For the Oklahoma Legislature, the only certainty in 2012 is that tax policy will be the focus for much of the session that starts Monday.
Stillwater residents got a preview of some of those upcoming tax debates Tuesday as part of a state budget forum hosted by KOSU and NPR’s StateImpact project. The forum featured Dave Schideler, Oklahoma State University assistant professor in agricultural economics, Rep. Cory Williams, D-Stillwater, and Sen. Jim Halligan, R-Stillwater.
One of the biggest discussions since the 2011 session ended is the possibility of eliminating state income tax. There are several plans out there including one to gradually step the tax down annually over a 10-year period.
Halligan has said any move to step down that tax has to be revenue neutral, and he repeated that argument Tuesday. One of the more popular proposals to replace that lost state revenue has been to rethink the state’s tax credit system. A task force examined various tax credits since the last session and has recommended a moratorium on all the credits to allow lawmakers to alter or eliminate some credits. But Halligan said that will be a difficult process.
“The problem you have with tax credits is once you start to go for one, then that constituency just mobs the Capitol,” he said. “We are going to have to look at reducing them for almost everybody in order to make that revenue neutral.”
Halligan also said he favored reducing state income tax slowly to allow lawmakers to see whether it results in stimulating growth and revenue in the way that supporters have claimed.
Williams said there are some abuses in the tax credit system that should be looked at, and if that results in adding revenue, he would be in favor of reducing the income tax some.
However, he opposed an outright elimination, and Williams suggested the state needs a broad revenue base if it hopes to fund programs and provide quality of life to attract businesses.
“I believe a lot of the reason that (businesses sometimes) choose not to locate here is more of a quality of life issue than a tax structure issue,” he said.
Williams cited a major firm’s decision not to locate in Oklahoma City in the 1990s despite the city offering the best incentives. That decision helped build support for the sales-tax-funded MAPS projects.
“What I have yet to be able to figure out is that you can look in downtown Oklahoma City ... you can say unequivocally MAPS has been a huge success, and it’s been through taxation and investment in self on targeted projects,” he said. “But you go a mile down the road to the Capitol and the path to prosperity is through tax decreases.”
Schideler said that from an academic perspective, quality of life is often a bigger concern for businesses.
relocating than tax incentives. However, he also said how you define quality of life changes on whether you are in urban or rural areas.
“As I look at rural Oklahoma, the quality of life issues are the water systems that are either 60 years old and made of clay pipes and are cracking ... or it’s that they are facing (water) contamination issues,” he said.
Schideler also said it would be worth including more education on where taxes go so Oklahomans can see a tangible benefit for what they pay.