By State Rep. David Dank
The Legislature has a golden opportunity this year to reform our state’s convoluted and wasteful tax credit system and pass along the savings to individual taxpayers. Unfortunately, some legislators seem to be wavering under pressure from an army of special interest lobbyists who persist in defending the indefensible.
The choices this year are simple: We must reform a widely abused tax credit system that dispenses special favors to the few, and then we can pass real income tax cuts for all. We cannot only do the latter without gutting the state budget. Unfortunately, the first month of the legislative session has been less than encouraging.
The task force I chaired last year reached some undeniable conclusions. It found that many tax credits that had been granted in the past failed to create promised jobs. The task force also criticized the practice of issuing transferable tax credits, which allow businesses in one industry to sell tax credits to a completely unrelated company which then cashes them in like poker chips.
Several bills have been filed to correct these abuses and to impose strict transparency and accountability on tax credits, which cost the state budget several hundred million dollars annually. It is important to recall that the Attorney General has already issued an opinion calling many of these tax credits “constitutionally infirmed.”
No responsible legislator opposes worthy incentives that create real, lasting jobs, or that help sustain basic industries. But some of us question a system that has become a gigantic roulette wheel, with various special interests jockeying to reap unearned rewards worth millions.
One tax credit being vigorously defended by lobbyists benefits construction projects on historic buildings, which also qualify for a long list of additional tax breaks and other incentives. A crafty developer can manipulate those special state and federal breaks to get the taxpayers – that’s you and me – to fund almost 100 percent of the project.
Other credits benefit the wind farm industry. Unfortunately, the turbines being used in Oklahoma are made in Arkansas, and many of those tax credits either subsidize lower utility rates in other states or boost profits for non-Oklahoma companies. Are we really getting a fair return for those millions in tax credits?
Transferable tax credits are even more damaging, since most are sold to insurance companies that use them to forgo paying the premium taxes that help fund the state police and firefighter pension systems. No cost of living raises for retired firefighters or cops? Blame those tax credits.
This session began with promises of real tax relief for all Oklahomans, but many of those promises were based on the need to reform the tax credit system. Early resistance to those reforms is already endangering the prospects for income tax cuts, and if lobbyists and special interests win the tax credit battle, it’s the ordinary taxpayer who will once again suffer.
Legislators need to decide now whose voice matters most – that of 3.75 million Oklahoma taxpayers or a hundred aggressive and highly-paid lobbyists.
State Rep. David Dank, R-Oklahoma City, is chair of the House Budget and Appropriations Subcommittee on Revenue and Taxation.