Budget woes stir talk among candidates about tax breaks
As Oklahoma’s budget problems have brought more scrutiny to various tax breaks, gubernatorial candidates have been talking about whether subsidies are worth the loss of revenue.
At forums last week, candidates were asked about tax incentives in general and about ones for wind energy in particular.
Candidates from the Republican, Democratic and Libertarian parties expressed skepticism about the value of trying to lure businesses with the promise of taxpayer subsidies, though some conceded it may at times be necessary.
The most common position among them is that a state providing good services, including schools, will be able to attract industry without giveaways.
“We must invest in education, in our roads and highways, in health and mental health and the other needs of our citizens if we expect corporate America to beat a path to our door,” Democrat Drew Edmondson said last week at the Oklahoma Academy forum in Stillwater.
Former state Sen. Connie Johnson, a Democratic candidate, said the benefits of any incentives should be widely distributed and that workers should be guaranteed a livable wage.
“I think business incentives work, but I think they should have to have some additional requirements,” said Johnson.
States and cities employ incentives, which can include income taxes, sales taxes, property taxes and others.
In Stillwater last week, Mick Cornett, the former mayor of Oklahoma City, recalled the time in the early 1990s when the state and city put together a massive incentive package to lure United Airlines. The company chose Indianapolis.
“All of those incentive dollars really didn’t matter,” Cornett, a Republican, said.
“What they found out later was that the quality of life in Oklahoma City had sunk so low that corporate America was no longer interested in Oklahoma and Oklahoma City at any price.”
That launched the effort to rebuild downtown Oklahoma City with residents investing in their future by paying a higher sales tax, Cornett said.
Cornett said most incentives were based on performance — such as employing a target number of workers — and leaders should be skeptical of anything beyond that.
“None of us like incentives, but it is the cost of doing business, especially if they’re higherpaying jobs,” he said.
Lt. Gov. Todd Lamb, a Republican, said the problem with most Oklahoma tax incentives is that they don’t include an objective in the law, they don’t have a firm expiration date and they don’t have a cap on the cost to the state treasury.
The lack of a ceiling has resulted in soaring costs for tax breaks for capital gains, wind power generation and some oil and gas production.
“The ultimate incentive for Oklahoma is sound public policy,” Lamb said.
“We’ve removed so many artificial barriers for growth — right to work at the turn of the millennium; 2007, lawsuit reform; and 2013, workers’ (compensation) reform.
“That’s the ultimate incentive for businesses to grow in Oklahoma.”
Incentives blowin’ in the wind
Oklahoma lawmakers are currently weighing whether to roll back a wind energy incentive that grew so much the state has been paying companies tens of millions of dollars a year.
Opponents of changing the law warn that Oklahoma would be viewed as a state that wouldn’t keep its word.
Tulsa businessman Kevin Stitt, a Republican, said the state shouldn’t break a deal.
“But we certainly can stop this going forward and negotiate better deals going forward,” he said at a forum last week in Oklahoma City. “There’s no need to give a special incentive over other states around us.
“That’s what I tell the industries: ‘I’ll make sure you’re competitive with other states around us, and you’ll be able to do business here.’ But I don’t think we should do special giveaways to certain industries.”
Oklahoma Auditor and Inspector Gary Jones said the state should modify the incentive if it isn’t fair.
“If you make a mistake, you need to correct the mistake,” Jones said.
Incentives should be viewed as business deals and scrutinized for whether taxpayers will get a return on their investment, Jones said.
Yukon pastor Dan Fisher, a Republican, said in Oklahoma City, “We are about to write a $70 million check to the wind energy this year, which is ridiculous.
“So this is what happens when government gets outside of its core functions. The job of government is not to meddle in the free market. If the wind energy is viable, it will make it. If it’s not, it won’t.
“What if instead of giving all those tax incentives and all of these ad valorem pass-bys to the wind industry, we’d taken that money and put it into education?”
Tulsa attorney Gary Richardson said, “We need to back off on buying companies to come to Oklahoma. We see them come and leave from another state because we give them more money. And they stay a little while and go to someone else who gave them more money than we gave them.
“We’ve got to develop our state in a way that they want to come here because of Oklahoma — who we are, what we’re doing and the business we have.”
Libertarian candidate Joe Exotic said small businesses wind up paying a higher tax rate than big companies given incentives. He called for a flat tax for all businesses.
Libertarian Rex Lawhorn said incentives were just “icing on the cake” for companies that were more interested in transportation networks and a good quality life for employees.
“We need to go back to core service and then (businesses) will come,” Lawhorn said.
Libertarian Chris Powell said tax breaks couldn’t be justified “when we are not funding mental health, when our schools don’t have the funding that we need (and) when the prison guards are woefully underpaid.”