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Congressional tax plan would take Oklahoma’s budget mess national

by | November 17th, 2017 | Posted in Taxes | Comments (2)

Oklahomans have learned the hard way what happens when you enact massive tax cuts without saying how you will pay for them. In the mid-2000s, we began slashing our top income tax rate. When Oklahoma first started cutting taxes, the economy was booming with revenues to spare. The tax cuts were also phased in with triggers over time, so we didn’t see the full cost right away.

With every passing year, it’s become harder to ignore the cost. In the past decade, Oklahoma’s made the largest cuts in the nation to K-12 school formula funding and higher education. Most state agencies now have 20 to 40 percent less funding compared to 2009. This year, Republicans and Democrats alike were talking about Oklahoma’s structural budget deficit and the ways that budget cuts are dismantling essential state services and harming Oklahoma families. That’s why a supermajority of legislators voted to raise taxes in special session (though in the House that vote was unfortunately just short of the super-supermajority required by State Question 640).

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The EITC has been an unfortunate victim of Oklahoma’s budget gridlock

by | November 14th, 2017 | Posted in Poverty & Opportunity, Taxes | Comments (0)

In 2016, Oklahoma lawmakers were struggling to pass a state budget amid a massive revenue shortfall. Sound familiar?

One of the measures taken by lawmakers in that year to fill their shortfall was making Oklahoma’s Earned Income Tax Credit (EITC) non-refundable. The EITC is a tax credit designed to incentivize work and keep low-income working families out of poverty. It grows along with wage income up to a maximum level and then phases out gradually, so it never becomes a disincentive to earning more wage income.

Making the EITC non-refundable in 2016 saved about $25 million for the state budget, but only by undercutting a key poverty-fighting tool with a long history of bipartisan support and proven, long-lasting benefits for entire families. Refundability is critical to the success of the EITC because it allows the credit to reward work even if families have small state income tax bills — yet these families are all paying sales taxes, payroll taxes, and, directly or indirectly, property taxes as well.

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How Oklahomans would fare under the Congressional GOP tax plan

by | November 9th, 2017 | Posted in Taxes | Comments (1)

A new analysis of the Congressional GOP tax plan reveals that in Oklahoma, the wealthiest 1 percent will receive the greatest share of the total tax cut in year one, and their share would grow through 2027. The value of the tax cut would decline over time for every income group in Oklahoma except the very richest.

Republican Congress members are trying to sell this tax proposal, which will increase the federal deficit by $1.5 trillion over the next decade, as a plan to boost the middle class. But a closer examination of the bill’s provisions reveals that it is laser-focused on tax cuts for the nation’s highest earning households. The wealthiest Oklahomans’ share of the tax cuts would grow over time due to phase-ins of tax cuts that mostly benefit the rich and the eventual elimination or erosion of provisions that benefit low-and middle-income taxpayers.

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This is Oklahoma’s last chance

by | November 7th, 2017 | Posted in Budget, Taxes | Comments (1)

Note: This post has been updated to reflect the most recent information (11/7/17: 9:00 pm)

You are needed right now to contact your Representative and urge him or her to support the comprehensive budget plan contained in HB 1054.

Monday, the State Senate passed with a bipartisan vote of 37-5 a revised version of HB 1035 which includes a $1.50 cigarette tax increase, a 6 cent fuel tax increase, and a 4 percent gross production tax on new wells. This comprehensive revenue plan, also dubbed Plan A+ or the “Grand Bargain”, must pass with a three-quarters majority to take effect in time to save lives threatened by the state’s budget emergency.

Tuesday, a new version of the comprehensive plan containing identical language to HB 1035 was introduced as HB 1054 and passed out of the House JCAB committee on a 19-6 vote. The bill number has changed but the plan is the same.

HB 1054 is expected to be heard by the full House today (Wednesday).

The deal contained in HB 1035/HB 1054 is the only solution left to avert devastating budget cuts, provide desperately needed raises for teachers and state employees, and restore the Earned Income Tax Credit for low-income workers. House members from both parties must support HB 1035/HB 1054so that it reaches the supermajority needed to pass a revenue bill.

This is it. This is the last chance for a comprehensive, fair, and long-term solution to the budget crisis. The hard reality is that there is no choice between HB 1054 and some better deal. The only choice is between HB 1054 and a far worse deal or no deal at all. The far worse deal, which has been promoted by House Republican leadership in recent days, involves a combination of one-time cash and cuts that would deepen next year’s budget hole, put our credit rating at risk, and do more damage to important state services needed by Oklahoman families. If there’s no deal at all by December 1st, Oklahomans’ health care and social services will be devastated.

The Senate vote means that there is now a realistic path to a good outcome — but it will take House members knowing that they have their constituents’ support for a tough vote. Please contact your House member today in support of HB 1054. Be sure to share how the failure to resolve the budget crisis will affect your family, your business, or your community. See our Advocacy Alert for talking points and additional resources and our Special Session Frequently Asked Questions for more information.

Here is our full statement on why OK Policy supports the comprehensive budget plan that is on the table and that requires passage of HB 1035/HB 1054:

The comprehensive budget plan based on HB 1054 is the best possible outcome and the only good outcome under our current  circumstances. It recognizes that the state budget can only begin to be fixed with new recurring revenues and provides an important measure of fairness by curbing the tax break for oil and gas companies and restoring the earned income tax credit.  Most urgently, it averts catastrophic cuts to our health care system and social safety net while providing crucial pay raises for teachers and state employees. There is still much more work to do in the next regular session to ensure a fairer tax system and a budget that meets the needs of Oklahomans, but now is the time to approve this compromise and bring the budget emergency to an end. We  urge all House members to support HB 1054.

