Democratic viewpoints on politics, policy and activism

Seeing the Light at the End of the Oklahoma Budget Debacle?

If more Oklahoma Republicans can be cured of their tax increase phobia, maybe we can get back to funding critical services in this state. Some real solutions are starting to be discussed at 23rd and Lincoln. Baby steps, but still!

Arnold Hamilton is editor of The Oklahoma Observer, but he also writes a regular guest column for The Journal Record. His latest op-ed addresses the foundational problem that has decimated our state’s budget in recent years: an out of date and unfair tax code.

In “Political spin, special interest cooks and future prosperity” (Behind paywall) Hamilton commends a handful of legislators who are trying to seriously review Oklahoma’x complex (and obviously broken) tax policies, and seek out solutions.

[I]t’s both notable and laudable that senators – led by Okemah’s Roger Thompson – took the first steps toward possible overhaul of a tax system that disproportionately burdens the working class and poor and undermines core state services whose funding is over-reliant on volatile revenue sources like oil and gas.

Noting how previous attempts to raise more revenue – like Gov. Fallin’s expanded service tax idea last year – have fizzled, optimism is not easy to come by, but the dire situation Oklahoma has in seems to have “woke” some Republicans to some realities that don’t mesh well with long-standing GOP dogma.

Thompson’s three-hour hearing this week served as a primer for senators of both parties seeking to better understand Oklahoma’s revenue picture. It also signaled that the Senate’s Republican majority has taken note of Kansas’ failed “trickle down” experiment – cutting taxes do not magically generate more income.

To me, that alone is cause for some ray of hope, but it’s a long way from the interim study currently underway and a supermajority required by State Question 640 to radically reform our tax code by changing rates and thus raising income taxes on high-earning groups. That will mean more than a handful of Republicans will have to recognize that “tax reform” doesn’t always mean cutting taxes for the wealthy and making the poor and middle class pick up the slack and suffer the effects of service cuts. Because, as Hamilton notes,

what helps create sustainable, predictable revenue streams to underwrite vital public services is a fairer, more broadly applied tax code that ensures the working class and poor have more to spend, the economy’s uber stimulant.

Slowly, it appears that this — the only real alternative to our current crisis — is getting through to those who make these decisions on our behalf. Perhaps the winning streak of reality-based Democrats in several recent special elections is playing a part in the new insights by the Republican majority.

We can hope!

What seems to Hamilton – and me – to be a very sane solution that will serve to tamp down Republican politicians’ nervousness about violating the Grover Norquist rule of polcymaking, is, yes, handing the job off to a bipartisan panel, an idea proposed recently by State Treasurer Ken Miller.

Such a group could tackle comprehensive reform – everything from income tax rates to sales taxes on services to gross production and motor fuel taxes – then present a plan for an up-or-down legislative vote.

That won’t be easy (thanks, Yes on SQ640 voters!) but can perhaps cushion the political pain for members of the majority running this state.

Because some of them are coming to the light and getting introduced to reality too. Hamilton quotes Miller, who, unlike some stubborn Norquist-bamboozled state legislators, reads the state’s books: “We need to have a modernization of our tax code,” he says. “It was built for an economy that doesn’t exist anymore.”

Ya think?!

 

Got A Light To Help The State Budget? Increasing Cigarette Tax Under Consideration Again

I don’t necessarily see anything wrong about raising the state’s cigarette tax by $1.50 a pack, but the legislative effort to pass it again shows how Oklahoma is still dependent on small fixes to help shore up its budget.

The proposed tax increase would generate around $184 million the first year in a budget of approximately $7 billion, and some $50 million of that would go to the Department of Mental Health and Substance Abuse Services, which is a good thing. With additional matching federal funding for health programs the amount of money the tax would generate has the potential to increase incrementally.

The problem though is that part of the mission of the tax is to get people to stop smoking so, if that happened, fewer smokers would mean declining revenue. It’s a tax that seeks its own demise.

In addition, those of us that don’t smoke won’t contribute at all, and smokers would pay a steeper price for their habit. The tax is regressive in that lower-income people, if they smoke, spend more of a percentage proportion of their money for cigarettes. I understand why smokers would oppose the cigarette tax and feel singled out, but the evidence is clear that long-term smoking can and does lead to severe illnesses, such as cancer and emphysema. The nicotine contained in cigarettes is also a highly addictive drug, and it’s difficult to quit. The tax is regressive, but it’s also a public health issue in terms of the overall medical costs to our society.

