Sunday, January 29, 2012

House Republicans outline tax credit reforms

OKLAHOMA CITY – Oklahoma’s tax credit system would undergo widespread reforms under a plan outlined by House Republican leaders last week.
“A tax credit should benefit taxpayers more than it costs them. Period. That hasn’t been the case in Oklahoma, but under this plan, it would always be the case,” said Rep. David Dank, R-Oklahoman City, chairman of the joint legislative Task Force for the Study of Tax Credits and Economic Incentives.
Dank said meaningful tax credit reform is an important first step for the Legislature to take as it considers reducing and phasing out the state’s personal income tax.
“We need to remember that we cannot accomplish real tax relief for all Oklahomans until we put an end to the costly sweetheart deals that have been handed to a very few in the past. Those giveaways cost us hundreds of millions of dollars each year. Ending tax credit abuse is one vital ingredient in assuring lasting tax relief for all,” Dank said.
The strategy outlined today would save between $250 and $300 million in fiscal year 2013 and continue saving millions of dollars annually in the future. It proposes:
  • Extending the current moratorium on all tax credits another two years;
  • Enacting a constitutional amendment establishing specific criteria for tax credits;
  • Ending transferability of tax credits; and
  • Requiring all future tax credits and all credits placed on moratorium to meet the constitutionally-required criteria and receive legislative approval in order to be enacted or removed from moratorium.
“Oklahoma’s tax credit system today is a big block of Swiss cheese with no rhyme or reason whatsoever to all its holes and cutouts. It’s time to wipe the slate clean and start over,” said House Speaker Kris Steele, R-Shawnee. “This policy is as pro-growth and fiscally conservative as it gets. It’s the right thing to do for taxpayers and will result in a better tax credit system that leads to economic growth without wasting taxpayer dollars.”
If all the reforms are enacted, all tax credits placed on moratorium would have to be brought back one-by-one by affirmative votes of the Legislature under criteria that would be in the state Constitution. Future credits would also require legislative approval and would have to meet the constitutionally-required criteria.
Steele plans to seek a constitutional amendment that would place the tax credit criteria adopted by the task force in the Oklahoma Constitution. House Joint Resolution 1089, by Steele, would send the criteria to a vote of the people in November. If approved, the criteria would be placed in the Constitution.
Under the criteria:
  • All credits would require pre-approval by the Legislature;
  • No tax credit would be transferable;
  • All tax credits would be subject to full transparency and regular auditing by the State Auditor;
  • Any proposed tax credit would have to be accompanied by a fiscal impact statement detailing how it would affect the state budget;
  • All tax credits would be subject to caps and specific termination dates;
  • No tax credit could be enacted within the final five days of any legislative session.
“It protects taxpayer dollars – plain and simple – and ensures all tax credits actually benefit the state,” Steele said. “But get ready, because as soon as we speak a word of this proposal, special interest groups are going to start lobbying tooth and nail in defense of their credits. Our message to them is simple: If the credit meets the criteria, the credit is useful and can stay, but if it fails the criteria, it’ll have to go.”
House Bill 2978, by Dank, would statutorily enact the criteria.
House Bill 2976, by Dank, would extend the tax credit moratorium that has been in place since 2010 for another two years. The extended moratorium only applies to tax credits. It does not apply to tax incentives such as the Quality Jobs program and certain engineering and oil and gas incentives that Dank said have adequate safeguards and produce net economic gains that exceed the cost of the incentives.
“An extended moratorium gives the Legislature additional time to consider the worthiness of each individual tax credit and to put in place specific criteria the task force believes must apply to all tax credits, be they existing or future proposals,” Dank said.
HB 2979, by Dank, would end transferability of tax credits.
“Transferable credits are bought and sold like poker chips by folks who’ve provided zero services to the state. This practice was identified by the task force as perhaps the most constitutionally questionable aspect of the entire system. It must end,” Dank said.
House Bill 2977, by Dank, would extend the Task Force for the Study of Tax Credits and Economic Incentives for another year, until January 2013.
“It benefits us to have the task force continue the analysis it started last year and serve as a watchdog as this reform process plays out over the next few years,” Dank said.
Rep. Earl Sears, the House Appropriations and Budget Committee chairman, said the reforms will have a direct benefit on the FY 13 state budget and future budgets.
“We’re talking about hundreds of millions of dollars here that we can use to fund core services or return to taxpayers. It’s a significant opportunity for us,” said Sears, R-Bartlesville. “I’ve been honored to be part of the task force and believe Chairman Dank’s leadership has been outstanding. This is what good, honest government is all about.”
NOTE: For accompanying video, go to

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