Don’t take away tax breaks for Oklahoma’s businesses. Take them away from Oklahoma’s working families instead.
— Salon.com (@Salon) February 8, 2016
That’s the message Republican Gov. Mary Fallin sent this week in response to a bill that in its introduced form would make steep reductions in tax-credit programs for working families and lower-income residents while suggesting more modest cuts to some tax-break programs that would affect certain businesses.
I wrote about state Sen. Mike Mazzei’s Senate Bill 977 in my last post. Essentially, the initial bill proposed $150 million in tax-credit or incentive reductions over a two-year period. The bill, which passed out of the Senate Finance Committee Tuesday but apparently won’t be specifically considered by the full Senate, is a response to the state’s budget crisis. Reductions to the state earned income tax credit, low-income sales-tax relief and the state child-care tax credit would net a savings of $106.5 million under the bill as it was introduced. These programs help out working families. The rest of the reductions—note the disparity in the amount differential—would have included a wide range of tax breaks that benefit and include historic preservation, the investment and new jobs credit, and aerospace engineering. These cuts have drawn the ire of some people in the business community and now Fallin.
Oklahoma governor warns against putting tax breaks on hold: By RICK M. GREEN Capitol Bureau email@example.com… https://t.co/fLKETjaZua
— OKC Breaking News (@okc_news) February 11, 2016
Fallin issued a statement Tuesday that warned about taking away tax credits for some businesses, claiming two business projects were apparently lost or almost lost because a legislative committee was even considering trimming tax breaks. She and her office didn’t initially name the projects, but later said they were The Boeing Company projects. Meanwhile, the reduction for historic preservation tax credit was removed from the bill so we can assume the overall “savings” from Mazzei’s bill has gone down as well. Mazzei has stressed his bill is a work in progress and other changes could be made before another bill is introduced.
Senate President Pro Tem Brian Bingman’s response to Fallin’s response is worth noting for its intraparty bickering:
It’s disappointing that less than two weeks into the legislative session, however, there already is retreat from the idea of simply examining whether or not tax incentives are working. The alternative is deep cuts to core services like education, public safety and transportation, which all of us are trying to avoid.
For years, some legislators have tried to fully examine the state’s numerous tax breaks for businesses to see what’s working or not. An Oklahoma Watch news story in 2014 reported the tax break or incentive amount for businesses at $760 million annually, more than double the amount given in 2010. The state’s coffers lose another $1 billion annually now because of recent income tax cuts. All these tax cuts have overwhelmingly benefited the wealthiest Oklahomans, some of whom no doubt own or are top executives at companies getting tax breaks.
The basic philosophical idea behind doling out tax breaks and subsidies for businesses is that they eventually impact the economy in positive ways by helping to create jobs and other economic development and, if such tax breaks are not offered, then these businesses will simply locate to another state.
It might make sense in limited cases to offer tax breaks to particular businesses for the overall public good in a specific, defined and well-publicized manner, but the overall logic behind giving tax breaks or public subsidies to corporations undermines the basic purity test when it comes to free-market ideology. If the market alone can’t sustain a business at some pre-determined profit level, then why does it exist? Conservatives want and get it both ways. They hold themselves up sanctimoniously as the great guardians of capitalism and the free market while forcing ordinary citizens to pay tax dollars to make businesses sustainable and profitable.
But that’s the larger philosophical picture. The pragmatic picture, and the most pressing right now, is that the Oklahoma government is experiencing a current revenue failure and an expected budget shortfall of more than $1.3 billion for next fiscal year. That number could grow even more in a state that has been passing budgets in the $7 billion-range recently. Of course, one of the ideas to help the situation is to examine all the state’s tax breaks for businesses and see which are truly worth it, but right out of the gate it became a turf war, which was to be expected, and it will most likely be won by big-business interests in the GOP-controlled legislature. Meanwhile, one Oklahoma legislator is even suggesting the budget crisis could mean the state might drop Medicaid coverage for some 111,000 state residents.
House roundup: Lawmakers say budget squeeze could knock 111,000 Oklahomans off Medicaid rolls https://t.co/NVr7wo00cJ
— Randy Krehbiel (@rkrehbiel) February 11, 2016
Meanwhile, the layoff announcements from the oil and gas industry in Oklahoma keep coming because of a worldwide fossil fuel glut it helped to create because it lacked adequate foresight. The boom mentality in the oil and gas patch is always best viewed rhetorically as an addiction. Combine that with Oklahoma’s chronic failure to diversify its economy, recent income tax reductions that primarily benefit wealthy people and all the tax breaks for businesses, which include oil and gas companies.
It’s created an Oklahoma epic fiscal disaster with the latest bad news getting reported on a regular basis. I don’t think that’s hyperbole.
I lived through the 1980s here as a working adult, and I know that economically things can get a lot worse here. Oil prices could go even lower, even into the teens per barrel, and stay there for months to come. People fled the state during that time in droves, which only erodes the tax base further. I hope it doesn’t happen again. Maybe the state’s economic foundations are stronger or maybe all the corporate tax breaks and income tax cuts since that time will make it worse.
Cracks in the global economy are making the oil glut worse https://t.co/LuEbfKB9XX
— Business Insider (@businessinsider) February 12, 2016