So it’s a debatable issue with no real answer. Do people have the right to smoke? Of course. But how much of that right infringes on other people in terms of its health costs to our society? This question will never be resolved to everyone’s satisfaction, and we know people will continue to smoke in the foreseeable future.

The state faces a $878 million shortfall for next fiscal year. Education funding is at dismal levels, and teacher pay here is ranked 49th in the nation, pushing some educators to leave the state for increased salaries. The budgets of state agencies have been sliced because of the state’s recent budget problems caused by an oil slump and relatively recent enacted income tax cuts and tax credits for the energy industry.

As I wrote earlier, the state budget faces structural financial change. What if we’ve experienced the last true fossil fuel boom in Oklahoma? Revenues from production taxes—taxes that have been cut recently—and income taxes paid by oilfield workers have always driven the economy and the state budget to an proportional extent in Oklahoma. What do we do now besides finding small revenue streams like the cigarette tax to help balance the budget? What happens when there are no more streams to find.

Oklahoma Government Could Remain Broke For A Long Time

Looming peak oil demand, a world fossil-fuel glut and Republican tax-cut ideology has structurally changed the state of Oklahoma’s revenue collections, resulting in abysmal and embarrassing funding for education, social services, health programs and corrections.

Renewable energy sources, such as wind and solar power, continue to grow incrementally around the world, lessening the need for fossils fuels, especially to produce electricity. New oil reserves, such as the tar sands in Canada, have been discovered throughout the world in recent decades. Oklahoma, as we all know, has been sustained by the fossil-fuel industry, which now pays a limited amount of production taxes.

The only thing that could push up oil prices, and thus increase production tax revenue on a major level for Oklahoma, would be a seismic disruption in the fossil fuel supply chain caused by a world war or at least a major conflict involving several countries. Obviously, that’s nothing to wish for, although I bet there are people who have their fingers crossed it will happen.

Meanwhile, most Oklahoma Republican politicians, whether they actually believe it or not, push the idea that tax cuts actually help the economy by increasing state revenues, but that’s not the truth. The truth is the state currently faces an $878 million shortfall in an average budget of approximately $7 billion. The truth is this comes after income tax cuts that primarily benefited wealthy people that then led to huge cuts to state agencies, including our education systems, in recent years. The truth is the state has cut public education funding on a percentage basis the most of any state in the country since 2008.

It’s difficult not to see the state at a huge breaking point. The Trump presidency will make it worse. More deregulation of the fossil-fuel industry and ending particular rules on energy companies related to the environment, which the Trump administration supports, will only accelerate global warming and pollution, and possibly the number and intensity of earthquakes here, while increasing the glut of oil, which drives prices even further down.

Obviously, tax breaks given to oil and gas companies have had a major impact on the state’s revenue collections, and they should be renegotiated, but the larger story is that Oklahoma should never rely again on the fossil fuel industry for its financial foundation, both in terms of tax revenues and employment. Oklahoma leaders need to embrace this new reality. The oil booms, unless created by world calamity, are most likely over or will taper off in weak gasps.

As usual, with only a month or so left in the legislative session, the Oklahoma Legislature and Gov. Mary Fallin have yet to offer up a workable budget for next fiscal year. The legislature supposedly wants to raise teacher salaries, but how can that happen with such a major budget shortfall?

Some partial and interim answers to what has become a systemic Oklahoma government revenue problem do exist: Significantly raises taxes on incomes at $250,000 and above on a graduated scale and then tax fossil fuel production at much higher levels. The likelihood of this happening anytime soon is practically nil, but there’s really no other alternatives.

The larger issue, of course, is to diversify the economy with different industries and businesses to boost tax revenue, but attracting such development is difficult in a state in which schools have four-day learning weeks and the college graduation rate is much lower than the national average. Our earthquake crisis, caused by an element of the fracking process used by the oil and gas industry, doesn’t help either. The volatile weather here isn’t a big draw.

What should be obvious to every thinking person in Oklahoma at this point is that the state is broke and broken, and no elected leader has a viable plan or the will to fix it.