Tax breaks cost state billions each year
BY SEAN MURPHY Associated Press Writer
Monday, February 22, 2010
2/22/10 at 6:58 AM
OKLAHOMA CITY — Whether it's the sale of railroad spikes or deposits paid on mushroom containers, Oklahoma's tax code provides a number of tax breaks that cost the state billions of dollars each year.
A semiannual report issued by the Tax Commission lists 460 separate exemptions, credits and deductions that total an estimated $5.5 billion. The real number is likely even higher, because dozens of these exemptions are never reported to the commission.
With the state facing its worst budget crisis in modern times, resulting in the elimination of senior nutrition programs, the closing of treatment centers and deep cuts to virtually every state program, policy makers are taking a close look at the billions given up by the state each year.
By far the largest category of tax breaks are exemptions on sales to manufacturers — which total $1.6 billion and list more than a dozen subcategories, including deposits made for returnable containers used to transport mushrooms from a farm for resale.
"If you're giving somebody money for something they were going to do already, it is a giveaway," said State Treasurer Scott Meacham, the governor's point man on budget issues. "It's time we took a hard look at these and see if we're actually getting the benefit that we expected and if that benefit we're getting is exceeding the cost."
Gov. Brad Henry, a Democrat, has proposed a one-year moratorium on a number of select income tax credits and the repeal of a rural small business capital investment credit. Those two plans combined would save the state about $82 million.
State Sen. Tom Adelson, D-Tulsa, unveiled a plan last week that would target tax breaks totaling $259 million for energy companies, manufacturing facilities, newspapers and investors.
While Republican leaders in the House and Senate indicated some of these proposals have scant chance for passage, they do appear willing to at least discuss the ideas as lawmakers try to build a state budget with about $1.2 billion less to spend than they did last year.
Senate President Pro Tem Glenn Coffee, R-Oklahoma City, said there is no legislative support for tax increases, but added: "Everything else is on the table."
For his part, Adelson said targeting some of these tax expenditures is more a matter of policy than politics.
"The growth in government spending through the tax code is the fault of both Republicans and Democrats," he said. "I'm not here to cast blame. I voted for some.
"Oklahomans want us to find solutions, not build party market share."
But while the state looks to target some of the tax breaks, the business community says they are critical to promoting economic development in Oklahoma.
"If these exemptions aren't proving useful or they're outdated, they don't need to be there, but it shouldn't be a witch hunt," said Ron Cupp, senior vice president for government affairs with The State Chamber of Oklahoma, which represents businesses and industry in the state and is a powerful lobbying force at the state Capitol. "It shouldn't be hanging targets on the backs of business.
"The State Chamber continues to oppose attempts to reduce or repeal necessary economic development incentives for existing and new business."
The Oklahoma Policy Institute, a nonpartisan think-tank that analyzes Oklahoma policy, issued a report last week recommending stricter oversight and scrutiny of tax breaks, along with spending caps and triggers that could rein them in during downturns in the economy.
"It's been extremely difficult to get reliable and consistent information as to the cost of these programs, and there's a general sense that you don't know what we're getting in return for the credits that have been granted," said David Blatt, who authored the report.