Rep. David Dank: On tax credits, the time for change is now

Rep. David Dank is co-chair of the Tax Credit Task Force. This is his opening statement to the Task Force’s meeting of November 9th. It is reprinted with permission and has been edited for length as indicated by […] The full unabridged statement can be seen here. A column presenting OK Policy’s recommendations for tax reform that previously appeared on Oklahoma Watch can be seen here.

[…] The very first question we need to ask today is who we are representing here []

I think the only valid answer is, The Taxpayers.

Not the special interests who have benefited from many of these tax credits… and certainly not the few who have manipulated this system for personal gain.

I think we should also make a second thing clear today [] We are not against business. We don’t oppose growth. We believe that government policy can help create jobs. We don’t think all credits or incentives are bad.

What I think most of us believe after all we have heard here is that far too many tax credits and other incentives enacted in the past were created for the wrong reasons, and in the wrong way.

Many were enacted virtually in secret.

Some had no checks and balances.

And as we know from reading the Attorney General’s opinion, a number of them were and are constitutionally infirm, which is really another way of saying they were simply illegal [..]

I know you have heard me refer to the culture that ruled this Capitol for too long… the ‘go along to get along practices’ and the ‘special deals’ slipped into legislation ten minutes before adjournment [..]

The simple truth is that a few of these tax credits are like the huckster who took a bucket of manure, covered the top with an inch of honey and sold the whole thing as a full bucket of honey. It wasn’t until the sucker got home with it that he found out what he had actually bought.

Well, the report we will issue by December 31 is a golden opportunity to reverse that culture and to shine some much-needed light on the public business we do here, all the way to the bottom of the bucket. I trust we will take advantage of that opportunity.

I said that today’s business should address the criteria we will apply to draft our report and draft some legislation. Let me propose some possible criteria, and then I will ask the members to add their own.

• First of all, I believe that we must end forever the creation of tax credits or other incentives that are transferable. Taxpayer dollars should never be traded around to the highest bidder in a shell game like some we have seen. Any tax credit should at minimum benefit only the recipient.
• Second, no tax credit or other incentive program ought to be enacted or changed by legislation created and introduced in the final days or hours of any legislative session [..]
• Third, any future tax credit needs to come wrapped in a clear and accurate fiscal impact study. We can no longer afford to enact tax credits with unknown future costs to the state budget. Tell us what it will cost from year to year.
• Fourth, any future credit must be designed to create or save jobs. That is the only acceptable reason for a tax credit in the first place, because that is the only way any tax credit will actually help build wealth and return the initial investment to the state. Economic growth is job growth. That has to be the central goal of any tax credit worthy of our consideration.
• Fifth, whenever a business comes to ask asking for our help to grow jobs, we need to look at all of the alternatives before we even utter the words ‘tax credit.’ We have discussed several times the job sustaining provisions of the Quality Jobs Act, as well as other state programs that can help keep people at work. A tax credit should be our last, not our first, resort.
• Sixth, the State Auditor should be required to thoroughly audit every tax credit, beginning in the drafting stage and continuing on a year to year basis. The Auditor was elected by the people to oversee how public dollars are spent, and this is one area that has cried out for oversight for a long time. We will never have the transparency and accountability we have spent the last few months talking about until we have a trusted authority examining these programs.
• Seventh, I firmly believe that we can no longer afford to enact open-ended tax credits. We are coming out of a severe budget crisis, but there will always be another one somewhere down the road. Any future tax credits need to have enforceable caps and limits.
• Eight, on that same theme, all future tax credits should be subject to sunset provisions. The Legislature should periodically examine and be required to re-certify any tax credit. Frankly, I am surprised that we did not turn up a tax credit for the makers of buggy whips that had been on the books since the delivery of the first horseless carriages in 1907 or so. No tax credit should be granted eternal like, and sun-setting will address that problem.
• Ninth, I believe we need to curtail the granting of tax credits on what has become virtually an automatic basis. Each project or separate credit needs to be subject to examination and individual approval. Without that we get projects like pizza parlors in buildings that just happen to qualify for a historic preservation credit.

Finally, I would encourage you all to remember where we started today. Our first obligation here is to the taxpayers. In the end they have paid for every dollar in tax credits granted by the State of Oklahoma, since a dollar lost to a tax credit, whether it is worthy or not, always winds up either coming out of the pocket of an individual taxpayer or leaving that taxpayer a dollar short in state services that didn’t get funded [..]

Now I would be anxious to hear your input…