Gov. Mary Fallin, in what is becoming another desperate search for a tax cut, has dropped her demand for a tax decrease this coming year and says she’s open to proposals that would slash rates in 2015 and in subsequent years.
House Speaker T.W. Shannon, a Lawton Republican, has also joined Fallin in a new show of openness and compromise over a Senate tax cut proposal. Both Shannon and Fallin had previously insisted on a tax cut for 2014.
This is mixed news. While it’s encouraging Fallin and Shannon might be open to a delay in a cut and support some reform of the tax code, including the elimination of unneeded credits, it also begs this question: Why not just wait until next legislative session to cut taxes since the initial decrease wouldn’t go into effect until 2015? Wouldn’t it be more responsible to just wait and see how well the economy is doing next year?
Of course, the real GOP elephant in the living room is that Oklahoma is still recovering from the Great Recession, recent budget cuts have devastated education funding and the tax cuts will primarily benefit only the wealthiest Oklahomans.
Are Republicans at this point just trying to pass a tax cut only for the sake of saying they cut taxes? I think so. Beyond sweeping generalizations—people need more money in their pockets, tax cuts will attract businesses, etc.—Republicans have offered no rational reason for a tax cut at this time, especially given recent budget cuts and pressing infrastructure needs.
Here’s where we stand. The House passed a Fallin-supported bill that would lower the tax rate from 5.25 to 5 percent in 2014 without any offsets. They also killed a Senate proposal that delayed a tax cut until 2015 and also dealt with deductions and credits. When the Senate got the House tax measure, contained in HB 2032, a committee inserted new language in it that would delay a tax cut from 5.25 to 4.95 percent until 2015 and sunset some tax credits.
What has transpired since is the type of Republican infighting that doomed a tax cut last legislative session. At first, Fallin and Shannon insisted on a 2014 tax cut. Now, they’ve backed off the rhetoric, and are indicating they could accept delaying a cut, especially if it’s larger. So it’s back to square one.
As expected, the trashy spectacle of the crumbling state Capitol building has become an important part of the GOP intraparty fight. Sometimes symbols—state Capitol buildings are about as symbolic as you get—are extremely important. Republicans are considering tax cuts in a building that has to be fenced off in places because pieces of it are falling to the ground. Scaffolding is in place to protect people from getting hit from dropping limestone fragments. The building needs major electrical and plumbing work as well. The building is now listed as an endangered historic place by Preservation Oklahoma, Inc.
It could take more than $200 million to repair and renovate the building, but it appears Republicans would rather give big tax breaks to millionaires than fix the house. State Senate President Brian Bingman, a Sapulpa Republican, and Shannon can’t even agree on whether the issue should be studied, much less on an aggressive plan for repairs. A bond issue to repair the building, even supported by the ultra-conservative editorial board of The Oklahoman, was deemed out of the question by House Republicans even before the session began.
It will probably take a major accident and ensuing lawsuit to get the current Republican majority at the Capitol to take action on the building.
Meanwhile, under Fallin’s initial tax cut proposal, 43 percent of Oklahomans wouldn’t even get a tax cut, according to the Oklahoma Policy Institute. The median cut would be just $39 annually. The real breaks go to those with household incomes in the top 1 percent. The plan would reduce revenue by more than $100 million a year. The current Senate plan would reduce revenues even more.
Let’s get back to education, which is just one area of government that has faced decreased state support in recent years. Gene Perry, an analyst with OK Policy, points out that funding for state schools has decreased by $200 million in the last four years and that higher education has seen its state support drop by 26.2 percent in the last five years.
It is fundamentally wrong to reward millionaires with tax breaks while systematically defunding state educational institutions. All of us who live here are going to pay the price for this ideological error.
Why can’t GOP legislators simply set aside tax-cut proposals for this session and wait until next year to assess the economy and determine what impact a cut might have on the state budget?
That would be the prudent course of action. It would be responsible governance after years of budget cuts to education in this state. No one is rallying at the Capitol for a tax cut. The tax-cut proposals presented so far only really benefit the wealthiest in our state. The last time I checked, our state’s millionaires, well, were still millionaires and doing all right financially.
What we have now at the Capitol is a repeat of last year when House and Senate members failed to agree on a tax-cut approach. I hope it all falls to pieces like last year and ends in a stalemate, but the more sensible course of action would be for legislators to just agree to delay any cut until the overall national economy fully recovers and get serious about eliminating unneeded tax credits for corporations.
