Taxes

Oklahoma politics has long seemed incredulous under Republican dominance, but it reached a new level of weirdness early this week.

On Monday, Gov. Mary Fallin signed her highly-touted tax cut into law amid the usual GOP rhetoric about people keeping their “hard earned” money and joyful predictions of a stampede of new businesses and skilled workers soon to flood the state. This is just GOP code for what the bill really does, which is this: It rewards the wealthiest Oklahomans with a tax cut through an irresponsible decrease in state revenue.

Also, on Monday, Fallin signed a measure into law that raises fees for driver's licenses by $12 making it all a net financial decrease for many of the approximately 40 percent of Oklahomans who won’t even qualify for the tax cut. Under the law, the top income tax rate would drop from 5.25 percent in 2015 and then to 4.85 percent in 2016 if there are available revenues to cover the cut.

Meanwhile, an Oklahoma City attorney, Jerry Fent, has announced he plans to sue the state over the tax cut measure, House Bill 2032, because he argues it contains more than one subject, which is unconstitutional in Oklahoma. The bill provides for the tax cut and $120 million in repairs to the state Capitol building. This could be considered log rolling, a political technique used to sway legislators to vote on a bill even though they stand against one component of it.

So let’s get this straight: Fallin and GOP leaders are making hoopla over a tax cut that doesn’t even give a break to some 40 percent of Oklahomans and might not even go into effect anyway because of a lawsuit. The hike in the basic driver’s license fee and other licenses’ fees under Senate Bill 652 would mean thousands of Oklahomans are actually paying more, not less, to the state.

But that basic reality didn’t stop the GOP propaganda machine, which was in full throttle Monday. Here’s Fallin in a press release issued by her office about the tax-cut bill signing:

One of the first questions I get when I am talking to business owners throughout the country is, ‘if I come to Oklahoma, are you going to raise my taxes?’ Passing a significant and responsible tax cut will help us to recruit these businesses and retain the ones we already have. Our tax cut will ultimately lead to more job opportunities for all Oklahomans.

Is that really one of the first questions she gets from business owners? Does the state even need businesses that are owned by people fixated on getting out of paying taxes?

Fallin called the tax cut “responsible” in her remarks, but the responsible approach would have been to delay a cut until the economy has fully recovered and then, with interest rates at historic lows, authorize a bond interest to fix the state Capitol building.

House Speaker T.W. Shannon, a Lawton Republican, had his say, too.

The way you grow an economy is by letting hard working people keep more of their hard earned money. Oklahoma has proven this conservative principle to be true over the past 15 years. By lowering the income tax rate, we are attracting skilled and educated workers to our state and making Oklahoma a leader in business and economic growth.

What is Shannon talking about when he refers to the past 15 years? Prior tax cuts that mean the state remains dead last on a regional basis in per pupil funding and has some of the nation’s worst medical outcomes? The state’s new-age dependency on the federal government for its sustenance and viability? The fact state workers haven’t had an across-the-board raise in six years? What we do know for sure is that the Great Recession beginning in 2008 devastated state revenues, the state has not fully recovered and education funding has taken the brunt of the hit. That’s not disputable, and that’s five of Shannon’s 15 glory years right there.

The average tax cut per person is $81 annually, but it would collectively cost the state budget $136 million in 2015 and then more than $230 million in 2016 if that year’s tax cut does take effect, according to estimates. The $81 average is a bit misleading. The bulk of the cut goes to the wealthiest Oklahomans, who will see an average cut of $2,031 annually, according to the Oklahoma Policy Institute. OK Policy estimates 41 percent of Oklahomans won’t get any break, people with incomes from $19,500 to $36,400 would only get a $9 reduction annually, and, overall, the bottom 60 percent of income earners will receive only 9 percent of the cut.

But don’t think the GOP isn’t thinking about the poverty-stricken here. On Monday, Shannon also announced that Fallin had signed into law his House Bill 1908, which uses money from Temporary Assistance for Needy Families funds to pay for a public service campaign promoting marriage. In other words, the GOP is taking money away from a program that helps impoverished people to tell them they need to get married.

So the class warfare waged by Republicans here continues.

After watching the Oklahoma House debate and then pass future income tax cuts for 2015 and 2016 on Wednesday, I almost have to wonder if Republicans haven’t intentionally placed a poison pill in the legislation through the process of logrolling.

The overall GOP argument for the cuts—basically, let’s cut taxes to make businesses locate here—was as vague and sloganeering as it gets and lacked any real, accepted empirical evidence beyond right-wing distortions and wishful thinking. The overall, rhetorical defense of the tax cut on Wednesday lacked basic conviction.

Meanwhile, the tax-cut legislation, according to Republican state Rep. Scott Martin, a Norman Republican, does “two fantastic things.” (Note the word “two.”) Those two things: (1) It cuts the top income tax rate from 5.25 percent to 5 percent in 2015 and then, perhaps, to 4.85 percent in 2016 if revenues go up enough to pay for the cut, (2) and it provides $120 million funding for repairs of the state Capitol building, two diametrically opposed initiatives.

The process of adding unrelated subjects to legislation in an attempt to circumvent the democratic process is called logrolling, and it’s unconstitutional here in Oklahoma. No matter how the Oklahoma Supreme Court eventually rules on this legislation, Republicans by their own admission and rhetoric have clearly separated it into two—shall we count it again, two, two subjects in one--different initiatives. It seems, forgive the word play, almost “two” obvious.

