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Oklahoma has many good options to resolve the teacher walkout

by | March 15th, 2018 | Posted in Budget, Education, Taxes | Comments (13)

The Oklahoma Education Association last week called on the Legislature to support an ambitious proposal to increase funding for public education and state services. The association, which represents nearly 40,000 teachers and school employees across the state, warned that “If the Legislature cannot fund education and core state services by the legal deadline of April 1, we are prepared to close schools and stay at the Capitol until it gets done.” The Oklahoma Public Employees Association, which is the largest group representing state employees, has announced that their members would join the teachers’ walkout on April 2nd unless lawmakers pass a significant state employee pay raise.

Oklahoma’s tax and budget policies have led to the current crisis

The threatened actions by the two associations follow years of budget cuts that have left teachers and state employees severely underpaid and the schools and agencies they work for desperately ill-equipped to do their jobs. To cite just a few examples, Oklahoma teachers have not seen an increase in the minimum salary schedule in a decade and our teachers are now the third-lowest paid in the nation. State funding for school operations is $180 million less than a decade ago, and Oklahoma schools have absorbed by far the deepest cuts in per pupil general state funding in the nation. Most state employees have gone eight to ten years without a raise; during this time, average salaries for state employees have fallen to 24 percent below the competitive labor market. State employee turnover has reached 20.5 percent, which is a nearly 40 percent increase from a decade earlier.

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Despite all the complaining about SQ 640, legislators avoid votes to reform it (Capitol Update)

by | March 9th, 2018 | Posted in 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.

This past week was important in determining what legislators will be able to accomplish this session. It was the deadline for getting bills past their first committee hearing. There are plenty of ways for ideas to be resurrected during the legislative process, but if bills were intentionally not heard or defeated in their first committee assignment, it’s unlikely the idea will survive this session.

When session started I thought legislators would surely submit to a vote of the people a change in the 75 percent requirement for raising taxes by the Legislature. SQ 640, imposing this requirement, is a relic of the 1980s and 1990s when Oklahoma’s economic conditions were similar, but worse than today.

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Capital gains deduction is an expensive loophole benefiting a small number of Oklahomans (Guest post: Cynthia Rogers, Ph.D)

by | February 26th, 2018 | Posted in Taxes | Comments (0)

Cynthia Rogers

Cynthia Rogers, PhD, is a professor of economics at the University of Oklahoma and a commissioner on the State of Oklahoma’s Incentive Evaluation Commission.

The Capital Gains Tax Deduction allows Oklahoma taxpayers to avoid paying taxes on income from the sale of Oklahoma real estate or stock in an Oklahoma-based firm where the assets have been held for a sufficient period (68 OS § 2358). The goal of the deduction seems to be to promote investment and access to capital for Oklahoma-based firms.

In an analysis for the state’s Incentive Evaluation Commission, PFM Group Consulting, LLC recommended that the capital gains tax deduction be eliminated. PFM concluded that the program cannot be shown to generate a positive return on investment for the state with the available data. As an IEC commissioner and an economist, I agree.

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Statement: Changes to Step Up income tax plan will bolster working families

by | February 8th, 2018 | Posted in Blog, Press Releases & Statements, Taxes | Comments (1)

For Immediate Release

Oklahoma Policy Institute Executive Director David Blatt released the following statement on the amendment to HB 1037, the income tax component of the Step Up Oklahoma plan, which passed out of House committee today:

The move to restore Oklahoma’s Earned Income Tax Credit and other changes in this amendment will make it easier for low- and middle-income Oklahomans to support themselves and their families. These changes will ensure a more balanced tax code by helping those families who pay the biggest percentage of their earnings in sales and property taxes, while strengthening our investments in education and thriving communities.

Oklahoma can do even more to restore balance to the tax code, close loopholes, and invest in our communities by restoring a higher top rate for very high incomes and ending the expensive, ineffective capital gains exemption.

Step Up coalition’s new tax credit is a poor substitute for restoring the EITC

by | February 7th, 2018 | Posted in Poverty & Opportunity, Taxes | Comments (0)

Just a few weeks ago, the Step Up Oklahoma coalition announced their plan for a variety of tax increases and reforms to resolve some of Oklahoma’s long-standing budget problems. Since then, the proposal has attracted support from a broad range of groups representing different parts of Oklahoma’s private and public sectors, and House leaders have promised that they will vote quickly on the package.

Several of the revenue ideas in the Step Up plan have been discussed in Oklahoma for years. The plan includes well-vetted ideas like increasing the cigarette tax to raise revenues while reducing smoking, increasing the gas tax which hasn’t been adjusted for inflation in three decades, and partially rolling back Oklahoma’s unnecessary tax breaks for oil and gas drilling. However, the plan also includes changes like a first-of-its-kind production tax on wind energy and a complex set of changes to the income tax that haven’t been nearly as well-vetted.

