By Patrick B. McGuigan
State Rep. David Dank, an Oklahoma City Republican, is leading a critical examination of tax credits, exemptions and other business incentives in the 2011 session of the State Legislature, which begins Monday, Feb. 7.
In his capacity as Chairman of the Revenue and Taxation Subcommittee, he answered a quartet of questions as the Legislature prepared to begin its work this week.
The perspective he brings to the issue is, he says, nuanced: “There is a place for incentives and even tax credits when the jobs those incentives would create are substantial. New jobs return more revenue to the state through added payroll, and they especially help our economy grow. But too many tax credits enacted in the past failed to pass that test. Some were simply giveaways.
“We need to ask a couple of fundamental questions about any tax credit. Will it create or sustain added jobs? And is it fair to everyone involved, especially the taxpayers, who are the ones footing the bill? That means we need to halt the practice of issuing transferable tax credits in particular. A legitimate tax credit should benefit only the industry it was supposed to help and not be bought and sold like securities or commodities.”
Concerning the role of the State Chamber of other groups that have relied on such programs to promote economic development, Rep. Dank told CapitolBeatOK, “There will be no conflict if these programs are really being used to create jobs and promote economic growth, which is a primary goal of business. But if chambers and other business groups oppose reform because they are simply trying to protect one or more of their members who are receiving an unjustified tax credit, we may well have a conflict.”
Concerning the amount of taxpayer money that might be wrapped up in wasteful or ineffective credits, exemptions and incentives of the past, he reflected, “In 2008 alone the State of Oklahoma granted $220 million in tax credits, with almost no accountability or oversight. If just half of those were questionable, that’s enough to take up a good percentage of the budget shortfall facing us this year. By any accounting, we are talking about hundreds of millions of taxpayer dollars each year.”
Of equal importance in Dank’s mind is his effort to examine Oklahoma’s high income tax rates, with prospect for addressing the challenge in the next couple of years. He said, “We started reforming our personal income tax under Governor Keating, and so far we have succeeded in reducing the top rate, which almost everyone pays, from seven to 5.25 percent if the newest reduction is allowed to kick in this year. That means we are still 5.25 percent more expensive than Texas.
“Happily we have a task force in place that is going to look at future income tax reductions. My personal preference would be to eliminate the state personal income tax entirely and replace it with consumption taxes on items other than groceries and prescription drugs, where everyone pays a fair share based on what they buy. The more money people have, the more they spend.
“It may be that we will approach that with gradual year-by-year reductions. The House staff will be running the numbers and looking at every possible scenario to see how we can reduce or eliminate the income tax and continue to fund government at an appropriate level.
“Either way I am encouraged by a renewed willingness on the part of both the legislative and executive branches to take a hard look at the negative impact the income tax places on our competitiveness as a state.”
Last week, the Oklahoma Council of Public Affairs issued an alternative budget that included reduction of state income tax rates to 4.25 percent.
Dank said he respects Governor Mary Fallin’s Commerce Secretary-designate Dave Lopez. In last week’s edition, The City Sentinel reported Lopez’s positive assessment of Dank:
“I know David and understand the passion he brings to assuring these programs are run right. I believe a good job can be done of measuring the effectiveness of those programs, and we should ask for the counsel of the best programs and businesses in the private sector on how to do it.”