To the Editor:
With State Question 766, Oklahoma voters will be asked to allow a tax break for some of the largest corporations in the state. This would be paid for by a combination of cuts to schools and counties and increases in individuals’ property tax bills.
Supporters of SQ 766 tell a very different story. They argue that voting down the question could lead to large tax increases on everyone, with assets ranging from teaching certificates to “goodwill” being newly taxed. This argument is incorrect for two reasons.
First, the legislature could have proposed an amendment that protects families and small businesses from intangible property tax without also exempting those corporations that have already been paying it. The tax had previously been levied only on those companies that are “centrally assessed,” which means their property tax bills are calculated by the state rather than by individual counties. Centrally assessed companies in Oklahoma include railroads and utilities such as AT&T.
After a 2009 Oklahoma Supreme Court ruling denied an attempt by AT&T (then Southwestern Bell) to exempt specific intangibles from taxation, the company began lobbying to exempt all intangibles. To gain support for their cause, the company and groups like the State Chamber of Commerce raised the specter of intangible property taxes spreading to all taxpayers.
To ensure this would not happen, the Legislature could have put forward an amendment that exempted locally assessed entities from intangible property tax while continuing the status quo for centrally assessed entities. That’s similar to what is done in Oregon. Alternatively, they could have exempted intangible property but allowed a method of assessing value that includes all assets of a public corporation (for example, basing valuation on the market-determined stock price).
Instead, the legislature created a loophole that will cost an estimated $50 million initially and is almost certain to grow over time.
The second reason individuals and small businesses are not in danger of seeing a tax increase if this measure fails is that the legislature has already created a safeguard. After the initial Supreme Court decision, lawmakers created a “business activity tax” of $25 that could be paid in lieu of intangible property taxes. They also created a corresponding tax credit to pay back the $25, so no one’s tax bill has changed. If SQ 766 fails, this temporary fix will stay in effect. It is a messy solution, but it gives us time to take a more careful approach without needing to worry about a tax increase in the immediate future.
Ironically, passing SQ 766 could result in a tax increase on individuals across the state. The revenue loss from this amendment would be partially paid for by cuts to schools and counties, but mandatory expenses like school bonds and court-ordered payments cannot be cut. To meet these obligations, counties could increase the property tax rate for everyone.
On the other hand, if SQ 766 fails, lawmakers can go back to the drawing board for a better solution.
Gene Perry, Tulsa
NOTE: Gene Perry is a policy analyst with the
Oklahoma Policy Institute. Find more information from OK Policy at okpolicy.org.
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