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The Republican governor candidates competing for the ‘no-tax’ vote (Capitol Update)

by | June 30th, 2017 | Posted in Budget, Capitol Updates, Taxes | Comments (0)

Steve Lewis served as Speaker of the Oklahoma House of Representatives from 1989-1991. He currently practices law in Tulsa and represents clients at the Capitol.

Gary Richardson

Republican gubernatorial candidate Gary Richardson announced last week that he will file a lawsuit challenging three of the measures that produced enough revenue during the legislative session to get the Legislature adjourned by the mandated last Friday in May. I think it was a smart political move by Richardson, who is attempting to consolidate the formidable anti-tax wing of Republican primary voters behind his candidacy. In his announcement for governor last February, soon after the Legislature went into session, Richardson said, “The current budget crisis in Oklahoma proves to me that Oklahoma isn’t a poor state but a state run poorly. It’s important that the people of Oklahoma have a Governor who will make the right decisions to get our state out of this budget crisis without raising taxes.”

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Highs and lows of Oklahoma’s 2017 legislative session (Part 1)

by | June 12th, 2017 | Posted in Budget, Education, Taxes | Comments (0)

At the start of session, OK Policy laid out our top priorities in the areas of budget and taxes, health care, education, criminal justice and economic opportunity. As the session developed, we achieved some victories with good bills and helped stop even more harmful bills from becoming law. And there were plenty of disappointments in the form of promising legislation that died along the way.

Here are our staff’s recaps of the major highs and lows of the 2017 session in the issue areas where we were most deeply engaged. In part one, we share recaps of what happened with budget, tax, and education polices. In part two, we discuss what happened with health care, criminal justice, and economic opportunity policies.

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Kansas experiment yields valuable lessons (Guest post: Heidi Holliday)

by | June 9th, 2017 | Posted in Taxes | Comments (2)

Heidi Holliday

Heidi Holliday is Executive Director of the Kansas Center for Economic Growth.

You’re welcome, America. Our state, Kansas, just wrapped up a 5-year long experiment in governance from which the other 49 states can now glean some important lessons. The Kansas Legislature has voted to roll back much of the 2012 package of tax cuts that sent the state into a downward spiral of financial instability and weakened the Kansas’ public schools, universities, Medicaid program, and virtually everything else that the state funds.

With the state facing yet another budget shortfall of $900 million, government leaders decided that enough was enough. Governor Brownback, who heralded the 2012 experiment, was proposing yet more temporary band-aid approaches and more cuts deal with the shortfalls. The Legislature chose a different path and instead sent the Governor a bill that would raise more than $1.2 billion in new revenue over two years by, among other things, repealing a costly tax break for pass-through income, rebalancing individual income tax rates by reinstating a third tax bracket, and reversing course on the Governor’s plan to eliminate our state income tax. Brownback vetoed the legislation but, with bipartisan support, the House and Senate quickly overrode the veto.

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Focus on “government spending” instead of real people is leading lawmakers astray

by | May 17th, 2017 | Posted in Budget, Taxes | Comments (0)

Right now most Oklahomans are worried about how our lawmakers will fill a huge budget shortfall following years of cuts that have contributed to teachers fleeing Oklahoma classrooms, left Oklahomans with severe disabilities and children in the child welfare system at risk of losing basic protections, and created an extremely dangerous environment in prisons for both inmates and staff, among other damaging effects. State agencies large and small report having overstretched staff with stagnant wages and low morale; inability to maintain buildings and equipment; and serious struggles to maintain quality services or perform their core mission. These cuts are rippling out to threaten entire communities, especially in areas of small town and rural Oklahoma where residents have fewer local resources to make up for disinvestment by the state.

Amid all of this turmoil, the Oklahoma Council of Public Affairs is working hard to convince lawmakers that our budget problems don’t exist. In a series they’re calling the “bogus budget”, they add up all of the spending by various state agencies and argue that if the total hasn’t plummeted, we don’t need to worry about their funding.

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How much new revenue will ending oil and gas tax breaks bring in?

by | May 15th, 2017 | Posted in Taxes | Comments (4)

As the budget debate has intensified in recent weeks, legislators and advocates have heard dramatically different estimates of how much additional revenue could be raised by ending or reducing the special tax rate for oil and gas production. Some have claimed that ending the gross production tax break would only bring in an additional $20 million next year, while others have suggested the impact could be as high as $350 million.

A new memo prepared for OK Policy by two leading tax experts, Jerry Johnson and Michael Clingman, provides clarity to this issue. The memo explains why honest revenue estimates vary so greatly and presents solid numbers on how much additional revenue would be generated if GPT is increased to 5 percent or 7 percent on new wells. It finds that if the Legislature is willing to apply the higher rate to wells drilled prior to the law being passed, which is well within its legal authority, the state would generate from $150 million to $313 million more for next year’s budget.

