Oklahoma ‘revenue’ options involve significant downside (The Oklahoman)

The Oklahoma Policy Institute issued a set of recommendations to fill the state’s $188 million budget hole, options the think tank believes are “balanced” and “feasible.” While a range of proposals are promoted, no one should think these options are painless.

One proposal is to use state rainy day funds to fill budget holes. This was always a strong possibility, but we would caution against using that cash for ongoing expenses. One-time funds are just that — one time.

Another suggestion is to collect taxes from online sales. Money raised by this approach would collect sales taxes already owed to the state that currently go uncollected. This would treat all businesses the same. But the plan is complicated by the need to make changes at the federal level — something Congress has resisted for years. Thus, this idea will likely remain on the back burner.

OK Policy also repeated its call to raise the tax rate on horizontal drilling. Under an incentive program set to expire next year, horizontal drilling is subject to only a 1 percent gross production tax; traditional drilling faces a 7 percent rate. Whether that incentive has outlived its usefulness is a proper subject for debate. Other oil-producing states impose substantially higher tax rates, although energy producers say those states often offset higher gross production taxes with other breaks and1/2 incentives.

If the horizontal incentive is eliminated, it will raise taxes on energy producers. But since the program was always designed to be temporary, it’s not like the change would be unexpected. The same can’t be said for other tax-increase measures touted by OK Policy.

Under state law, if a taxpayer claims a deduction for state taxes on his federal return, he can claim the same deduction on his state return. Admittedly, that’s an unusual tax break, but it’s one available to all taxpayers. OK Policy calls for eliminating it. For tax year 2011, nearly 400,000 itemized returns were filed in Oklahoma. It’s likely that most of those itemizing individuals and families claimed the targeted exemption. Repeal of this tax break could translate into $101 million in additional taxes being paid by those filers.

Another recommendation is to freeze current spending on transportation, which is scheduled to gradually increase for several more years. Yet Oklahoma’s roads and bridges remain in need of significant upgrades, even after years of gradual funding increases and repair efforts. Addressing this need benefits all citizens. Why deliberately halt progress?

Finally, OK Policy calls for state officials to accept federal funds to expand Medicaid. Yet this would do nothing to fill the state budget gap, and could actually increase financial challenges down the road. Initially, the federal government would cover the cost of expansion, but the state is required to pay at least 10 percent of the cost in the near future. We agree with U.S. Sen. Tom Coburn, R-Muskogee, and others, that Washington won’t keep its promise to pay 90 percent of the costs indefinitely.

A Leavitt Partners report predicted Oklahoma taxpayers would pay $850 million over 10 years for Medicaid expansion. Other estimates place the cost even higher. If a case can be made in favor of Medicaid expansion, it certainly doesn’t involve filling budget holes.

OK Policy officials insist the effects of additional budget cuts to state agencies will be painful. True enough. No one should suggest that all budget cuts are equal or consequence-free. But neither should anyone pretend that proposed alternative “revenue options” have no serious ramifications of their own.


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