Officials should tout state economy
USUALLY politicians miss no opportunity to tout economic growth and take credit, so it was surprising to see Gov. Mary Fallin’s administration recently downplay talk of economic improvement on her watch. The data show that recovery is underway in Oklahoma; citizens should welcome this reality.
The Office of Management and Enterprise Services revealed that state tax collections for the budget year running from July 1, 2017 to June 30, 2018 came in 7 percent higher than estimated. All money exceeding the projection, or $381.6 million, is being deposited into the state’s Rainy Day Fund.
That’s an encouraging sign of improvement following an oil bust that fueled a large drop in economic activity several years ago. Yet the head of OMES seemed to downplay talk of recovery, saying “significant law changes” had “contributed to the revenue the state collected in 2018 and continues to collect in the current fiscal year.”
“The total estimated impact from legislative changes since the first regular session of 2017 is approximately $358.9 million, which is nearly the same amount we are depositing into the Rainy Day Fund for FY 2018,” the director said.
OMES implies tax increases, not economic growth, account for the extra money. But the official state estimates for the just-concluded 2018 budget year accounted for all money expected to come from all approved tax increases. And lawmakers spent every dime they were legally allowed to spend from those tax increases.
The $381.6 million deposited into the Rainy Day fund is money collected above and beyond the amount projected (and already spent by lawmakers) from the 2017 tax increases. It’s a sign of economic growth, period.
Furthermore, OMES data show some 2017 tax increases haven't work as hoped. That year, lawmakers voted to impose a 1.25 percent sales tax on top of the excise tax Oklahomans had long paid when buying an automobile. That tax increase was projected to boost collections by a little over $100 million.
OMES figures show FY 18 motor vehicle tax collections came in slightly below projections and those taxes generated only $2.7 million more than what was collected the year before the 1.25 percent sale tax was imposed.
Tax increases on energy production also failed to generate anticipated revenue despite a steady increase in oil prices. In 2016, lawmakers imposed an estimated $120 million in tax increases on energy producers by capping a long-standing economically at-risk well rebate, and in 2017 they added another estimated $141 million in tax increases when they voted to end all gross production tax rebates and increased the gross production tax rate by 300 percent on roughly 6,600 older wells. Yet OMES reports gross production taxes subsequently came in $20 million below estimates.
Put simply, two areas where lawmakers raised taxes the most in 2017 contributed almost nothing to the revenue growth that allowed the recent Rainy Day deposit.
Oklahoma state government’s improved financial standing owes much to the private sector’s resiliency, which is fueling job creation and associated tax collections. Rather than downplay this reality, politicians should give credit where it’s due.