Shine the light

If you are thinking about doing most anything in Oklahoma that could possibly be seen as encouraging economic development, chances are you’re eligible for a tax credit. The state offers tax credits for everything from  investing in small business venture capital companies and film production companies to purchasing poultry litter. Until very recently, however, public information about who is claiming these credits and in what amounts was all but non-existent. (The Oklahoma Tax Commission publishes a bi-annual tax expenditure report, but that provides only aggregate amounts and provides no data for many credits.)

The state of disclosure of tax credits has now taken a giant leap forward. In 2007, the Legislature passed SB 1, the Taxpayer Transparency Act, authored by Sen. Randy Brogdon and Rep. Paul Wesselhoft. The bill required the Office of State Finance to set up a website to allow the public access to comprehensive information on state government. The website was to include detailed information on all recipients of  government funds not only through direct budgetary expenditures, but also incentive payments and tax credits. Expenditure information has been available since early 2008 on the Openbooks.gov website.  Last month, tax credit information was added.

Anyone can now go to the site and either call up information by credit or search by taxpayer’s name for 35 income tax credits for the 2007 tax year, along with an unspecified “other credit” category. The database contains over 5,500 entries on both individual and corporate filers who claimed a credit in 2007. The amounts claimed range from a high of $2.4 million for the rural small business capital credit claimed by Donald and Joyce Harvey to $1 claimed for assorted credits by some dozen taxpayers. The largest corporate recipient of a tax credit is listed as Terra International, Inc., which claimed a credit of $2.1 million under the Investment/New Jobs incentive program.

The website is not entirely comprehensive – it lacks information on incentive programs, such as the Oklahoma Quality Jobs program (even though this information is called for in the Act), or for credits against taxes other than the income tax, such as the 5-year ad valorem manufacturing exemption or gross production tax rebates for various types of oil and gas drilling. The website in its current form is somewhat clunky to use, as a search by credit calls up multiple separate pages of 25 entries apiece without any simple way to see or download all the entries or to generate aggregate information on the number of recipients of the credit or the total amount claimed. But it’s a good start, and a vast improvement over what was previously available.

The website is guided by the powerful principle that by claiming a tax credit, a taxpayer is receiving public benefits similar to the recipient of a government contract or award. The site does, however, raise some genuine concerns about the balance between public disclosure and taxpayer confidentiality. Some may express alarm at discovering that an individual who claims a credit on their Oklahoma tax return for providing child care for their employees or completing volunteer firefighter training will now have this  information made available online. Some of these credits seem more akin to receiving a food stamp benefit – information the government would not disclose (at least not intentionally) – than to receiving a government contract or being on the state payroll.

The Legislature might well consider reviewing which tax credits are and are not subject to reporting under the Taxpayer Transparency Act, as well as consider setting some kind of dollar amount threshold under which information is not shared publicly. But while some additional work still needs to be done, the website represents important progress toward the goal of government transparency in Oklahoma. We hope that as more information on tax credits becomes available, it helps spark additional efforts to review of system of tax incentives and to implement some efforts to cap their cost, especially at this time of declining revenues and growing budget shortfalls. We’ll have much more to say on these subjects in the months ahead, and hope you’ll contribute to the conversation by clicking on “leave a comment” and offering your input.