformity, effective 2026. At the exact moment New Jersey is joining the federal QSBS framework because the evidence demanded it, Oregon is considering leaving it. Oregon would be the only state in the Pacific Northwest (and one of only a handful nationally) to actively tax QSBS gains that the federal government and nearly all states have chosen to exempt. Oregon’s access to capital and network effects is already limited. This bill widens that gap. Additionally, the risk that an Oregon-based company decides to relocate to another state increases significantly if this bill is passed. Even 1-3 companies leaving is material. We estimate that each departing Oregon company in the 400–600 Letter to the Governor on SB 1507 3 employee range costs the state approximately $15 million in direct annual tax revenue (payroll, corporate, and personal income taxes), excluding secondary effects on vendors, landlords, and local services. Each company departure adds permanently to the annual loss. By year five, the conservative scenario of one departure per year results in $75M of tax revenue losses per year — every year — with no path to recovery. Scenario Companies Avg Annual Cumulative Departing (Yrs 1–5) Revenue Loss 5-Year Loss Low Case 1 per year ~$15M ~$225M Mid Case 3 per year ~$45M ~$675M High Case 5 per year ~$75M ~$1.125B 2. New Company Formation Loss Nationally, venture capital firms are 74% more likely to invest in early-stage startups when the QSBS exclusion is available. In addition, since its expansion by President Obama, sectors eligible for QSBS have seen significantly higher rates of new business starts and overall employment growth than ineligible sectors. In speaking with many local investors and venture firms, many of their limited partners (“LPs”) invest in their funds because of the QSBS benefits and many have said that they would be less likely to invest if they no longer existed. This is not a hypothetical risk. Oregon VC funding has already collapsed from $2.8 billion in 2021 to approximately $586 million in 2024, dramatically outpacing the national slowdown. We modeled a representative Oregon early-stage startup as employing approximately 50 people at an average salary of $85,000, generating approximately $500,000 in annual Oregon income tax revenue — based on Oregon's 8.75% marginal rate applied across the employee base. This figure is deliberately conservative. It excludes employees earning above $250,000 who tip into Oregon's 9.9% top bracket, excludes founder income entirely, and excludes any corporate taxes the startup pays as it scales. Oregon attracts less than 1% of West Coast venture funding and SB 1507 would put Oregon entrepreneurs at an even bigger disadvantage when trying to raise capital. This bill accelerates a deterioration that is already well underway and gives investors another reason to invest elsewhere. Scenario Fewer Startups Revenue Lost Per Annual Tax Founded Per Year Startup Revenue Loss Letter to the Governor on SB 1507 4 Low Case 5 ~$500K ~$2.5M Mid Case 10 ~$500K ~$5M High Case 20 ~$500K ~$10M 3. Investor Exits Multiple Oregon fund managers, including Oregon Venture Fund, confirmed that their LPs invest specifically because of QSBS benefits and may not invest without them. States like Nevada, Texas, Tennessee, and Florida all offer the full federal QSBS exclusion with no state income tax and Washington continues to recognize QSBS despite recent changes to its tax code. When investors leave, they stop investing in these funds and take their other tax revenue with them. We estimated annual state income tax contribution per qualified investor at approximately $300,000, consistent with income profiles typical of active angel investors and venture LPs. Scenario Investors Exiting Revenue Lost Annual Tax Per Year Per Investor Revenue Loss Low Case 5 ~$300K ~$1.5M Mid Case 10 ~$300K ~$3M High Case 20 ~$300K ~$6M 4. CEO & Founder Moves QSBS treatment is determined by where the founder is domiciled. What Oregon loses when a founder moves is everything else they bring with them, including their salary, their investment income, their real estate investments, and their spouse's income. These are high-earning individuals with substantial tax profiles well beyond any single liquidity event. They are also highly mobile in an age where you can increasingly work from anywhere. When these founders leave, Oregon loses more than their tax contribution. It loses the investors who write the first checks into the next generation of startups, the mentors who take the calls, the board members who have been through it before. That informal network, built over decades, is what turns a good idea into a company. It cannot be rebuilt quickly, and it cannot be replaced by policy. We estimate each departing founder represents approximately $1 million in annual non-QSBS taxable income, generating roughly $99,000 in annual Oregon income tax Letter to the Governor on SB 1507 5 at the state's effective rate on high earners. That loss is permanent, recurring, and begins the day they change their address, not the day they sell their company. Scenario Relocating Other Taxable Annual Tax 5-Year Per Year Income Revenue Loss Cum Low Case 5 ~$1M ~$500k ~$2.5M Mid Case 10 ~$1M ~1M ~$5M High Case 20 ~$1M ~2M ~$10M In our analysis, SB 1507 is a net loser. Even under conservative assumptions, Oregon loses far more tax revenue each year than the $19.45 million LRO