The Enid News and Eagle, Enid, OK

May 18, 2013

Time waning to tackle state tax credits

Staff and wire reports
Enid News and Eagle

OKLAHOMA CITY — Despite calls by several Oklahoma legislators to address hundreds of millions of dollars in state tax credits and exemptions for businesses and industries, little has been done as another session approaches its end.

And at the same time, other legislators are trying to write even more tax giveaways into state law for things like tickets and hospitality suites to sporting events and the sale of helicopters.

“Once again, a bunch of very questionable tax credits are emerging from the cracks in the walls of our crumbling state Capitol,” said Rep. David Dank, R-Oklahoma City, a longtime critic of tax credits. “There are stealth efforts under way to give away hundreds of millions of dollars at the end of a session, when we told our state troopers and prison guards we had no money to pay them a decent salary.”

Dank sponsored a bill this session to ensure that hundreds of existing tax credits undergo more rigorous scrutiny, including pre-approval, expiration dates, fiscal limits and a requirement they actually create jobs. The bill easily cleared the House, but was derailed in a Senate committee.

Now, with only two weeks left before the Legislature is required to adjourn, several bills to create new tax credits and exemptions still are working their way toward the governor’s desk, including a measure that exempts taxes for the purchase of helicopters used exclusively for training. Other tax break bills are being considered for the construction of “affordable” homes and for tickets and hospitality suites to certain sporting events.

Rep. Charles Ortega, R-Altus, said the helicopter excise tax exemption is designed to show state support for a helicopter training facility opening in southwest Oklahoma, even though he acknowledged the facility is planning to open without the credit. The sales tax exemption for tickets and hospitality suites is an attempt to lure a professional golf tournament to Oklahoma City, said Sen. Clark Jolley, R-Edmond, the sponsor of the measure.

“We’re trying to land the U.S. Open,” Jolley, R-Edmond, told a Senate budget panel last week before the bill passed on a 20-1 vote.

And while tax credits often are quick to gain support in the Legislature, once they are written into statute they become politically difficult to eliminate.

“It’s easy to pass a tax credit, but once you get them on the books and you try to sunset something or change it, there’s a lot of powerful people that take advantage of tax credits ... (and) there’s a lot of lobbyists out here who lobby the members successfully about why we should keep them,” acknowledged Senate President Pro Tem Brian Bingman, R-Sapulpa.

As part of negotiations this year over a plan to slash the personal income tax, the Senate this year attempted to end the transferability of five separate tax credits for coal mining, wind power, rehabilitation of historic buildings, energy-efficient home construction and railroad modernization. Although those tax code changes ultimately were eliminated during negotiations, Sen. Mike Mazzei, R-Tulsa, said he’s still hopeful some tax credit “reform” can be accomplished before the Legislature adjourns.

Mazzei said he’s sponsoring one bill to change the coal and wind power tax credits from transferable to refundable, a move he says will result in about $1.4 million in savings for the state, and a second measure to eliminate more than a dozen “obsolete and ineffective” tax credit items from state law.

“So if at the end of this year we actually start the process of reforming the existing transferable tax credits, and we at least start taking out of the tax code some very special-interest tax credits, I’ll be pleased with that,” Mazzei said. “It’s always hard to take away the gravy train for beneficiaries of taxpayer dollars.”

But Dank said such efforts fall far short of significant tax credit reform, especially since the proposals call for an extension of the wind and coal tax credits through 2021.

“Worst of all, none of these tax credits will carry any restrictions or limitations,” Dank said. “And I have been told that the transferable measure went to conference to insert language that exempts the recipients from taxation on their refunds. It’s a double free ride on the backs of the taxpayers.

“Maybe we should just give them unmarked $100 bills and cut out the middleman.”

Enid legislators weighed in on the subject of tax credits with three unique views.

Sen. Patrick Anderson, R-Enid, pointed to the short amount of time left in the session.

“The likelihood of any real reform happening this year is very slim,” Anderson said. “This week is the last week of the session.”

Anderson predicts a flurry of last-minute activity on bills of questionable value.

“There’s going to be a real push for bad bills,” Anderson said.

Anderson earlier sponsored Senate Bill 240, which would eliminate all tax credits. It encountered opposition from the same senator who is sponsoring tax credits to attract the U.S. Open.

“It was sent to appropriations committee and the appropriations chairman, who is sponsoring the bill for the U.S. Open tax credits, said he didn’t want to hear it,” Anderson said.

Anderson said elimination of all tax credits and would allow individual income tax rates to drop down to 2.95 percent.

“That would be the lowest income tax rate of any state that has income tax,” Anderson said.

Rep. John Enns, R-Enid, said he’s discussed the subject with Banks on numerous occasions.

“David Banks is my seat-mate and I’ve heard all this from him,” Enns said.

Enns said Oklahoma tax credits should be sustainable — attracting corporations and creating jobs.

“If a tax credit isn’t really doing any good, why are we doing it?” Enns said.

As for transferable tax credits, in and of themselves, Enns opposes them.

Mike Jackson, R-Enid, said he believes the Legislature will indeed accomplish some measure of tax credit reform.

“You’re going to see a removal of transferability of credits for wind and coal,” Jackson said.

He considers that a step in the right direction and an accomplishment in its own right.

“In the last 5 or 10 years, we have not eliminated any tax credits, but in this year we are going to reform two transferable tax credits,” Jackson said.

Not all tax credits are bad, Jackson contended.

“If they are spurring growth, they should remain as ways to grow our economy and ways to give people jobs,” Jackson said.

Staff writer Phyllis Zorn contributed to this Associated Press story.