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Step Up Oklahoma plan adds to the consensus that new revenues are essential

by | January 24th, 2018 | Posted in Budget, Taxes | Comments (5)

Note: This post was edited on Jan. 28th to reflect updated revenue estimates from the Step Up coalition

The new Step Up Oklahoma coalition, a bipartisan group of business and civic leaders and organizations, has put forward a comprehensive plan aimed at stabilizing Oklahoma’s budget and reforming state government. While far from perfect, their plan is a serious and laudable attempt to address the budget problems that have plagued our state for years.

The most significant aspect of the coalition’s plan is its clear recognition that Oklahoma has a structural budget deficit that can be fixed only through approval of substantial new permanent revenue. The proposal is projected to generate $750 million through a combination of higher taxes and the elimination of various tax breaks. In conjunction with an improving budget outlook, this amount would end the longstanding reliance on one-time funds and accounting gimmicks to balance the budget. The plan includes a $5,000 raise for teachers; although other critical spending priorities, including raises for state workers and more support for schools are not spelled out, the plan should generate enough revenue to meet those goals while preserving essential state services.

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Cost of oil and gas tax breaks continues to approach $400 million

by | December 21st, 2017 | Posted in Blog, Taxes | Comments (2)

Tax breaks for the oil and gas industry will continue to cost Oklahoma close to $400 million this year and next, based on new data from the Oklahoma Tax Commission.

At the December Board of Equalization meeting, the Tax Commission submitted forecasts of gross production tax (GPT) revenues for FY 2018 and FY 2019. In FY 2018, total GPT from oil and gas is projected at $638 million. Based on these revenue projections, OK Policy calculates that GPT collections will be $397.5 million less than the state would collect if all production was taxed at the standard 7 percent rate. Instead, new wells are being taxed at 2 percent for the first three years of production. Some older wells were being taxed at lower rates but lawmakers raised the rate on these “legacy wells” to 4 percent in regular session and to 7 percent in the first special session. The state is also expected to pay $2.0 million in credits and adjustments in FY 2018.

In FY 2019, which will begin on July 1, 2018, gross production tax revenues are projected at $722.0 million. That is $333.5 million less than what collections would be if all wells were taxed at 7 percent, rather than new wells benefiting from the 2 percent rate for their first 36 months. In addition to the tax break for new wells, the state is projected to pay out $39 million in rebates, credits, and adjustments to producers.

For FY 2018, the effective rate for all production is projected to be 4.3 percent; in FY 2019 the effective rate is expected to rise to 4.8 percent. That’s an increase over the effective rate of 3.2 percent calculated for 2016 in a study released earlier this year by the Covenant Consulting Group prior to the tax on legacy wells being raised from 1 to 7 percent, but it still puts Oklahoma’s effective rate well below that of other major energy producing states. In a fair comparison of all taxes on the value of oil and gas combined, producers pay an effective rate of 8.3 percent in Texas and North Dakota, 13.3 percent in Louisiana and 13.4 percent in Wyoming, according to the Covenant Group report.

While the bills to raise the tax rate on older wells have reduced the cost of oil and gas tax breaks, Oklahoma continues to forsake hundreds of millions of dollars annually by taxing new oil and gas production at just 2 percent, and this continues to be a major contributor to the state’s continued budgets shortfalls. Whether in special session or regular session, Oklahoma lawmakers should further curtail or end altogether these costly tax breaks to put the state budget on a sound and sustainable path. If lawmakers do not rise to the challenge, Oklahoma voters may do it for them.

SQ 640 has made Oklahoma ungovernable

by | December 14th, 2017 | Posted in Taxes | Comments (1)

[Correction: An earlier version of this article stated that nothing else was on the ballot with SQ 640. It shared the ballot with the Presidential primary election in 1992.]

In March 1992, Oklahoma voters approved State Question 640. It passed by a margin of 56 percent to 44 percent, but there was very low turnout.

The total number of voters was less than one-third (32 percent) of registered voters in the state, and it was less than half (48 percent) of the number of voters who would turn out later that year for the Presidential election. For example, President Bill Clinton, who received just 34 percent of the vote in Oklahoma in 1992, still had nearly 100,000 more votes than State Question 640.

Nevertheless, the minority of Oklahoma voters who supported SQ 640 on that day has had a dramatic and long-lasting impact on our state.

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Senator Lankford ignores the example of his own state if he thinks tax triggers are responsible

by | November 29th, 2017 | Posted in Budget, Taxes | Comments (4)

The United States Senate is poised to vote as early as this week on a major tax overhaul bill.  Although tax reform is the highest priority of Congressional Republicans and the White House, crafting legislation capable of securing a 51-vote majority in the narrowly-divided Senate has been a huge challenge for Republican leaders.

For several Republican Senators, including Oklahoma Sen. James Lankford, the main concern with the tax bill is the huge amount it would add to the federal deficit. According to the official estimate from the non-partisan Congressional Budget Office, the Senate bill would increase the deficit by $1.4 trillion from 2018 to 2027. Other respected estimates show an even larger deficit increase resulting from this plan.

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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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