Reality Check: Restoring Oklahoma’s Gross Production Tax won’t hurt the economy

by | November 6th, 2017 | Posted in Taxes | Comments (0)

In a recent editorial, The Oklahoman newspaper accused critics of Oklahoma’s huge tax breaks for the oil and gas industry of ignoring reality. They wrote that the claim that oil and gas companies pay far less taxes in Oklahoma than in other states is “false upon inspection.” They go on to claim that removing the tax break would push investment out of Oklahoma. However, to justify their argument, The Oklahoman makes deeply flawed assumptions about Oklahoma’s taxes and the role of those taxes in decisions about drilling. Here are the facts.

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Oklahoma taxes are the lowest in our region, and falling

by | October 18th, 2017 | Posted in Taxes | Comments (2)

This week the Oklahoma Department of Mental Health and Substance Abuse Services began alerting care providers that they will have to shut down the state’s entire outpatient behavioral health system, with just a few exceptions, if lawmakers don’t find ways in special session to fill the agency’s $75 million budget hole. The Oklahoma Health Care Authority is planning to cut rates paid to doctors, hospitals, and nursing homes by 9 percent — a scenario that would likely put more rural hospitals out of business at a time when pregnant women in rural Oklahoma already are being forced to travel long distances for basic care. Teachers are continuing to flee the state as one study found those who left Oklahoma are making on average $19,000 more per year.

With headlines like these, few can dispute that Oklahoma’s state budget is deeply deficient. The details of how Oklahoma ended up in its latest budget mess are complicated. However, the big picture reason why Oklahoma struggles year after year to fund basic services is simple — we’ve slashed our revenue base.

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Repeal the capital gains tax break

by | October 10th, 2017 | Posted in Taxes | Comments (0)

A tax break that benefits a small number of wealthy taxpayers and costs the state of Oklahoma around $100 million per year cannot “be credibly shown to have significant economic impact or a positive return on investment for the State,” according to a study presented to Oklahoma’s Incentive Evaluation Commission by a national consulting firm. Lawmakers should heed the advice of the experts and act quickly to repeal this expensive and inefficient tax break.

The study found that over the past five years, Oklahoma’s capital gains deduction has reduced state tax revenues by $474 million while creating just $9 million in additional tax revenue. “This results in a net cost to the State of $465 million,” writes PFM Group Consulting, a firm with extensive experience in evaluating tax incentives that is working under contract with the state’s Incentive Evaluation Commission. The study also found that “over the life of the program, an average of 85.5 percent of the total deduction amount was made by individuals with income equal to or more than $200,000.” By comparison, just 3 percent of all Oklahoma taxpayers make over $200,000, according to 2015 IRS data.

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It matters who we ask to pay more

by | October 4th, 2017 | Posted in Taxes | Comments (1)

As lawmakers continue to work to develop a plan to address the state’s budget crisis, the top priority has rightly been generating enough new revenue to avoid even more cuts to critical services and to fund longstanding needs like a teacher pay raise. At the same time, with tax increases on the table, we can’t lose sight of who is being asked to pay more.  A good revenue plan must also ensure that everyone is contributing their fair share.

One of the most frequently overlooked features of our state’s current tax system is that it is regressive, which means that low- and middle-income families pay substantially more of their income in state and local taxes than do wealthier families.  The median Oklahoma household with annual income between $33,000 and $53,000 pays 9.4 percent of their income in combined state and local taxes, while the wealthiest households with annual income over $176,000 pay under 6 percent, according to a 2015 analysis by the Institute on Taxation and Economic Policy (ITEP).

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Bills filed in special session put many options in play

by | September 26th, 2017 | Posted in Budget, Taxes | Comments (0)

Yesterday was the first day of the special legislative session called by Governor Fallin to fix Oklahoma’s chronic budget problems. One day in, the outcome of special session is still very much up in the air. With so much at stake, it’s an essential time for Oklahomans to call, write, and visit lawmakers. Read on for analysis of the bills filed so far and what you can do to influence the result.

Although Governor Fallin promised to veto any budget that makes further cuts to state agencies, House Speaker Charles McCall continues to insist that the only revenue on the table will be another try at a cigarette tax. At this point in the year, the cigarette tax by itself will only close about half of Oklahoma’s current budget shortfall. And if the Legislature still does not have a three-fourths majority needed to pass the tax, sending it to a vote of the people means the soonest it could go into effect would be 2019, far too late to avoid life-threatening cuts to health care.

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Supreme Court strikes a balance on State Question 640

by | September 12th, 2017 | Posted in Taxes | Comments (0)

“The purpose and intent of State Question 640 is now eviscerated…” So declared Oklahoma Chief Justice Douglas Combs in a dissent to last month’s 5-4 Supreme Court decision upholding a new state law that partially removed a tax exemption on motor vehicle sales. For former House Speaker Steve Lewis, the Court’s ruling is “no less sweeping than the original passage of SQ 640 in 1992.”

Yet this ruling came just weeks after the Court unanimously struck down a law establishing a $1.50-per-package smoking cessation fee as a violation of State Question 640. In both cases, the Legislature had passed tax-related bills without heed to the constitutional requirement, set by passage of State Question 640, that revenue bills be approved by three-quarters votes in the Legislature or by a vote of the people.

Is there a contradiction between the Court’s rulings in the two cases? And has State Question 640 now been eviscerated?  I contend that the answer to both questions is no.  The two rulings — both authored by Justice Patrick Wyrick, the Court’s newest member and the sole appointee of Governor Fallin — together strike the balance that increases in tax rates are subject to the supermajority requirements of SQ 640 while measures that remove a tax exemption are not.

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