Tax credits to be major focus in 2011 Oklahoma Legislature
Once again, tax credits will be a major focus for the 2011 Oklahoma Legislature.
In her State of the State speech, Gov. Mary Fallin said: ” … Our course of action will be simple: only tax credits that create jobs will stay. For instance, my budget begins the process of restoring the Aerospace Engineer Tax Credit, which brings good, high tech jobs to Oklahoma. But those tax credits that do not create jobs must be eliminated.”
Rep. David Dank, chairman of the House Revenue and Taxation subcommittee, held his first committee meeting Monday evening. It was delayed several hours by a contentious meeting in the House to go over new rules.
“This is a very complex area,” Dank said of tax credits. “We’ve been working on it a long time and we’ll probably be working on it for a long time to come.”
Dank had one of the state’s foremost experts on tax credits, Mark Harter, give a presentation to lawmakers setting up the landscape of tax credits. Harter is assistant chief counsel for the House. Here’s a copy of Harter’s presentation:
Dank said a recent opinion by former Attorney General Drew Edmondson’s office would help shape the subcommittee’s work on tax credits this session. The opinion called into question the constitutionality of several existing tax credits and set up a framework for evaluation. Since only the courts can strike down existing statutes as unconstitutional, the AG opinion is nonbinding.
Basically, the AG opinion sets up a three-part test for the constitutionality of tax credits or other incentives: They must have a public purpose; the state should get something in return for giving up expected revenue; and incentives must have “adequate controls and safeguards.”
Several members of the committee had questions for Harter about the possibility of filing a lawsuit that would force the state Supreme Court to rule on the constitutionality of certain tax credits. Harter said it was doubtful the subcommittee could bring an action in court, but individual lawmakers might be able to band together to bring suit in either district court or before the Oklahoma Supreme Court.
Rep. Mike Reynolds, R-Oklahoma City, asked Harter if lawmakers could bring what’s called a “qui tam” lawsuit (a type of whistleblower lawsuit) and recapture revenue from tax credit claimants that has been lost over the years. Harter said he’d have to review the law in that area. Even so, former lawmakers who passed the laws setting up various tax credits would not have any personal liability in such a lawsuit, Harter said.
Lawmakers and panels studying tax credits have always grappled with a lack of information about their true costs. That’s partly due to the confidential nature of tax filings, which ties the hands of the Tax Commission. Tony Mastin, director of the Tax Commission, said his agency is not really set up to evaluate tax incentives passed by the Legislature.
“The commission has always taken the position that it’s there to enforce the statutes,” Mastin told committee members. “They are presumed to be constitutional.”
Mastin said asking the Tax Commission to pick and choose which tax credits are constitutional “would put us in an awful position. We have a very large tax code to administer. We are set up to administer and collect taxes, not administer economic development programs. That would put extra stress on our agency.”
A few lawmakers said the process for evaluating tax incentives should be a task for the state’s Commerce Department.
Dank warned committee members to be wary of lobbyists touting their favored tax credits.
“I think it’s a runaway train,” Dank said. “I think there are good things that happen, but there’s a lot of brilliant lawyers in downtown offices coming up with these credits. There’s going to be a lot of lobbying. Every tax credit is going to be good in the eyes of those presenting them, but we’ve got to remember the taxpayers.”
Dank has several bills dealing with tax credits this session, including HB 1284 and HB 1285. The first opens up certain information about credits claimed against the insurance premium tax that’s administered by the Insurance Department. HB 1285 sets up a so-called “Blue Ribbon” task force to study tax credits. (The state’s Incentive Review Committee has been studying such incentives for the last several years.)
–Paul
Previous posts:
- Oklahoma tax credits face scrutiny amid budget crunch
- Oklahoma Quality Jobs incentive program pays out $54m during budget crunch
Written by Paul Monies
Follow @pmonies
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These comments are not directed at the individuals per se.
This presentation is a perfect example of how little Oklahoman officials and the media know about our tax credit programs and problems. To present an attorney as the state’s foremost experts on tax credits is like presenting the attorney for a neurosurgeon as the foremost neurosurgeon in the state. Would you want an attorney operating on your brain? How about, letting a cab driver pilot a jet liner.
This presentation does nothing to provide meaningful information. That being said, the slide presentation does not represent these programs, and reads like something entirely different. It lacking coherency, has misinformation, statements that make no sense in several areas; and meaningless information.
These programs were created for misuse and fraud in the mid 1980’s and have been used that way every since. Every time legislators have claimed to take action, they have only produced more fraud friendly programs. They do not have a clue the programs work, are ignoring the issues, and relying on misleading and meaningless issue.
This is a ruse and another cover up to keep the programs available for fraud. The same as happened in
- 2005 when they were supposedly closing a loophole. Instead language was slipped in that allowed exchanging tax credits for tax refund checks that could be sent out of country to launder.
- 2006 when they were supposedly closing the loophole, that didn’t get closed in 2005. The reason the loophole wasn’t close? According to former State Senator Ted Fisher, someone tweaked the language and he didn’t catch it
The real truth a loophole had nothing to do with the problems in 2005 or 2006.
- 2007 two more cover ups.
1) Open Books which gave us a false sense of security that we would see the hidden spending. Anyone willing to check will see the hidden spending is not reported.
2) Using the State Securities Dept to claim a 2007 letter offering $2 in tax credits for each $1 invested, was not a securities violation! Say what? The question was about tax credit fraud, and had nothing to do with securities violations.
Low taxes does not work! Look where it put us!
http://www.youtube.com/watch?v=2aicRvQkHts
I know many want to lower wages also!
http://www.examiner.com/democrat-in-los-angeles/republicans-call-for-lowering-eliminating-federal-minimum-wage
Gee that would help us!
http://www.youtube.com/watch?v=L9zqDZkv9eA
Dank is eyeing to replace the state income tax with a sales tax. I lived in Tennessee for a few years and they had that system in place. It cripples municipalities from passing measures such as road projects and adequately funding fire and police protection. In Memphis, the roads are disaster because neither the Shelby county or the City of Memphis can generate enough revenue to undertake a decent sized transportation project. In addition, I paid $0.14 on the dollar in sales tax because for every dollar you have to pay the county, the city and the state.
In addition, sales tax schemes like this are a way of ensuring those who live paycheck to paycheck pay taxes on nearly all of there income (save rent/mortgage, food and medical) while the wealthy pay less and less per dollar the higher their income. Its like taking a baseball bat to the knees of the middle class.
Basically, this idea is foolish, naive, crippling to middle and lower class and allows for the state government to intrude into small communities’ affairs. Republicans are constantly throwing a hissy fit about the federal government intruding on the state’s by making them more reliant on the federal government but this scheme does the exact same thing except its the state government intruding on municipalities.
I ask Dank to go to Memphis, talk to the Shelby County Commissioner, talk to the mayor and talk to the citizens before he starts wasting his time on this fools- errand.
[...] by Gene | March 1st, 2011 | Posted in Effective Use of Public Dollars | leave a comment At the end of 2010, outgoing Attorney General Drew Edmondson issued an opinion on the constitutionality of several Oklahoma tax credits. The opinion was requested by Rep. David Dank, R-Oklahoma City, who chairs the House Revenue and Taxation subcommittee. [...]
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