House Democrats slam tax credits, offer budget steps

CapitolBeatOK Staff Report

Published: 27-Apr-2010

With current and future leadership making their case, Democratic members of the Oklahoma House of Representatives today (Tuesday, April 27) presented proposals to reduce a wide range of business tax credits. According to an overview of the plan sent to CapitolBeatOK, the House Democrats view their approach as a way to fill the state’s billion-dollar budget deficit for Fiscal year 2011 without “damaging job cuts and service reductions.”

Democrats expressed frustration with plans to cut agency budgets by as much as 10 percent. They asserted Republicans have failed to consider cuts in the area “where spending by government has increased the most, tax expenditures.”

The House Democratic presentation labeled tax expenditures as a category including “tax breaks and loopholes of all kinds, such as incentive programs, credits, exemptions and deductions.” Their analysis concluded spending on tax breaks has increased by approximately $1 billion in just the past two years, and now totals $5.6 billion per year, an amount nearly equal to the entire annual state budget. “The bulk of the increase has gone to corporate recipients,” according to the House Democratic caucus statement.

“At a time when we are asking our parents and children to accept teacher firings and larger class sizes, when we are asking our senior citizens to make do with less food, when we are asking everyone to make sacrifices, we cannot afford to continue running giveaway programs that provide dubious results,” said Rep. Scott Inman of Del City. He is the House Minority Leader-elect.

“Some of these programs are intended to create jobs, and that is certainly a goal we support, but our research shows that we do not have adequate accountability in tracking whether these incentive programs are actually accomplishing anything,” Rep. Inman continued. “In some cases, we have found it cost $153,000 for each job created, but the salaries for those jobs were nowhere near that amount.”

Among the credits which Democrats believe should be reduced are:

·      corporate tax credits for rural venture capital companies and small businesses, which rose from $2.7 million in 2006 to $45 million in 2008;

·      corporate tax credits for venture capital, which rose from $1.66 million in 2006 to $26.6 million in 2008

·      income tax credits for investment in small business capital companies, which rose from $1 million to $13.3 million in 2008

·      income tax credit for investment/increased employment, which rose from $40.24 million in 2006 to $118.7 million in 2008.

“We believe we should be looking at these and many other tax credits and incentives that were put into place with the best of intentions, but which we can ill afford in the current situation,” said Danny Morgan of Prague, the current leader of House Democrats.

“Another thing we could modify is the vendor discount on sales tax, which allows big companies to retain as much as $3,000 per store out of the sales tax they collect each year. Just eight to ten companies are collecting something like 70 percent of the sales tax in the sate each year, and they are not the ones we need to be helping with tax breaks,” Rep. Morgan added.

“We will continue to address this crisis with more suggestions in the days to come,” Morgan added. This fresh criticism of “tax expeditures” continues a wave of closer scrutiny of business incentives and tax credits characterizing this legislative session.

Among outside analysts, the Oklahoma Policy Institute has encouraged tougher standards on use of and access to tax credits, gaining some agreement from analysts at the Oklahoma Council of Public Affairs.

On the Republican side of the aisle, state Rep. David Dank of Oklahoma City remains a visible critic of business tax credits.

In his own statement today, provided to CapitolBeatOK, Democratic State Rep. Mike Brown of Tahlequah assailed “the past six years of policy,” while asserting “government spending chosen by those driving Oklahoma’s economy” had caused “revenue failure, creating an environment that has forced the loss of jobs, loss of services, and put the general public’s safety at risk.” He said recent policies were “gutting 30 years of education advances.”

Brown criticized several venture capital investment credits, and distributed to reporters a summary of legislation he has envisioned that would modify a wide range of tax credits benefiting businesses but, he believes, negatively effecting state revenues.

State Treasurer Scott Meacham told reporters earlier this month that discussions about possible revenue enhancement measures have been under way, but that no tax increases will be on the table. Concerning the revenue impacts of some tax credits, the treasurer said, “I’m joining up with Rep. [David] Dank in concern over some business tax credits.”

In recent encounters with reporters, Meacham, House Speaker Chris Benge and President Pro Tem Glenn Coffee have indicated tax credits are under review and discussion, without detailing what reductions, suspensions or moratoriums might be in the offing. The House adjourned early on Tuesday, and members moved into a variety of closed door meetings.

NOTE: Editor Patrick B. McGuigan contributed to this report.