A new $5 state charge on wire transfers has already brought in almost $2 million to Oklahoma for the war on drugs.
Just don’t call it a tax.
Lawmakers approved the fee on wire transfers at places like Western Union in the waning days of last year’s legislative session. It was just one of several new or increased fees designed to shore up declining revenues as the recession’s fallout reached Oklahoma.
The wire transfer fee went into effect July 1 and raised $2 million from July to September, according to the Oklahoma Tax Commission.
"A lot of what government officials are doing right now at the state and local level are things designed to get cash in hand right now,” said Joe Henchman, tax counsel and director of state projects at the Washington-based Tax Foundation. "There are good policy ways of doing it and bad policy ways of doing it.”
The fee on cash wire transfers goes to a dedicated fund at the Oklahoma Bureau of Narcotics and Dangerous Drugs Control. The agency’s legislative appropriation last year was $6.2 million. If the fee income continues at its current pace, it could swell to almost $8 million by the end of the state’s fiscal year June 30.
Critics of the fee say it’s arbitrary and functions just like a tax because the money goes to drug interdiction instead of services related to financial transactions. The fee is not assessed on wire transfers at banks, nor is it assessed on Internet payments such as PayPal. Oklahoma taxpayers can claim a credit of the wire transfer fees on their tax returns beginning in 2011.
"This fee does not cost the legal, law-abiding citizens of the state of Oklahoma one red penny,” said Rep. Randy Terrill, R-Moore, who authored House Bill 2250 with Sen. Anthony Sykes, R-Moore.
Terrill and Sykes, who lead the public safety appropriation subcommittees in their respective chambers, said they were alarmed by a drop in the asset forfeiture and seizure money that has typically funded part of the narcotics bureau’s drug interdiction efforts. Suspected drug dealers were challenging the forfeiture and seizure actions at a greater rate, and judges were reluctant to issue final judgments until criminal cases had ended, Terrill said.
"Because the state makes the bureau of narcotics eats what it kills, it was at some point in the very near future going to create a serious cash-flow crunch at the agency,” Terrill said.
Darrell Weaver, director of the narcotics bureau, said his agency’s threat assessments show drug dealers are increasingly using wire transfers to send money to countries such as Mexico.
"If we could somehow fund all of our operations on taking from bad guys and proceeds from bad guys, I think that would be a good thing,” Weaver said. "I wouldn’t want anyone to spend $5 who’s not a drug offender, but I think with the window of being able to file it on your taxes and get that money back, it’s been very positive.”
Businesses in the wire transmitter industry said they were not consulted about the measure before Gov. Brad Henry signed it into law. The Western Union Co. said it has incurred extra costs to comply with the Oklahoma law. The state Banking Department, which licenses money transmitters, said there are 33 companies and more than 2,200 licensed agents doing business in Oklahoma.
"To our knowledge, nobody in our industry was consulted or given notice that this was part of any bill,” said Steve Gawlik, spokesman for Western Union, the world’s largest money transmitter company. "We would have taken the opportunity to work with lawmakers on this matter, but we simply weren’t given the chance.”
David Landsman, whose National Money Transmitters Association represents small- and medium-sized companies, said fees are supposed to be charged for a governmental service.
"This fee is imposed on a particular class of financial institutions’ customers, not on the act of sending money,” Landsman said.
Check out a spreadsheet of detailed fee, license and...