Newspaper article THE JOURNAL RECORD

Tax Law Challenge Approaches

Newspaper article THE JOURNAL RECORD

Tax Law Challenge Approaches

Article excerpt

A group headed by Oklahoma Corporation Commission Chair Denise Bode will file suit as early as next week challenging the constitutionality of a state income tax increase that took effect Jan. 1.

At issue is a statutory triggering mechanism in a 1998 law that reduced the top personal income tax rate from 7 percent to 6.75 percent and expanded the number of households that qualify for a state sales tax rebate. The same statute provided that if revenues go down below the previous year, the tax changes are lifted. That occurred for the first time in December when the State Equalization Board certified revenues for the fiscal year starting July 1. Also blocked was a 2000 measure that reduced the top rate even further, to 6.65 percent.

Over a full year, the fiscal impact of the tax hikes is about $85 million.

"A conditional tax reduction is the most objectionable kind of tax policy," said Bode, who is also a candidate for attorney general.

Such "iffy" tax breaks have the opposite effect from what their backers intend, which is to encourage taxpayers to participate more fully in the economy, Bode added.

"It encourages bad behavior," she said, meaning that such policies prompt individuals to wait, to postpone decisions involving their income. "It's tied to recession."

The tax hike took effect shortly after Oklahomans approved right to work, which Bode said was aimed at sending the message that Oklahoma is open for business.

"It is absolutely the worst signal to send," she said.

Bode and Oklahomans Against Tax Hikes also believe the tax increase goes against State Question 640, a constitutional provision requiring that revenue measures not receiving a three-fourths majority in both legislative houses be put to a vote of the people.

"The people said we want you guys to vote on it, or we want to vote on it," Bode said. …

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