Implementing a new tax on services is one way the state could
preserve public programs while continuing to slash income taxes,
policy analysts told lawmakers at the first of a series of meetings
to scrutinize Oklahoma's tax code.
But another group that spoke before the House Appropriations
Subcommittee on Revenue and Taxation on Thursday advocated the state
follow Colorado's example of implementing a flat tax and more
stringent limits on government spending.
Likening the state's budget to a three-legged stool funded by
income tax, property tax and sales tax revenues, Elizabeth Hudgins,
senior policy analyst for the Center on Budget and Policy
Priorities, said the state would do well to avoid over-reliance on
The budget surpluses Oklahoma has enjoyed in recent years are
largely the result of increased collections of income taxes and
corporate taxes, and much of that increase can be linked to salaries
paid in the oil and gas industry. Corporate income taxes are highly
vulnerable to an economic slowdown, she said, putting the entire
state budget at risk.
"Services are a growing segment of what we consume, and Oklahoma
taxes relatively few readily taxable services, about 10 compared to
24 in Texas or 39 in New Mexico," said Hudgins. Taxing services
could yield an additional $500 million a year for state government
Tax cuts the Legislature has approved in recent years are "back-
loaded," creating greater reductions in estimated state revenue each
year, said David Blatt, director of public policy for Community
Action Project. Tax cuts are expected to result in "lost revenue" to
the state of nearly $777 million in the fiscal year that ends in
Committee Chairman Rep. Randy Terrill, R-Moore, questioned
Blatt's use of the term of "lost revenue" since the tax cuts allowed
taxpayers to keep more of their earnings. Blatt agreed that there
are some economic advantages to cutting taxes, but those benefits
are outweighed by negative results caused by cutting public
services, he said.
Blatt said Oklahoma's revenues are not going to be able to keep
pace with the state's fiscal responsibilities. For years, needs in
the state's transportation, corrections, education and the teachers'
retirement systems have gone underfunded. Blatt recommended
lawmakers stop cutting taxes until they can assess what the state's
long-term financial needs are and devise a plan to pay those bills. …