projects it would gain. The cumulative five-year picture (accounting for the permanent, compounding nature of the above scenarios) runs into the hundreds of millions or more. The LRO’s math doesn’t factor in the downstream tax impact of companies that might leave, companies that will never be founded here, founders who may take residency advice from their lawyers or advisors, and investors who might choose other states over Oregon. Oregonians believe in the power of government to positively impact people’s lives. SB 1507 will shrink the resources available to do that, and the hole it leaves will deepen every year. A Better Way Forward The timing could not be worse. We are at the beginning of an AI-driven economy that will create the next generation of great companies faster than any prior era. Oregon’s long-standing values of creativity, entrepreneurship, and integrity are perfectly-suited to leading the way, and the window to seed those companies, attract that capital, and build that ecosystem is open right now. It will not stay open. Matt Price co-founded Crescendo in Portland in 2024. The company combines AI with human customer service operations and has raised $50 million, one of the largest fundraises by an Oregon-founded company in the last two years. Matt lives in Portland, believes in what this community stands for, and wants to build here. But Crescendo is headquartered in San Francisco, where the AI talent density made it necessary. And in the last year alone, Crescendo hired over 500 people in other U.S. states rather than in California. This could have been here. These are not executive roles. They are the working people jobs that Oregon's economy needs most, the kind that stabilize neighborhoods, fill schools, and keep local businesses alive. At an average salary of $60,000, that is $30 million in annual payroll that did not land here. The reason is not indifference. Oregon's employer payroll taxes and Portland-area taxes make hiring materially Letter to the Governor on SB 1507 6 more expensive than states like Texas. The potential elimination of QSBS adds another weight to the scale. States that recruit and welcome founders as economic builders will get them. States that signal they see them only as sources of revenue will not. Oregon is on the edge of sending exactly the wrong signal at exactly the wrong moment, to the people building the companies of tomorrow. Matt would like to pull the company toward Oregon. The state keeps pushing him the other way. A state as dependent on income taxes as Oregon (representing 80+% of the general fund) has three levers for revenue growth: more taxpayers, higher incomes, or higher rates. This bill pulls the third lever while actively working against the first two. That is not a budget solution. It is a bet that the people won't notice, or won't leave. Anecdotal evidence and the data in this letter say otherwise. You created the Prosperity Council to build the next decade of economic growth in Oregon. While we understand the fiscal pressures driving this bill, we respect the difficulty of the choices before you and are not asking you to ignore the budget imbalance. But signing this bill makes that work harder before it starts and creates a deeper hole once the correct math is applied. We urge you to veto the bill and task the Legislature with fixing it in a special session. If that’s not politically possible, we are asking for something specific and achievable before the bill is signed: a clear, public commitment in a signing letter that makes concerns clear and sets the expectation for the Legislature to restore the QSBS exclusion at a special session this year. That commitment costs nothing today. It tells Oregon's entrepreneurs, founders, investors, and scaling companies that this is a bridge, not a verdict. It gives the business community a reason to stay the course rather than start making calls to their attorneys, accountants, and real estate agents. And it gives the Legislature the runway to get this right before the damage becomes permanent. Your commitment to fixing this is the clearest possible proof that this administration means it. We urge you to make that commitment now, and to send an unambiguous message to every founder, investor, and scaling company in this state that Oregon is a place where building something great is still worth the risk. Sincerely, [Signature page to follow] Letter to the Governor on SB 1507 7 Nathan Christensen Irving Levin Justin Vandehey Mineral & Huckleberry Genesis Financial Thread Sam Kolbert-Hyle Colin Nederkoorn Jessica Gomez Brandlive Customer.io Rogue Valley Micro Marcelino Alvarez Skip Newberry Kim Thanost Photon Marine TAO Lumen Learning Diane Fraiman Eric Rosenfeld Teresa Coats Voyager Capital Oregon Venture Fund LearnAIR Stephen D. Marsh Marty Kagan John Horton Smarsh Hydrolix LegitScript Ross Gray Ganesh Shankar Stephanie Weber Cloud Campaign Responsive Ruby & SheerID Thomas Iwasaki Eric Breon Kate Johnson Vitality Blueprint Vacasa & Fairly Act On! Eric Winquist Ryan Comingdeer Jama Software Platformr Matt Price Mac Lavier Crescendo gearUP Sports * Signatures as of 11:00am on March 19, 2026. Additional names will be added as they arrive. Letter to the Governor on SB 1507 8 --- Parent: [Appendix E: Submissions & Feedback](./INDEX.md) · PDF: [pp. 215-222](https://www.oregon.gov/gov/Documents/Oregon%20Prosperity%20Council%20Report_June%202026.pdf#page=215)