Here’s a summary:

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OCPA’s attack on OK Policy and ITEP doesn’t hold up

by | May 11th, 2017 | Posted in Press Releases & Statements, Taxes | Comments (1)

Last night, the Oklahoma Council on Public Affairs released a statement attacking the credibility and integrity of Oklahoma Policy Institute and the Institute on Taxation and Economic Policy (ITEP). They claim that a “Number of the Day” we cited from a report by ITEP regarding Devon Energy’s effective state corporate income tax rates from 2008 to 2015 is “not based on facts.” However, OCPA apparently did not look at or understand the methodology of the ITEP report, which fully explains where the numbers came from and how they were analyzed to make the best possible estimate of effective state corporate income tax rates.

In essence, the ITEP report reversed “impairment charges” that companies claim based on long-term projected values of oil and gas. These charges are an accounting fiction that have no effect on current income taxes or a company’s cash flow. Impairment charges are widely recognized by investors as separate from earnings and actual expenses when evaluating a company’s profitability and overall health. When calculated correctly, Devon Energy paid $71 million in state corporate income taxes over an eight-year period in which they recorded more than $21 billion in profits, for an effective tax rate of 0.3 percent.

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Itemized deduction proposal has flaws, but opponents’ claims are overstated

by | May 11th, 2017 | Posted in Taxes | Comments (2)

With only a couple of week lefts in the Legislative session, lawmakers are scrambling to put together a budget that avoids devastating cuts to Oklahoma communities. The latest revenue idea to emerge is to limit itemized deductions to $17,000 per tax return, which would increase revenues by $107 million or $166 million, according to different estimates. This idea has been introduced as HB 2347 and approved by the House Joint Committee on Appropriations and Budget (JCAB), though it has recently been pulled from further consideration as lawmakers discuss revising it.

Itemized deduction reform is a promising state budget solution because it would not require the difficult-to-reach 3/4ths supermajority support for a tax rate increase under SQ 640. It also would not harm the large majority of low- and middle-income taxpayers who take the standard deduction instead of itemizing. Under HB 2347, even families and individuals who do itemize would not be affected unless they take more than $17,000 in deductions. A bill to freeze the standard deduction that would affect lower income taxpayers (HB 2348) has already been passed by the Legislature and sent to Governor Fallin, so HB 2347 would help ensure the cost of fixing Oklahoma’s budget shortfall is dispersed across both lower and higher-income households.

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On revenue options, the right choice is “All of the Above”

by | May 10th, 2017 | Posted in Budget, Taxes | Comments (1)

With less than three weeks left in the legislative session, there is still no overall budget agreement. Facing a budget hole of close to $1 billion, a bipartisan consensus has emerged at the Capitol on the need for substantial new revenue to avert budget cuts that could have a catastrophic affect on Oklahoma communities and families. There is not yet, however, a firm consensus on which revenues to raise.

Republicans are promoting a $1.50-per-pack increase in the tobacco tax and a six-cent per gallon hike in the fuel tax. Democrats are holding out on both these measures, which require a three-fourths majority in both chambers to pass under the terms of State Question 640. Democrats are instead calling for an end to Oklahoma’s large tax break for oil and gas drilling, a change which Republicans are resisting. To attract Democratic votes, Republicans have introduced, but have not yet advanced, several revenue bills that contain aspects of the Democrats’ Restore Oklahoma budget plan. These include partly restoring the state Earned Income Tax Credit, narrowing the capital gains income tax exemption, and adopting combined corporate reporting. 

Which of these revenue measures should be approved? The right answer is “all of the above.”

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Statement: Repeal of tax cut is a milestone for Oklahoma

Oklahoma Policy Institute released a statement in response to the Legislature’s final passage of SB 170, a bill to repeal an automatic income tax cut trigger:

The repeal of this tax cut is a milestone. After years of promises that income tax cuts would pay for themselves, a majority of lawmakers have finally begun to recognize the cost. We cannot afford more tax cuts that have drained resources from our communities without paying off in economic growth.

While repealing the next tax cut won’t help to resolve Oklahoma’s current budget shortfall, we hope that it begins the restoration of responsible budget and tax policies in the years ahead. This is also a hopeful sign that lawmakers now realize tax policy decisions should be based on current conditions, not automatic triggers created by prior Legislatures.

House and Senate vacancies should make passing revenue bills easier (Capitol Updates)

by | May 5th, 2017 | Posted in Capitol Updates, Taxes | Comments (3)

Steve Lewis served as Speaker of the Oklahoma House of Representatives from 1989-1991. He currently practices law in Tulsa and represents clients at the Capitol.

Several revenue-raising measures were introduced last week, and at least some will soon be making their way to the House and Senate floors for a vote. The revenue bills were introduced in the House and must be passed by 75 percent of the members of each chamber to become law. Discussion continues between House and Senate leaders and the governor’s office on which revenue bills to bring to a vote. A consensus seems to have developed that more revenue is necessary, but the debate now is over how much and how to raise it. A 75 percent vote on any controversial issue is a high bar, but it was intentionally created for revenue bills by the Oklahoma Constitution as the result of SQ 640 passed in 1992.

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