(Updated to reflect correct source links for tax credit information).
I recently read an article in the McCarville Report entitled, “Democrats Blame Republicans for Revenue Failure, Budget Gap,” putting most of the blame on tax cuts and credits.
If you look at the Oklahoma Almanac, you will find that in the first 100 years of statehood, the Legislature had a Democrat majority, and 2009 was the first year the Legislature had a Republican majority.
Let’s check some history.
It was Democratic Governor Brad Henry who implemented the two largest tax cuts in state history: $627M in 2006, four times larger than a then-record $150M tax cut plan in 2005. Under that tax relief package, the top income tax rate was decreased from 6.25% to 5.5% over three years, and to 5.25% in the fourth year, if the economy continued to grow.
To understand our past, let’s look at some examples of tax credits (info from the Oklahoma Tax Commission’s Tax Expenditure Report). Note that these particular examples were all enacted before 2009.
|Type||Citation||Year Enacted||Description||Estimate*||Number of Returns*||Sunset or Repeal Date|
|Investment/New Jobs||68 O.S. § 2357.4||1986||Based on either percentage of investment in depreciable property or net increase in employment (credit depends on level of investment).||$94,792,000||937|
|Oklahoma Coal Production (REFUNDABLE at 85%)||68 O.S. § 2357.11||1988||$5 per ton for both purchase and extraction||$79,000||10||1/1/22|
|Investments in Clean-burning Motor Vehicle Property (CNG)||68 O.S. § 2357.22||1996||45% for CNG vehicles, 75% of refilling station expenses and 50% or up to 42,500 of private refilling expenses||$10,674,000||872||12/31/19|
|Credit for Electricity Generated by Zero-Emission (WIND) Facilities (REFUNDABLE at 85%)||68 O.S. § 2357.32A||2001||½ cent per KWH electricity produced, may be claimed for 10 years||$18,181,000||114||facility placed in operation before 1/1/2021|
|Tax Credit for Historic Rehabilitation Expenditures (TRANSFERRABLE)||68 O.S. § 2357.41||2000||100% of the federal credit for certain expenses related to rehabilitation||$3,869,000||47|
|Oklahoma Earned Income Tax Credit (REFUNDABLE)||68 O.S. § 2357.43||2001||5% of the federal EITC||$39,126,000||331,854|
|Credit for Energy Efficient Residential Construction (TRANSFERRABLE)||68 O.S. § 2357.46||2005||100% of eligible expenditures, not to exceed $4,000||$3,714,000||174|
|Aerospace Industry Employee Credit||68 O.S. § 2357.304||2008||up to $5,000 annually for 5 years||$2,497,000||895||12/31/17|
|Sales Tax Relief (REFUNDABLE)||68 O.S. § 5011||1990||$40 times the number of personal exemptions||$39,328,000||476,193|
Readers may also contact the Oklahoma Department of Commerce and request a publication entitled, Oklahoma Business Incentives and Tax Guide. You will discover that there are millions of dollars of tax credits and incentives. If you research Oklahoma Statute Title 68, you will find that credits and incentives were first passed by a Democrat controlled Legislature.
All that being said, I believe that tax credits not yielding a return on the investment need to simply go away. We are currently repealing or adjusting tax credits that don’t benefit the state.
Oklahoma Teacher Retirement
Oklahoma teacher retirement (OTR) has failed to receive proper funding by the Legislature for decades now – ever since the system was started in 1938, in fact. The teachers paid their part, the schools paid their part, but the state did not.
In 2010, OTR was funded at 48%. In 2011, legislation was passed to put in $300 M per year. In just three years, the OTR system is up to 63% funded and the system is expected to be fully funded by 2025. Had the Democrat-controlled Legislature funded the system properly, this is $300 M that could have been used to fund pay raises, for example.
I constantly hear that the Legislature doesn’t fund textbooks for school. Section 12 of last year’s General Appropriations bill in House Bill 2242 says this: “There is hereby appropriated to the State Board of Education from any monies not otherwise appropriated from the Special Cash Fund of the State Treasury the sum of Thirty-three Million Dollars ($33,000,000.00) or so much thereof as may be necessary for the purchase of textbooks and instructional materials.”
The Legislature allocated funds for textbooks, but it is up to the Superintendent whether to spend or not to spend the money on textbooks and/or instructional materials.
There are many sources of information available to research the history of past Legislatures that affect the current Legislature. Feel very free to contact my office if there’s information we can help provide. Call 405-521-5576 or email email@example.com.
Until next time,
Senator Mark Allen