Each year, the State Board of Equalization meets three times to review and approve projected revenues for the upcoming fiscal year – in December, February and June. At this year’s June meeting, which took place earlier this week, the Board approved a packet that included revised revenue projections that are extremely important for the new fiscal year set to begin July 1st. Read the rest of this entry »

In their efforts to find additional revenues for the upcoming budget year, legislative leaders and Governor Henry took some strong and politically risky steps to suspend tax credits for various forms of economic activity. But when it came to tax incentives for the oil and gas industry, expected to amount to some $150 million in FY ’11, it was the industry that seemed to have the upper hand. HB 2432, which passed in the final days of session, allowed the state temporarily to defer incentive payments to oil and gas producers – but only in return for some permanent and questionable concessions to the industry. Read the rest of this entry »

One measure adopted this session to mitigate the extent of budget cuts was HB 2359, which aims to increase the collections of taxes owed on purchases made over the Internet or by other remote retailers. After opposition emerged, the final enrolled version of the bill dropped a controversial provision that would have required online retailers to report annual sales by each customer to the Tax Commission. Michael Mazerov, a Senior Fellow at the Washington-based Center on Budget and Policy Priorities, is one of the leading national experts on state taxes and a staunch proponent of state efforts to collect taxes on remote sales. He discussed Oklahoma’s new bill, which awaits final action by the Governor, in a phone interview with OK Policy’s Director, David Blatt.

David Blatt: Remind us of why a bill like HB 2359 is needed? What’s the problem that this legislation is trying to address?

MM: Legislation like this is needed because, like every state with a sales tax, Oklahoma is losing a significant share of revenue because it can’t collect sales taxes from many purchases made from internet sellers, catalog companies, and other so-called ‘remote sellers’. In fact, the best estimate is that Oklahoma is losing over a hundred million dollars a year in potential sales tax revenue from uncollected taxes on remote sales. This is revenue that is already due under existing state law. The state’s failure to collect this revenue makes its budget gap that much bigger and undermines the ability of state and local governments to maintain basic public services. It also makes the sale tax more regressive because most of the people that are avoiding paying this tax are relatively affluent people who have computers and Internet access account and can buy things tax-free online, while low-income people have to pay tax when they shop in stores. Read the rest of this entry »

Legislative leaders and the Governor yesterday announced their agreement on the FY ‘11 budget. We’ve posted the press release here and the document that was provided comparing appropriations for each agency for this budget year and next, and listing the additional revenues that were agreed on in addition to the $5.4 billion in state revenues certified by the Board of Equalization in February. The Oklahoman’s Paul Monies has created a nifty visual breakdown of where the money is going  using a program called Many Eyes. Read the rest of this entry »

Last week, the Oklahoman published a “Tax Day” editorial addressing OK Policy’s recent contributions to the debate on the state budget crisis. They began by emphasizing our common ground:

Along with the Oklahoma Policy Institute’s David Blatt, we’ve been urging lawmakers to use the downturn to find sensible new sources of revenue (such as ending or capping ineffective tax credits) and to better prepare for the next downturn.

This is a meaningful and much-appreciated acknowledgment, as the need for new sources of revenue is a contentious principle  at the Legislature and around the state these days (See this insightful article by Patrick McGuigan on how this issue divides the state’s two policy think-tanks, us and the Oklahoma Council of Public Affairs). But the Oklahoman proceeds to reject one of our main proposals for bridging the budget gap, doing away with the exemption that allows taxpayers who itemize their returns to also claim the deduction for state income taxes from their state taxes. The exemption costs the state an estimated $118 million on income tax revenue annually, which at a time of drastic budget scenarios, could make a major difference in preserving critical public services.

We have noted that the exemption for state income tax benefits only the minority of taxpayers, about one in four, who claim itemized deductions. Their editorial states:

That alone is reason to urge caution — especially considering that some states (most notably Texas) have no income tax and Oklahoma’s maximum personal income tax rate is uncomfortably high at 5.5 percent. Read the rest of this entry »

As Oklahoma faces record budget shortfalls, the threat of massive cuts that would slow the state’s economic recovery and have potentially devastating effects on schools, social services, and public safety loom large. In this context, there is an urgent need for a balanced approach to bridging the state’s budget gap that includes identifying possible sources of additional one-time or ongoing revenue. This post is the second in a series that discusses some of the most promising policy ideas for generating additional revenue that would go at least part of the way to closing the budget deficit; the first looked at the sales tax discount paid to vendors.

Were you aware that Oklahoma allows a state income tax deduction for state income taxes? The idea doesn’t sound plausible, but it’s true.  Among the allowable deductions for those who claim itemized deductions on their federal taxes is one for state income tax. In 2007, according to IRS statistics (Excel file),  about 400,000 Oklahomans claimed this deduction to the tune of $2.2 billion. Due to a quirk of Oklahoma tax laws, those deducting state income taxes from their federal taxes are also allowed to claim this deduction against their state income tax. Read the rest of this entry »

With state revenue collections seeing their steepest plunge in a generation, Oklahoma is enduring a tough year of state budget cuts that are already having a harmful effect on families, communities and the economy. However, while the severity of this year’s cuts has been mitigated, the outlook for next year’s budget is substantially worse. In the absence of new revenue, we should expect additional budget cuts of 10 to 12 percent across the full range of state agencies beyond those cuts already enacted this year. While we know far too little about how deeper cuts will be absorbed by state agencies and school districts, we are certain that if  the budget were to be balanced exclusively by cuts, the impact will be devastating to our schools, safety net programs, infrastructure, and public safety.

In this context, there is an urgent need for a balanced approach to the state’s budget shortfall that includes identifying possible sources of additional one-time or ongoing revenue. Governor Henry, in his FY ‘11 Executive Budget,  proposed over $700 million in revenue enhancing measures, along with additional cuts across all of state government, savings from efficiencies and consolidation, and the use of remaining stimulus and reserve fund balances. Not all of the Governor’s ideas are likely to gain traction, but they provide a good starting point for an urgently-needed  discussion. In this and subsequent blog posts, OK Policy will explore some of the most promising policy ideas for generating additional revenue that would go at least part of the way to closing the budget deficit.

One straightforward revenue-generating idea involves limiting the discount that the state pays retailers for collecting the state sales tax. Currently Oklahoma is among 26 states that provides vendors some form of compensation, or discount, for collecting and remitting sales tax. As the policy organization Good Jobs First has noted: Read the rest of this entry »

Just when it looked as if the the extended negotiations over how to address FY ‘10 budget shortfalls were finally resolved, a new wrinkle emerged this week.  As a means to protest the continued failure to find supplemental funds for senior nutrition programs in the Department of Human Service, Senate Democrats refused to approve the emergency clause on a bill to transfer $30 million to the Special Cash Fund . Without an emergency clause, the transfer cannot take effect until July 1st, which threatens a whole series of agreements between the House, Senate and Governor intended to put this year’s budget to rest. (Update: an agreement was announced Wednesday afternoon on funding for senior nutrition programs allowing the emergency clauses for the funding bills to be passed). Read the rest of this entry »