A question about state taxes

[Ed W]

Last year, Oklahoma had a $1.6 billion budget shortfall, and federal stimulus money covered $500 million of it.  I read somewhere - perhaps here on the forum - that the tax breaks handed out to the wealthiest Oklahomans and various businesses would have covered a substantial portion of the remaining $1.1 billion, but I can't find the figure or any references.  

Can anyone point me in the right direction?  (And, yes, that's an inadvertent pun.  I didn't catch it until after I typed it, but it's going in anyway!)

[RecycleMichael]

Oklahoma tax breaks rose despite budget shortfall

By RANDY KREHBIEL World Staff Writer
Published: 10/21/2010  2:19 AM
Last Modified: 10/21/2010  7:55 AM

Even as Oklahoma went through some of the most difficult state budget years in its history, the number and dollar amount of tax breaks through exemptions, deductions, credits and other devices continued to increase.

The Oklahoma Tax Commission's most recent Tax Expenditure Report, released Oct. 1, lists 473 such items. That's 28 more than in the last biennial report, issued in 2008.

The total value of just the 166 expenditures for which the Tax Commission said it could provide an estimate increased $470.9 million, to $5.87 billion - or about $1 billion more than was certified for general fund appropriations this budget year. Expenditures are the commission's somewhat Orwellian name for revenue not collected because of tax exemptions and other breaks.

The Tax Commission said it could not provide estimates for 280 expenditures; the estimate for 27 expenditures was zero, in some cases because the expenditure in question had never been used.

Some of the entries cause a little head scratching, at least at first glance. There is, for example, a tax credit for damaged bingo cards. There is another for excise tax paid on private aircraft sold for $5 million or more.

Buy some poultry litter and you may be eligible for a $5 per ton income tax credit.

Most of these, however, amount to little or nothing in the scheme of things. Most tax expenditure dollars are locked up in a few exemptions and deductions not likely to ever change.

The biggest single tax break – $1.74 billion – is the sales tax exemption granted manufacturers. The second largest – $1.5 billion – is the sales tax exemption on sales for resale.

Third on the list are itemized and standard deductions at $733.1 million. All three are fairly standard nationwide.

Fourth and rising fast on the list is Oklahoma's exemption on Social Security and other retirement income. Originally limited to low-income households, the exemption's cap has been steadily raised in recent years and will come off entirely next year.

Because of that, and the state's aging population, the cost of the retirement exemption nearly doubled from 2008 to $143 million.

Also rising sharply were the estimates for the sales tax exemption on prescription drugs ($132.2 million, up more than 117 percent) and oil and gas incentives (almost doubling to $112.8 million).

The oil and gas incentives – actually eight separate rebates counted as one by the Tax Commission – have been targeted by those who think the state is leaving too much tax money on the table.

Efforts by governors and the Legislature to chip away at even the tiniest tax break, however, has proved almost completely unsuccessful. An attempt this year to eliminate a long list of tax credits ended with the liability for most of them being deferred – meaning the state's still on the hook, just not this year – and the rest were left alone.

Read more from this Tulsa World article at http://www.tulsaworld.com/news/article.aspx?subjectid=16&articleid=20101021_16_A1_Evenas823400&rss_lnk=11

[Ed W]

Thanks, Michael.  If I understand this correctly, the three largest tax exemptions revolve around sales taxes on manufactured goods, sales taxes on items to be resold, and the standard and itemized deductions on income taxes.  While it might be tempting to say we could balance the state budget by collecting these, the reality would be that manufactured goods would inevitably increase in price.  Those prices would be passed on to consumers who would presumably buy the same goods from an out-of-state competitor at a lower price, and Oklahoma jobs would be lost as a result.

And if the state eliminated the standard and itemized deductions, people would march on the state capitol with torches and pitchforks in hand.

To close the shortfall, then, it seems that the state will have to both increase taxes and cut some budget items.  The big question is whose ox gets gored?

[heironymouspasparagus]

The biggest "deduction" we have had in just about forever was the 1% cut in the top tax rate from 6 to 5%.  Now there is a deal that has put us in the billion dollar hole!

[guido911]

To close the shortfall, then, it seems that the state will have to both increase taxes and cut some budget items.  The big question is whose ox gets gored?

I vote for the obvious: cut public school funding and limit the period for persons to receive unemployment benefits. In no case should we not increase money to build more prisons.

ducking

[RecycleMichael]

I vote for the obvious: cut public school funding and limit the period for persons to receive unemployment benefits. In no case should we not increase money to build more prisons.
ducking

I propose we fill the prisons with lawyers then annex the area of Arkansas that includes Wal-Mart headquarters.

[Ed W]

I vote for the obvious: cut public school funding and limit the period for persons to receive unemployment benefits. In no case should we not increase money to build more prisons.

ducking

You know my point of view, Guido.  Let most of the roads go to hell, making them so bad that people won't drive on them.  I can simply weave around the potholes on my bicycle.

Seriously, though, we need good roads for commerce and to attract and keep people and businesses.  By those same measures, we need decent educations for our kids, too.  These are thorny problems and we need statemen willing to step up and make the hard choices.  Unfortunately, we're more likely to get political posturing where ideology substitutes for critical thinking. 

