Temporary resolution of the fiscal cliff debate in Washington resulted in higher payroll taxes for most Oklahomans. Coupled with higher health insurance costs and additional taxes associated with Obamacare, these looming drains on our economy make it even more essential to reduce state income tax rates. But that's unlikely to happen until we address the tax credit scandal that siphons off hundreds of millions of dollars from our state budget each year.
A tax system should have two features. It should adequately fund essential state services and it should be fair to all. Because of substantial tax credits granted to vocal and often narrow special interests, Oklahoma's system fails on the second criteria.
We have a long history of granting tax credits that range from the questionable to the outrageous. Some may recall the ill-fated Rocketplane boondoggle that handed out $18 million in tax credits for a venture that literally never left the ground. Great Plains Airlines got $27 million and never flew.
A legitimate tax credit should create or sustain real and lasting jobs. It should return more than it costs to the taxpayers in the form of increased income, sales and property taxes from those jobs. It should boost our economy in significant ways. At bottom, a legitimate tax credit is an investment in ourselves.
Too many of our existing tax credits fail that test. We're subsidizing wind power developers who can also take advantage of lucrative federal incentives, and who can then sell the power they generate out of state. We're underwriting historic preservation projects that create few lasting jobs and enrich even fewer. You can get a generous home office tax credit by opening a business that's not a home office at all — and you can keep getting that tax credit forever.
Last year we were unable to deliver income tax relief for Oklahomans, in part because we failed to address the tax credit issue. Lobbyists blocked those efforts. As a result, many Oklahomans are now being hit with higher federal taxes and no relief from the state.
Our goal during the upcoming legislative session should be twofold: put in place stringent criteria to govern existing and future tax credits, and sunset all existing tax credits as of July 1, 2014, to give lawmakers two full sessions to assess, change or repeal them. These criteria should include sunsetting, caps, strict auditing requirements, and most of all a careful cost-benefit analysis of any tax credit to assure that it creates real, lasting jobs. We also must stop issuing transferable tax credits, which can be bought and sold like poker chips.
Those are the rules that govern our successful Quality Jobs program. If we apply them to current and future tax credits as well, we can plug our state's leaky fiscal boat and get down to the business of giving all Oklahomans substantial income tax relief.
Dank, R-Oklahoma City, represents District 85 in the Oklahoma House.