Data should drive move to end credits, exemptions
HOW difficult is it to eliminate or alter tax incentives and tax credits, something Oklahoma lawmakers are considering in this brutal budget year? The head of the Senate Finance Committee is finding out.
One day after the committee passed a bill placing a two-year moratorium on nearly two dozen tax credits, Gov. Mary Fallin — who has pushed for reviewing Oklahoma’s sales-tax structure, although not necessarily tax credits — warned that lawmakers need to be careful because too much tinkering can be a problem.
The next day, Fallin offered more specifics, saying the rustling at the Capitol regarding tax incentives had prompted Boeing Co. to scrap two proposed projects in the state. “They had a couple projects that they were looking at, and they got a message from their corporate office: What’s going on in Oklahoma?” Fallin said.
Boeing’s director of government operations wouldn’t confirm that, but did say the company believes the Oklahoma Aerospace Tax Credit should remain on the books. We would second that, because the credit clearly has paid dividends for the state — Boeing has brought nearly 3,000 highpaying jobs to Oklahoma, the sort of jobs this state needs in abundance.
Sen. Mike Mazzei’s approach to reviewing credits and incentives also has the wind industry concerned. Oklahoma is on its way to passing California and becoming the nation’s third-leading wind producer, as the result of numerous projects completed through the years and those now in the works. But the head of The Wind Coalition says uncertainty about what the Legislature may do led one company building a plant on the Texas-Oklahoma border to decide against placing turbines on the Oklahoma side.
Mazzei, R-Tulsa, chairman of the finance committee, argued that lawmakers hadn’t definitively identified any credits that should come off the books, and that his moratorium bill is meant to be a starting point. The title was stricken, which allows for bills to be revised considerably, and no doubt that will occur.
Senate President Pro Tem Brian Bingman, R-Sapulpa, said he has a difficult time believing any company would considerably alter its strategy when bills are so early in the legislative process. With a $1.3 billion budget hole for next fiscal year, Bingman said, lawmakers are obliged to look for ways to save money. “Let’s get real,” he said.
Yet it is understandable that industries would be nervous about a potential moratorium. Companies need to be able to plan for the long term; potentially freezing a credit that they’re banking on can cause companies to reconsider that strategy.
Bingman’s point is also well taken — Oklahoma lawmakers must review the credits and incentives, particularly now. It’s worth mentioning that Bingman isn’t antitax credit. He has said he’s a fan of the credit provided for restoration of historic buildings. Yet he also knows that income tax credits, rebates and exemptions reduce revenue by about $1.7 billion annually.
Efforts are underway at the Capitol to measure the value of credits now on the books — which ones really work, and which ones don’t? But completing that exercise is going to take time. Mazzei’s misstep was in painting with a broad brush — potentially icing many big-ticket credits, such as those for aerospace, that have shown to be successful. Any changes should be driven by concrete data showing targeted credits don’t work, not by a desire to fill a budget hole regardless of economic consequence.