[guido911]

You know my point of view, Guido.  Let most of the roads go to hell, making them so bad that people won't drive on them.  I can simply weave around the potholes on my bicycle.

Seriously, though, we need good roads for commerce and to attract and keep people and businesses.  By those same measures, we need decent educations for our kids, too.  These are thorny problems and we need statemen willing to step up and make the hard choices.  Unfortunately, we're more likely to get political posturing where ideology substitutes for critical thinking.  

Come on Ed, you have to know I was kidding. Seriously though, during the SQ744 debate, we heard on TV about all the waste in government. Let's start there.

[Ed W]

OK, I'll play.  One man's government waste is another man's essential program.  What wasteful programs would you cut? 

[Red Arrow]

What wasteful programs would you cut? 

All of them.   

[Red Arrow]

Oklahoma tax breaks rose despite budget shortfall

By RANDY KREHBIEL World Staff Writer
Published: 10/21/2010  2:19 AM
Last Modified: 10/21/2010  7:55 AM

Even as Oklahoma went through some of the most difficult state budget years in its history, the number and dollar amount of tax breaks through exemptions, deductions, credits and other devices continued to increase.

The Oklahoma Tax Commission's most recent Tax Expenditure Report, released Oct. 1, lists 473 such items. That's 28 more than in the last biennial report, issued in 2008.

The total value of just the 166 expenditures for which the Tax Commission said it could provide an estimate increased $470.9 million, to $5.87 billion - or about $1 billion more than was certified for general fund appropriations this budget year. Expenditures are the commission's somewhat Orwellian name for revenue not collected because of tax exemptions and other breaks.

The Tax Commission said it could not provide estimates for 280 expenditures; the estimate for 27 expenditures was zero, in some cases because the expenditure in question had never been used.

Some of the entries cause a little head scratching, at least at first glance. There is, for example, a tax credit for damaged bingo cards. There is another for excise tax paid on private aircraft sold for $5 million or more.

Buy some poultry litter and you may be eligible for a $5 per ton income tax credit.

Most of these, however, amount to little or nothing in the scheme of things. Most tax expenditure dollars are locked up in a few exemptions and deductions not likely to ever change.

The biggest single tax break – $1.74 billion – is the sales tax exemption granted manufacturers. The second largest – $1.5 billion – is the sales tax exemption on sales for resale.

Third on the list are itemized and standard deductions at $733.1 million. All three are fairly standard nationwide.

Fourth and rising fast on the list is Oklahoma's exemption on Social Security and other retirement income. Originally limited to low-income households, the exemption's cap has been steadily raised in recent years and will come off entirely next year.

Because of that, and the state's aging population, the cost of the retirement exemption nearly doubled from 2008 to $143 million.

Also rising sharply were the estimates for the sales tax exemption on prescription drugs ($132.2 million, up more than 117 percent) and oil and gas incentives (almost doubling to $112.8 million).

The oil and gas incentives – actually eight separate rebates counted as one by the Tax Commission – have been targeted by those who think the state is leaving too much tax money on the table.

Efforts by governors and the Legislature to chip away at even the tiniest tax break, however, has proved almost completely unsuccessful. An attempt this year to eliminate a long list of tax credits ended with the liability for most of them being deferred – meaning the state's still on the hook, just not this year – and the rest were left alone.

Read more from this Tulsa World article at http://www.tulsaworld.com/news/article.aspx?subjectid=16&articleid=20101021_16_A1_Evenas823400&rss_lnk=11

What you say makes perfect sense as long as one agrees to the concept that all earnings belong to the government except the portion that the government allows the public to keep.  I do not prescribe to that philosophy.

[guido911]

What you say makes perfect sense as long as one agrees to the concept that all earnings belong to the government except the portion that the government allows the public to keep.  I do not prescribe to that philosophy.

You have tapped in to what is my problem with certain people's views on tax policy. I work for myself and those that pay me; I do not work for the government.

[RecycleMichael]

Oh guido. So naive.

[Conan71]

You know my point of view, Guido.  Let most of the roads go to hell, making them so bad that people won't drive on them.  I can simply weave around the potholes on my bicycle.

Seriously, though, we need good roads for commerce and to attract and keep people and businesses.  By those same measures, we need decent educations for our kids, too.  These are thorny problems and we need statemen willing to step up and make the hard choices.  Unfortunately, we're more likely to get political posturing where ideology substitutes for critical thinking. 

Buy one of these, they roll over everything with the 29" wheels



The sales tax credits for manufacturers and re-sale goods is necessary in creating and keeping jobs.  We can scream "corporate welfare" until the world looks level, but the truth is, corporations and small business are always going to gravitate toward tax-friendly environs.  If we don't offer the credits, there's plenty of other states who manage their money better who can afford to offer them.  I hate to use the old cliche' but it's truly a Catch 22

[heironymouspasparagus]

Can't see that any state handles money any better than any other.  It's just mishandling in different ways.  And our way appears to concentrate on efforts to kill roads and schools.

Tax credits, etc don't really do much to attract anything - note Whirlpool and Kimberly-Clark.  They came for the slave wages and that is why they stay.  The "tax benefits" wore out long, long ago, but the low pay is the gift that keeps on giving.  Nationally, statewide, and locally - it's all about the cheap labor.  (Hence, 25 million illegals.)