Here’s where we stand: Gov. Mary Fallin’s simple plan, contained in House Bill 2032, to reduce the top income tax rate from 5.25 to 5 percent without offsets has now been recrafted by the Senate Finance Committee. The new proposal would lower the tax rate from 5.25 to 4.95 percent in 2015 and limit the transferability of some tax credits.
It’s not difficult to see the new proposal as a direct retaliation to the House where a committee voted down a previous Senate proposal that also delayed a tax cut and dealt with tax credits and deductions in the state’s tax code. The arguments between the House, Senate and Fallin’s office might well doom any tax-cut proposal. That’s good. But it could also lead to impulsive, last-minute legislating that could harm the state for years to come. That’s not so good.
Much like Fallin’s proposal, the new Senate offering makes little sense. Fallin’s proposal is simply a tax cut for a tax cut’s sake, reducing state revenues by $120 million annually just to proclaim look at us, we’re Republicans, and we cut taxes for rich people. The new Senate proposal begs the question: Why vote on a delayed tax cut when you can just wait until next year and accomplish the same thing?
The Oklahoma Policy Institute, a state think tank, issued a statement about the new Senate plan that included this: “If we set aside a tax cut for now, lawmakers would still be free to approve one next year or to prioritize other investments, depending on the state's situation. It is irresponsible to make tomorrow's decision today.”
I don’t want to denigrate the overall approach to tax reform by state Sen. Mike Mazzei, a Tulsa Republican and chairman of the Senate Finance Committee. I’m opposed to any tax cut right now, but tax-code reform and modernization, if done responsibly and fairly, could add to state revenues and make any tax cut easier to absorb.
The larger issue remains the conservative quest to eliminate the state’s income tax, which has become a holy grail created by ideology not logic. Is it even possible to eliminate the income tax in a small state like Oklahoma without raising regressive sales taxes or other taxes that would only make our impoverished citizens here even poorer?
The state faces many problems, from inadequate education funding to pressing infrastructure needs. The state Capitol building is literally crumbling before our eyes, and there’s no will among the GOP to do anything about it. A small, token tax cut should be placed on hold this session. Let’s deal with our problems first.
The only tax-cut proposal left standing this legislative session is one that grants no financial relief for 43 percent of Oklahomans and is heavily weighted to benefit rich people here.
Let’s be clear: Gov. Mary Fallin’s proposal to drop the state’s top income tax rate from 5.25 to 5 percent ignores difficult arguments over what changes are desperately needed in the state’s tax code and is simply a give-away to the wealthy here. Are the rich here even demanding a cut or is Fallin simply pandering? Why eliminate $120 million annually from state revenues? The average tax cut under the proposal is only $39 a year, but the top one percent of income earners get an average tax cut of $1,870.
This is so obviously apparent, the measure containing her bill, House Bill 2032, got stalled in the Senate Finance Committee yesterday, although conceivably it might well be passed by the time this is published. The political stall has to be construed, as well, as a direct retaliation after a House subcommittee killed a Senate bill that proposed lowering the top rate from 5.25 to 4.75 percent but also tackled the politically volatile issue of deductions and tax credits.
In essence, for all its own flaws, the dead Senate tax bill, SB 585, showed its creators had taken time and used a fair amount of energy to assess the state’s current tax code while thinking through the implications of revenue loss. Fallin’s proposal is merely a tax cut for a tax cut’s sake. Arguments that such a cut will lead to corporate relocations here or that it’s just a first step toward eliminating the income tax altogether are more than disingenuous. There’s little empirical evidence showing interstate tax policy affects economic development and the piecemeal erosion of state revenues is hardly sustainable in a state that is known as a place that now defunds education for no reason and has the lowest per-pupil spending rate in the region. I wrote about that issue here.
Senate Finance Committee Chairman Mike Mazzei, a Tulsa Republican, has indicated he wants to collaborate with House members about reforming the tax code before moving forward, but it appears the tension between the House and Senate and Fallin’s office is ongoing. Fallin’s bill is sponsored by House Speaker T.W. Shannon, a Lawton Republican and Senate President Pro Tempore Brian Bingman, a Sapulpa Republican.
Let’s hope we’re witnessing the start of a Republican squabble that will lead to the downfall of Fallin’s bill and any tax cut for this session. This would be a repeat of last year when Republican legislators couldn’t come to an agreement. By all means, have a serious conversation about the tax code and clean it up fairly, but passing a tax cut just to say you’ve passed a tax cut is not right.