Lack of car tax information is not a new development

WHAT does it say about the Legislature that lawmakers won’t address apparent problems with a tax increase plan because of insufficient information, but were willing to enact that tax despite the same lack of valid financial data?

That’s the case with the new car tax. This year Oklahoma’s Republican-dominated Legislature voted to impose a 1.25 percent sales tax on new vehicle sales. That amount was added to the 3.25 percent excise tax Oklahomans already pay when they buy a vehicle.

The tax was signed into law May 31, and the legislation had an effective date of July 1. But by early September, House Majority Floor Leader Jon Echols, R-Oklahoma City, announced a legislative fix was needed to exempt the trucking industry from the new tax. Gov. Mary Fallin agreed and added the car tax fix to her special session call.

The abrupt demand for a legislative fix occurred as reports came in that companies with national fleets were shifting activity to other states. Some state officials have even indicated the net impact of the car tax could be a higher tax rate that produces less revenue due to market reaction.

The House approved legislation exempting from the new tax trucks and truck-tractors registered for a combined laden weight of 55,000 pounds or more, as well as trailers and semi-trailers registered as transport cargo vehicles, and frac tanks associated with oilfield activity.

But the Senate balked and rejected the bill last week. Some lawmakers who opposed the bill cited a lack of sound financial estimates.

The Oklahoman’s Dale Denwalt reported that fiscal analysts had projected earnings from the new car tax would be “more than $100 million in the first year, but they reportedly did not include earnings from the sale of semi trucks.”

That doesn’t give one confidence in the financial planning behind the tax increase in the first place when any retelling must qualify associated fiscal projections with a “reportedly.”

The fiscal estimates tied to the subsequent car tax exemption, generated by legislative staff and the Oklahoma Tax Commission, did little to clarify the issue. Those documents say that exempting semitrailers from the tax would have “minimal” impact on state sales tax collections.

Technically, that’s almost certainly true. Tax collections can’t fall if an exemption is provided on economic activity that would otherwise not occur in Oklahoma if the tax is left in place. But the bigger question is: How much economic activity will Oklahoma lose if the tax is fully intact? No one seems to have an answer.

Sen. John Sparks, D-Norman, said, “In this situation, I don’t know if this is good policy, bad policy; we have no data on the positive or negative impacts of this. We have an absence, a void of data.”

The problem is that the “absence” of data is not a recent development. Lawmakers clearly didn’t have sufficient and valid data when they originally approved the tax increase in May. Now they say they can’t provide any exemptions because they lack data.

In many instances, lawmakers who have advocated for tax increases have implied they understand how taxes impact business decisions better than the people who actually run businesses (many of whom have opposed various tax increases). The car tax mess is proof to the contrary.