Income tax, water issues await Legislature
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December 30, 2011
By M. Scott Carter�
M. Scott Carter is OKC and Capitol reporter for The Journal Record. Contact: 405-278-2838 / scott.carter@journalrecord.com / http://twitter.com/JRMScottCarter
Posted: 10:27 PM Thursday, December 29, 2011
OKLAHOMA CITY – Last session it was jobs, money and more jobs.Next year it could be taxes, money and water.
Just a few weeks away from the opening of the second session of the 53rd Oklahoma Legislature, the issues facing state lawmakers will be similar to last year’s list, but with a twist – a fight over tribal water rights and a continuing discussion about taxes.
Plus that flat budget.
With about $6.5 billion in certified revenue to spend, state lawmakers still face a budget shortfall of close to $150 million. That hole, attributed to the loss of one-time revenue, isn’t as large as those in past sessions.
“We’re very encouraged that our economy is growing,” Republican Gov. Mary Fallin said to the Associated Press. “It’s moving in the right direction. But we also know that with one-time funds that will not be available that we’ve had the previous couple of years … we still need to be optimistically cautious about the amount of money that we will have.”
Echoing Fallin, House budget chairman Earl Sears, R-Bartlesville, said he would spend the next legislative session focused on passing a balanced budget.
“My energies will be on the budget and filling the holes that we have,” Sears said. ‘We have to look at programs and see if we need to try and make adjustments. I’m very open to that.”
Sears said he didn’t want to increase spending until the state’s recovery was well under way.
“It’s like all those ideas for bond proposals,” he said. “I’m absolutely not inclined to push any of them, other than a public vote to address the maintenance needs of the Capitol.”
But a flat budget won’t be the only issue.
After about six months of meetings, members of the Task Force on State Tax Credits and Economic Incentives sent a report to Fallin and legislative leaders calling for the elimination of all transferable tax credits, great transparency and the development of a preapproval process for future tax incentives.
“There is a general consensus here that says tax incentives that create real, lasting jobs are worthy, while those that fail that basic test are not,” state Rep. David Dank, R-Oklahoma City, said earlier this month. “If I go down to buy a car, it doesn’t matter that I bought one 10 or 20 years ago. I’m going to have to be preapproved before I drive that car off the lot. The same rules should apply to tax incentives.”
He said he wanted to develop a system where everyone knows exactly what is going on and what is at stake.
“It needs to be open and upfront, because we are spending the taxpayers’ money,” Dank said.
University of Oklahoma political science professor Keith Gaddie said the call to eliminate the state’s income tax could be a powerful motivator for many lawmakers.
“I would love to see us get rid of the income tax,” Gaddie said. “I think it would be a smart move. But if we do it, we have got to make up the revenue, either by expanding the base and amount of the sales and services tax or by increasing property taxes.”
And the property tax, he said, was universally hated.
“When you look at property taxes, you can’t look to Texas,” Gaddie said. “Their property tax is three times higher than ours and it includes everything. If lawmakers try to use property tax, they would have to get rid of the homestead exemption and increase rates on personal and corporate property.”
The other issue, he said, could be an increase in the cost of car tags.
“If you eliminate the personal income tax, you’ll have to try and make up about half the state’s revenue,” Gaddie said.
Other issues waiting on the Legislature include a legal fight with two Native American tribes over water issues and major changes in the Department of Human Services.
Gaddie said reforming DHS could be the swan song for outgoing Republican House Speaker Kris Steele.
“It’s a good issue to focus on and I don’t think anyone is going to get in his way,” he said.
Still, with a final certified amount set to be determined in February, lawmakers on both sides of the political spectrum will be scrambling to find every available dollar to help smooth what could still be a rough budget year.
“I think it’s important that state leaders and my office and the Office of State Finance look at all of our reserve funds, our cash funds, to see if there are pockets of money that we’re not aware of that can be used to help in balancing our budget,” Fallin said.
The Oklahoma Legislature returns to the Capitol in February.
Associated Press writer Sean Murphy contributed to this report.
