Oklahoma Legislative Committee Begins Scrutiny of Taxation Methods
Francis-Smith, Janice, THE JOURNAL RECORD
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 income taxes.
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 to spend.
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 June 2010.
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. …