How many Republican legislators were willing to buck the bullying of the GOP leadership and vote no, either because they oppose the tax cut or the immediate allocation of money to repair the crumbling Capitol building? To be sure, seven Republicans did stand up, but in the end the vote was 65 to 35 to approve the measure, and now Gov. Mary Fallin will sign House Bill 2032 into law.

Fallin and the rest of the GOP leadership had to know the legislation would eventually face a constitutional challenge in the courts because it contains more than one subject so their overall reasoning deserves any speculation it can muster. Either they intentionally poisoned the legislation knowing it would never become law or, probably more likely, they’re simply rolling the judicial dice, knowing they can always come back next legislative session and pass the same or even larger tax cut for 2015.

Either way, Republicans can proudly say they passed a tax cut in 2013, which seemed to be the main purpose of the legislation, anyway, since no cut would go into effect until 2015. Remember, there’s still the next legislative session to undo or revise the whole thing. The entire GOP tax-cut spectacle this session could easily become meaningless next year.

This arcane political process means little or nothing to most ordinary Oklahomans. More than 40 percent of them won’t even get a tax cut under the legislation, and the average cut is only $88 annually. Those with the highest incomes fare much better, of course, because it’s a flat, regressive income tax cut. This is absolutely a tax cut for Oklahoma’s wealthiest citizens, though Fallin insists it “will let Oklahoma families keep more of their hard-earned money.” Well, frankly, governor, only some Oklahoma families, and it isn’t much money at all.

Meanwhile, the 2015 and 2016 tax cuts would cut $237 million from state revenues after a time period of drastic budget cuts to education. The proposed state budget, released yesterday, doesn’t even begin to address inadequate education funding in Oklahoma.

On the brighter side of Wednesday’s action, House Democrats held together and voted unanimously against the tax cut, and state Rep. Scott Inman, a Del City Democrat and the House minority leader, delivered the day’s most passionate and intelligent remarks about the issue.

Here’s to Inman, and his "it's important" speech. It’s difficult to rouse energy and compassion in one losing cause after another in one of the reddest states in the country, something this blog has tried to do for nearly 10 years now. Inman gives us inspiration to keep up the progressive fight.

Gov. Mary Fallin and legislative leaders have announced a plan for future tax cuts in 2015 and 2016 that primarily benefit the wealthiest Oklahomans and will cut money available for schools by millions of dollars in coming years.

It’s an irresponsible plan in today’s uncertain economic environment and can easily be seen as part of the GOP strategy to “starve the beast” of government funding through incremental tax cuts. Neighboring Kansas, which cut taxes recently and is now facing major budget problems, wasn’t mentioned in the announcement.

On Tuesday, as expected, Fallin, House Speaker T.W. Shannon, R-Lawton, and Senate President Pro Tempore Brian Bingman, R-Sapulpa, announced they had reached an agreement on the future tax cuts. Under the plan, the top rate would drop from 5.25 percent to 5 percent in 2015, and then to 4.85 percent in 2016. The second cut is dependent on revenue growth in 2016 that is equal to or greater than the amount of lost revenue.

Besides mostly Democrats and the Oklahoma Policy Institute, a state think tank, there appears to be no real emerging opposition to the tax-cut plan at the Capitol. Republicans now hold super majorities in both the House and Senate. A press release issued by Fallin’s office said the cuts and two other measures dealing with workers’ compensation and state buildings have been “identified as having the support of both the governor and majorities in the House and Senate.”

As I’ve written before, the futuristic tax-cut plan lacks basic logic. Why not simply wait until next year, gauge the economy and incoming revenues, and then decide on a tax cut for 2015? This plan, if passed, will tie the hands of legislators next year if there’s a major drop in revenues. How many Republican legislators would ever vote to rescind a tax cut?

According to media reports, the cuts would reduce state revenue by $237 million annually if and when they go into effect. This comes right after a time period in which education funding in Oklahoma has faced massive cuts. The cuts also don’t address unneeded tax credits that lower state revenues each year.

The cuts would mean an $88 to $140 annual savings for the average Oklahoma taxpayer, according to one media report, but because it’s a flat, regressive cut state residents with the highest incomes will pay thousands less each year. The question becomes if an $88 tax cut is worth lowering the quality of life here through inadequate education funding.

Fallin claims the cuts will “boost our economy and help us to create more jobs and bring more businesses to Oklahoma,” but what businesses besides oil and gas companies are going to locate here when our educational systems are so vastly underfunded?

Kansas is still grappling with recent tax cuts that could eventually lead to a $1 billion shortfall by 2018, according to some estimates. If that’s what most Oklahoma Republicans want for our state, then they should simply argue for it and not spend time covering their tracks with sweeping and outdated GOP myths about tax cuts.

In response to the plan, OK Policy issued a statement that argued it would “commit us to tax cuts two years from now, when we have no way of knowing what Oklahoma’s needs or economic situation will look like.” The organization also issued a call to action to “stop these irresponsible tax cuts” through a letter drive to legislators.

The tax cut plan, according to the release from Fallin’s office, also includes $120 million in funding to repair and renovate the state Capitol building, which is a worthy endeavor. But the potential, long-term cost to educational and other vital services caused by inadequate funding is simply more important despite the Capitol’s obvious symbolic value. In fact, it would make more logical sense to NOT cut taxes at all until the Capitol is renovated and education funding is restored.

The other two measures contained in the announcement would change the state’s workers’ compensation system from a judicial process to an administrative process and would centralize the management of state buildings and provide a plan for renovations. Bingman has championed the workers’ compensation system “reform,” which I oppose and wrote about here. Shannon championed the building plan.