A legislator who cites lawmakers' failure to eliminate or reduce business tax credits as a key reason the state's personal income tax wasn't reduced last year is proposing the incentives undergo a thorough review in the next two years.
“It is very clear that any effort to reduce state income taxes for all Oklahomans has run aground on the tax credit issue,” Rep. David Dank said. “We cannot give real tax relief to all while we continue to pass out hundreds of millions of dollars in questionable tax credits to a favored few.”
Dank, R-Oklahoma City, has filed legislation to establish criteria in the next two years that would govern all existing and future tax credits, with a firm sunset date of July 1, 2014, beyond which all tax credits would be changed, reauthorized or eliminated.
“My plan would take a deliberate look at every tax credit and put in place a permanent set of rules that would assure that any tax credit, now or in the future, would have to return real dollars to the state,” he said in a statement Friday.
Dank, who has been crusading to provide more accountability for tax credits and business incentives for seven years, has said that the best way to attract jobs to Oklahoma is to reduce and eventually eliminate the state's personal income tax instead of providing tax credits to certain industries and companies.
Dank said his approach would allow legislators elected last year to have two full sessions to deal with the issue.
House Bill 1369 would put in place a set of criteria that would govern existing or future tax credits. Criteria include stringent auditing; rigorous cost-benefit analysis; cost and time caps; and a requirement that any tax credit would create or sustain quality, permanent jobs. Dank said a primary goal will be ending the use of transferable tax credits that can be bought and sold.
HB 1372 would sunset all existing tax credits as of July 1, 2014. Dank said that date would give lawmakers time to examine each tax credit, change it to meet the new criteria or let it expire on the sunset date.
A House of Representatives committee is scheduled to take up both bills next week.
Related to income tax
Four proposals introduced last year basically called for cutting the top personal income tax rate of 5.25 percent by more than half, but the proposals depended on eliminating virtually all tax credits and deductions to help make up for lost revenue.
Gov. Mary Fallin earlier this week called on lawmakers to reduce the rate to 5 percent and use state revenues to make up the lost funds, estimated at $120 million annually when fully implemented.
Dank said the issue of state income tax relief is more important now because many Oklahoma taxpayers are likely to face higher federal income tax bills in 2013 as a result of the federal fiscal deficit.
Various pieces of legislation to change the way tax credits are issued were killed last year in committees. Legislation to end the transferability of tax credits failed in the House Budget Subcommittee on Revenue and Taxation. A bill in a House budget committee that would have extended the existing moratorium on tax credits also failed.