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.”Comments
Industry reactionBusinesses 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. "You can still go to a bank in Oklahoma and not have to pay this; this is only imposed on licensees. "If this fee were extended at the banks and you called it a money laundering fee, the bankers’ associations would be up in arms. They would say this implies us and our customers are money launderers. It’s terrible.” Landsman said the state fee is also a veiled way to target illegal immigrants who send money to their home countries. Landsman estimates about a third of the customers at small- or medium-sized wire transmitters are undocumented. "They are not going to use banks,” Landsman said. "They are being targeted in order to fund the war on drugs in Oklahoma and the whole thing is unfair on so many levels.”
Fee or tax?The Tax Foundation’s Henchman said Americans have a long antipathy to taxes stretching back to colonial days. The foundation monitors fiscal policy and tax matters at the federal, state and local level. "Politicians do whatever they can to avoid being labeled as the guy who wants to raise taxes or the woman who wants to raise taxes,” Henchman said. "There’s two ways around that. You can either not raise taxes, or you can call them something else. This could all just be a discussion that lawyers care about except for two things: One is for whatever reason, Americans scrutinize taxes more than fees. Second is that in many states and localities, taxes undergo additional legal hurdles than non-taxes do.” Since the passage of State Question 640 in 1992, the Oklahoma Constitution requires tax increases to be approved by voters or be passed by three-fourths of the state House and Senate. It imposes no such requirements on fee increases. The state took in about $1.5 billion from fees, permits and licenses in the 2009 fiscal year, according to data from the Office of State Finance. That’s up from $1.24 billion in 2007. The totals do not include student fees for higher education. Part of the increase could be attributed to the greater use of government services. In his executive budget last year, Henry listed several "revenue enhancements,” including fee increases for seven agencies. The governor is still crafting his proposed budget for 2011, but Henry spokesman Paul Sund said "everything’s on the table except for a tax increase.”
Court fees challengeMeanwhile, Oklahoma City attorney Jerry Fent has challenged several civil court fees that go to the Department of Human Services and the attorney general’s office. The action is pending before the Oklahoma Supreme Court. Fent said in court filings he doesn’t oppose the services that the fees fund. But he argues the fees for adoption registries, child abuse investigations and victim services are not the traditional court-related functions that are funded by court fees. "You’re paying (fees) to maintain the court file, pay the salaries of the clerks and the judges and maintain the buildings and everything,” Fent said in an interview. "When they transfer it to a different purpose, it’s basically a backdoor tax. "It’s really a tax against all the people in the state of Oklahoma, because the clients pay the court costs, not the lawyers.” In its court filings defending the fees, state officials wrote court fees can be waived for indigent filers, so they do not harm access to the court system. They also said the money sent to DHS and the attorney general’s office from court fees helps relieve the burden on state courts. Those programs "have court-related purposes and benefit the overall administration of justice,” an assistant attorney general wrote in the filing. Fent filed his case in May and argued before the Supreme Court in October. He doesn’t expect an opinion until February, after the Legislature goes into session.
OnlineTo check out a spreadsheet of detailed fee, license and permit income that the state collected from fiscal years 2007 to 2009 and to read a report about Oklahoma’s wire transfer fee prepared for the National Money Transmitters Association, go to NewsOK.com and search for "state fees.”