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Tax Spending

Written by Dick Pryor on Tuesday October 4, 2011

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September 25, 2011

As lawmakers are looking at new ways to fund state government, tax credits and incentives have drawn increased attention. By most accounts, the state gives away more than $5 billion in various tax breaks each year, and nobody knows whether the tax spending is doing what it was intended to do.

Oklahoma Watch reporter Warren Vieth and StateImpact Oklahoma online reporter Joe Wertz joined us for the discussion with State Rep. David Dank, R-Oklahoma City, who is co-chair of the Legislative Task Force for the Study of State Tax Credits and Economic Incentives.

Rep. Dank's committee has held several hearings on tax breaks to determine their effectiveness and make recommendations for the 2012 legislative session. One of the biggest problems identified so far is transferable credits, that is, tax credits that can be sold to a third party for which there is little or no accountability. As Warren Vieth pointed out, one of these transferable credits is one designed to help a few eastern Oklahoma coal mines. The coal credits were suspended in 2010, but will be available for new coal production in 2012. Dank calls them "handouts" and believes the credits are not producing any new jobs. Clearly, that is one tax credit that is in question.

Another concern about transferable tax credits is that they are often sold to out-of-state interests who don't bring jobs to Oklahoma or stimulate the economy. While intended to create private sector investment, such tax spending may not be having the desired effect in-state. The fact that there is no enforcement or monitoring system in place to ensure that the credits are used to the state's benefit is problematic. Rep. Dank has also determined that many tax credits have no caps, which can create uncertainty in the state budgeting process.

One tax credit that has received favorable reviews is the Oklahoma Quality Jobs Act. Its tax rebate program has controls and transparency, according to Dank, and has benefitted more than 600 companies that have invested heavily in Oklahoma since 1993.

The work of Rep. Dank's committee is continuing and its final report will be a must-read for lawmakers and those interested in state policy. Likewise, this program is a must-see.

Until next time,

Dick Pryor

(Pictured above, left to right: Host Dick Pryor, Rep. David Dank, Joe Wertz, Warren Vieth)


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