Dank provides aggressive framework for reform of Oklahoma tax credits and economic incentives
Published: November 9th, 2011
Chairman David Dank said the Wednesday (November 9) meeting of the Oklahoma Task Force on Tax Credits and Economic Incentives might be “the most important one we have held thus far.”
In his opening remarks to the morning session, he proceeded to give substance to that characterization of the proceedings. Dank said the day’s object was to turn the committee’s attention to the “criteria we will use to judge the validity of the tax credits we have examined in the past months. We will also discuss how we will proceed in drafting that report and the legislation that will ultimately result from it.”
The comments of several others, including panel members Earl Sears (House Appropriations and Budget Chairman), Gary Jones (state Auditor and Inspector), Ken Miller (state Treasurer), Andrew Rice (Senate Democratic Leader) and Preston Doerflinger (Director of State Finance) were also noteworthy, providing strong indications of consensus in some areas, and potential disagreement in others. State Rep. Mike Reynolds, who has regularly participated in the deliberations although not a member of the task force, also added to the day’s substance.
Still, it was the comments of Rep. Dank, an Oklahoma City Republican, that outlined explicitly the framework likely to emerge as the task force moves to meet a Dec. 31 for its recommendations to the Legislature.
Dank asked rhetorically, “Who do we represent? I think the only valid answer is, The Taxpayers. Not the special interests who have benefited from many of these tax credits … and certainly not the few who have manipulated this system for personal gain.”
The Oklahoma City Republican continued, “We are not against business We don’t oppose growth. We believe that government policy can help create jobs. We don’t think all credits or incentives are bad.
“What I think most of us believe after all we have heard here is that far too many tax credits and other incentives enacted in the past were created for the wrong reasons, and in the wrong way. Many were enacted virtually in secret. Some had no checks and balances.”
As he has before, Dank said an attorney general’s formal opinion and its tripartite test for the legal adequacy of credits and incentives concluded a number of Oklahoma’s existing programs “are constitutionally infirm, which is simply another way of saying they were simply illegal.”
Speaking from the presiding chair in the House Chamber at the Capitol, Dank acknowledged that some critics want to pursue “the recipients of some of those very questionable tax credits to recover those funds. I do not believe that would be wise or even legal, and it has the potential for punishing innocent people.
“I don’t blame a business or individual for using a tax credit that was on the books at the time. I do blame those few who gamed the system for maximum advantage and past legislatures for passing defective legislation. … Some of those last minute deals were pretty smelly. And the culture here tolerated that. In some cases it encouraged it.”
In perhaps his bluntest language of the day, Dank said, “The simple truth is that a few of these tax credits are like the huckster who took a bucket of manure, covered the top with an inch of money and sold the whole thing as a full bucket of money. It wasn’t until the sucker got home with it that he found out what he had actually bought.”
Crafting a report that aims to retain effective, transparent and legally sound incentive programs while bringing the more dubious systems to and end provides, Dank said, “a golden opportunity to reverse that culture and to shine some much-needed light on the public business we do here, all the way to the bottom of the bucket.”
Dank listed nine principles he believes should be included in any reform package or packages:
“First of all, I believe firmly that we must end forever the creation of tax credits or other incentives that are transferable. Taxpayer dollars should never be traded around to the highest bidder in a shell game like some we have seen. Any tax credit should at a minimum benefit only the recipient.
“Second, no tax credit or other incentive program ought to be enacted or changed by legislation created and introduced in the final days or hours of any legislative session. We all know how that works. We’ve seen it before. A bill or amendment suddenly appears on the calendar during the final hours with no time for debate or deliberation. In fact we all know lobbyists who prefer it that way. When it comes to allocating public money, that practice must end, and I believe any legislation we submit needs to say so.
“Third, any future tax credit needs to come wrapped in a clear and accurate fiscal impact study. We can no longer afford to enact tax credits with unknown future costs to the state budget. Tell us what it will cost from year to year.
“Fourth, any future credit must be designed to create or save jobs. That is the only acceptable reason for a tax credit in the first place, because that is the only way any tax credit will actually help build wealth and return the initial investment to the state. Economic growth is job growth. That has to be the central goal of any tax credit worthy of our consideration.
“Fifth, whenever a business comes to us asking for our help to grow jobs, we need to look at all of the alternatives before we even utter the words ‘tax credit.’ We have discussed several times the job sustaining provisions of the Quality Jobs Act, as well as other state programs that can help keep people at work. A tax credit should be our last, not our first, resort.”
In a sixth recommendation that proved a prelude to lengthy critical discussion sparked by comments from Treasurer Miller, Dank said he believes the Auditor and Inspector should have power “to thoroughly audit every tax credit, beginning in the drafting state and continuing on a year to year basis. The Auditor was elected by the people to oversee how public dollars are spent, and this is one area that has cried out for oversight for a long time. We will never have the transparency and accountability we have spent the past few months talking about until we have a trusted authority examining these programs.
“Seventh, I firmly believe that we can no longer afford to enact open-ended tax credits. We are coming out of severe state budget crisis, but there will always be another one somewhere down the road. Any future tax credits need to have enforceable caps and limits.
“Eighth, on that same theme, all future tax credits must be subject to sunset provisions. The Legislature should periodically examine and be prepared to re-certify any tax credit. Frankly, I am a little surprised that we did not turn up a tax credit for the makers of buggy ships that had been on the books since the delivery of the first horseless carriage back in 1907 or so. No tax credit should be granted eternal life, and sun-setting will address that problem.
“Ninth, I believe we need to curtail the granting of tax credits on what has become virtually an automatic basis. Each project or separate credit needs to be subject to examination and individual approval. Without that we get projects like pizza parlors in buildings that just happen to qualify for a historic preservation credit.”