Final days nonrevenue revenue bills defy sense, if not law (Tulsa World)

By Wayne Greene

Way back when Democrats and Republicans were trying to work together to come up with reasonable changes to the state tax code — in other words until late Monday — there was a puzzling story making the rounds.

We were told that Speaker of the House Charles McCall, R-Atoka, wouldn’t accept any changes to the state’s gross production tax that applied to oil wells that were already in production.

He was willing to negotiate on raising the tax rate on new wells, but McCall was convinced that applying the tax to existing wells was an unconstitutional retroactive tax.

That made a big difference in how much income the tax increase would produce and it became a sticking point in those negotiations, although apparently not the one that broke things up.

No one would want any legislator to move ahead on legislation that he is convinced is unconstitutional. They swear an oath on that very issue on Day 1, although a lot of McCall’s peers in the Legislature forget that oath as soon as their hand leaves the Bible.

But as a matter of logic and politics, and maybe law, McCall’s position doesn’t make sense.

Raising the gross production tax on existing wells seems as legitimate as raising the income tax on existing jobs. You might not want to do it, but you certainly can. You’re taxing the oil when its produced, not when its well was drilled.

A memo prepared for the Oklahoma Policy Institute by state tax experts Jerry Johnson and Michael Clingman says there’s little doubt about the legality of a gross production tax increase on existing wells: “The gross production tax is a tax on production and the incidence of the tax occurs when the oil or gas is actually produced. It is appropriate to adjust the rate for future production.”

By the way, on Tuesday — after the Republicans and Democrats had stopped talking and as part of GOP efforts to cobble together the best revenue plan possible with 51 votes — the House approved a plan to raise the gross production tax effect on 5,790 existing Oklahoma oil wells from 1 percent to 4 percent … with McCall voting for the proposal.

That’s not really hypocritical, at least in law, Republican legislators insisted during consideration of House Bill 2429. Why? Because the measure didn’t raise the tax rate on the wells. It removed a rebate.

That may sound like a distinction without a difference, but fine points matter in law, and, in this case, I’ll actually accept that Speaker McCall could simultaneously maintain that raising the gross production tax rate on other existing wells would be unconstitutional (even if he wasn’t right), but eliminating a rebate program on 11 percent of existing wells (and having the effect of raising their taxes) is constitutional.

What really defies logic (and maybe law) is that you can eliminate that rebate … and create $73 million in new revenue for the state for one year … and insist that it’s not a revenue bill.

In sense, if not in law, it’s nothing but a revenue bill. That’s why you’re doing it.

The offered explanation — adjusting rebates instead of tax rates distinguishes a tax policy bill from a tax increase bill — just doesn’t get the Good Sense Seal of Approval.

Of course, you also can’t pass a revenue bill in the final five days of the regular legislative session, which would include Tuesday, when the House voted on HB 2429. That would be unconstitutional, and we know how Speaker McCall feels about voting on unconstitutional bills. But, again, they say it isn’t a revenue bill, so that’s fine too, right? Right?

You’re also not supposed to raise taxes without a three-quarters majority vote in the House and the Senate, which none of the nonrevenue revenue-raising bills that came through the Legislature in its final five days got. To the people who are producing oil, or buying cars or buying cigarettes in Oklahoma next year it’s certainly going to feel like their taxes went up, even if Speaker McCall insists that those measures only remove a rebate or an exemption or imposed a “fee.”

Law isn’t about feel. It’s about “is,” and the “is” of all of this can all be tested by the Oklahoma Supreme Court, and probably will be.

But a lot of politics is about the feel of the situation, and nothing about the politics of the final week of the legislative session feels right.

I’ll leave it to the Supreme Court to decide if McCall’s version of constitutionality is constitutional, but as a program you’re trying to sell voters who sent legislators to Oklahoma City in November with the clear instructions to do something about school funding, I don’t think any of this passes the smell test.


Margaret (Maggie) den Harder obtained a Bachelor of Arts in Christian Theology from Seattle Pacific University and a Master of Public Administration from the University of Oklahoma. Originally from the Pacific Northwest area of Washington state, Maggie has called Tulsa home for the past 8 years. Since living in Tulsa, Maggie has worked in the legal field, higher education administration, and the nonprofit sector as well as actively volunteering in the community. Maggie also recently spent time at the City of Tulsa as a consultant and wrote the content for Resilient Tulsa, an action-oriented strategy designed to better equity in Tulsa. Through her work, community involvement, and personal experiences, Maggie is interested in the intersection of the law and mental health and addiction treatment issues, preventative and diversion programs, and maternal mental health, particularly post-partum depression and post-partum psychosis. While working at Oklahoma Policy Institute as a research intern, Maggie further developed an interest in family dynamics and stability, economic security-related stress, and intergenerational trauma.

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