Guest blog (Tom Daxon): Putting tax expenditures on the right TRACC

From time to time, we use the OK Policy blog to post submissions we receive from Oklahomans who have interesting perspectives on important policy issues for the state. This entry is from Tom Daxon, an Oklahoma City CPA who served as State Finance Director from 1995 – 2001 under Governor Frank Keating and is a noted conservative voice in Oklahoma. The opinions stated below are not necessarily the opinions of OK Policy, its staff, or its board. This blog is a venue to help promote the discussion of ideas from various points of view and we invite your comments and contributions. To see our guidelines for blog submissions, click here.

State government spends too much money.  It should spend less.  However, even this strong conservative realizes some government is necessary and further, we should pay for it currently.  As former Chief Justice Oliver Wendell Holmes observed, “Taxes are what we pay for a civilized society.”

Good tax policy dictates that when we tax, we should impose the tax on the largest possible base to keep the rate to a minimum.  Unfortunately, all the tax credits, exclusions and preferences that riddle Oklahoma’s tax code have led some to note that our tax code resembles Swiss cheese.

Perhaps we should consider a “TRACC” – tax realignment and credit commission – modeled after BRACC that successfully closed unneeded military bases at the federal level.  TRACC would be a bipartisan committee including both House and Senate members with participation from the Governor’s office.  TRACC would prepare a list of tax expenditures for elimination.  The legislature would then consider the list in a straight up or down vote, without amendment.

If TRACC could meet a target of $300 million, roughly twice the ongoing static impact of reducing the marginal rate on the individual income tax to 4.95%, we could lessen the need for budget austerity and provide helpful tax stimulus.  In other words, conservatives would get to apply half the proceeds toward reducing the marginal rate on the income tax while their liberal brethren could use half for state appropriations along with another $85 million immediately because the income tax reduction would not take effect until the middle of the fiscal year.

A bold step?  You bet!  Oklahoma could fill a big part of its budget hole and also send the rest of the country a message that we are making ourselves more competitive for entrepreneurs who want to pursue business opportunities.  While the rest of the country stumbles, Oklahoma moves boldly forward.

Before my more liberal friends think about seizing this as an opportunity to spend the entire $300 million, this would be my best offer.  After all, the rate is already scheduled to drop to 5.25% when revenues rebound.  But, if our liberal counterparts are willing to meet us half way, we might be able to do something positive for Oklahoma.


Former Executive Director David Blatt joined OK Policy in 2008 and served as its Executive Director from 2010 to 2019. He previously served as Director of Public Policy for Community Action Project of Tulsa County and as a budget analyst for the Oklahoma State Senate. He has a Ph.D. in political science from Cornell University and a B.A. from the University of Alberta. David has been selected as Political Scientist of the Year by the Oklahoma Political Science Association, Local Social Justice Champion by the Dan Allen Center for Social Justice, and Public Citizen of the Year by the National Association of Social Workers.

2 thoughts on “Guest blog (Tom Daxon): Putting tax expenditures on the right TRACC

  1. Mr. Daxon- there would need to be alot of details fleshed out before any reasonable person would consider this…
    You present the classic oxymoron here- “governemnt spends too much” combined with “Taxes are what we pay for a civilized society”.
    Oklahoma does not pay the highest or the lowest tax rates in the country. We do have a very limited population base to generate those revenues from, but that base clearly uses the services of the governement, we all drive on the highways, famlies utilize the eduction systems in the state, those type of uses are clear, but how about how OKDHS has had interactions with 1.2 millon people in our state in the last year, 25% of the children in this state are on food stamps? Or federal farm subsidies in our state that apparently pay out more to farmers than what they generate themsleves as revenues.
    The state’s citizens “like” and “use” the services of the state clearly. They are just not willing to pay for those services.
    This proposal seems to suggest a strong belief that there is a correlation between the individual tax rates and new business, but I don’t know of any legitimate and reputable research studies that would actually tie these two together. None.
    In principle the idea of plugging holes in the Oklahoma tax code would be an logical and sound move regardless.
    It is somewhat sad that somehow “doing the right thing”, in this case reviewing the questionable tax loopholes and closing them, has to be tied to carrots for the two political parties. It would infer that without a “benefit” to take home and show the citizens our legislators are incapable of doing the right thing. It would imply there is no political will on either side of the asile to deal with the real issues here- the cost of the services that citizens do use.
    Give the tax breaks a rest until the current budget situation has been rectified. What you suggest should be done regardless because plugging holes that should not be in the tax code, that benefit only a few vested special interest is the right thing to do… and would be a political winner for whatever party has the guts to stand up and just do it no strings attached…

  2. You cannot save your way to prosperity. Essentially, the state has tied its fiscal arms behind its back by forcing any tax increase to a vote of the people. The legislature has shown a reluctance since that bill was passed to even consider sending a tax increase proposal to the people.

    1) There is no guarantee such would pass and…

    2) the ballot box retribution for such would mean political suicide.

    The concept of permanent tax cuts in Oklahoma is therefore fiscal suicide but some seem ready to try this. Eliminating tax loopholes is a good plan but as with any plan it must be monitored to show effectiveness and the money must be distributed to those government agencies and projects that most benefit the people, not just the corporation or a collective of corporations.

    The people of Oklahoma nearly universally buy into the concept that their taxes are too high because the ruling party in the state says they are. This is echoed by local and national talk radio outlets. It is the tired worn out statements that claim placing money back in the pockets of the corporation will naturally generate a vibrant economy because corporations will freely hire more employees. In the 30 years since the Reagan revolution there is no evidence that such is true. The evolution of a global economy also shows that these corporations have an itchy trigger finger when it comes to moving out of state or out of the nation. It is a vastly more complex game. It is not a time to play a political social engineering game so that one party can beat the other as if this were some kind of football game.

    There is evidence that our infrastructure, completed in the 1970s is deteriorating to the point where something must be done. The I-35 bridge collapse in Minneapolis is a sad and sobering example. However, Oklahoma can and should get more out of the tax-dollars it collects. State agencies must come under closer scrutiny from the legislature.

    For anyone who travels beyond state borders you know how deplorable state roads and bridges are in comparison. There is really no excuse.

    ODOT is a $1.4 billion state agency. It on average spends more than the Kansas Department of Transportation, a $600 million annual state agency. Still, Kansas roads are far superior to Oklahoma roads. The land mass of Kansas is nearly a quarter larger than that of Oklahoma. Something is afoul in this equation.

    However, are state legislators looking at this enigma; or are they avoding the difficult questions by attempting to legislate morality through Ten Commandment monuments, modifications to marriage laws, and making illegal the donation of women’s eggs? None of these are controversial subjects in conservative Oklahoma.

    The really difficult fiscal subject of taxpayer stewardship and oversight seems to be a lost art. Oklahoma needs a reality check and fast.

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