POSTED ON JULY 10, 2013:
A Tax By Any Other Name
Unable to raise taxes, but getting paid anyway
It's all but impossible for state lawmakers to raise taxes in Oklahoma thanks to a constitutional amendment that voters approved two decades ago.
Indeed, the anti-tax mood remains so entrenched that our elected leaders now routinely cut state income taxes -- another quarter-percentage-point kicks in January 2015.
Of course, it doesn't cost any less today than it did 20 years ago to build bridges, staff prisons, or operate public schools.
It just means our elected leaders must be especially ingenious to have it both ways politically -- lower taxes and decent public services.
As you might suspect, there is no single preferred method for recouping $1 billion lost to tax cuts. But there is one at which lawmakers are particularly adept and duplicitous: raising fees.
Consider one of the whoppers approved in the recent session: Starting Nov. 1, the cost of renewing your standard driver's license jumps from $21.50 to $33.50.
What the right hand giveth (a quarter-percentage-point income tax cut that primarily benefits the rich), the left hand taketh (fee hikes that hit seniors, the working class and poor the hardest).
"They've backdoor-ed it by raising fees," says Oklahoma City attorney Jerry Fent, who's spent more time than just about anyone before the state Supreme Court fighting lawmakers over spending practices.
How bad is it? No less an authority than House Speaker T.W. Shannon himself complains that fees have increased about $100 million since 2007.
Moreover, the state collected nearly $600 million in fees, licenses and permits in fiscal year 2012 -- an eye-popping 48 percent jump over the previous year.
Call it the legislative version of a fee-for-all.
It's hardly surprising that lawmakers talk out of both sides of their mouths -- pledging themselves to austerity and smaller government while quietly embracing taxes by another name.
After all, the first order of business is re-election, which depends on keeping the folks back home happy. The problem is, what they want is first-rate services without having to pay for them.
Few officeholders who want to remain so are willing to be the bearers of bad news: Taxes finance services. There is no free lunch.
There are, however, some who believe the tax-fee shell game is not only disingenuous, but also bad public policy.
And they are willing to say so publicly -- though it's often couched in standard uber-right rhetoric: The budget is bigger this year than last. The money is clearly available. We simply have to cut the fat.
Given the Legislature's hard-right turn in recent years, it seemed a slam-dunk that lawmakers this session would approve a moratorium on fee increases.
After all, Shannon's name graced House Bill 1914 as the principal House author.
Yet, in the session's waning days, it inexplicably died -- just about the same time lawmakers approved Senate Bill 652 that generated about $10 million for the Department of Public Safety, most via higher driver's license fees.
"I can't tell you why that bill (HB 1914) didn't move in the end," says Guthrie Rep. Jason Murphey, who co-sponsored the measure. "It's a worthy initiative I think can move in the future and I think will move in the future."
One theory is that lawmakers were sensitive to the possibility their hypocrisy would attract negative publicity. It wouldn't have been easy, after all, to explain why lawmakers were increasing DPS-related fees while simultaneously freezing other fee hikes until 2016.
There was another factor that may have contributed to HB 1914's demise: The unexpected death in late March of the Oklahoma Highway Patrol's legislative liaison, Capt. Pete Norwood.
It suddenly wasn't so easy for legislators to tell the grieving highway patrol family no. At least not on everything. A campaign to give troopers their first pay raise in seven years stalled, but the driver's license fee increases sailed through and were signed into law in mid-May by Gov. Mary Fallin.
That meant the fee moratorium would have to wait for another session, leaving open the possibility that more fees could be raised before the shell game is ended.
But fee-hike shenanigans are not without potential legal pitfalls.
According to Fent, the state Constitution is clear -- and the courts have so ruled -- that if a fee is not actually used for the purpose for which it is collected, it is a t-a-x.
Similarly, he says, if the fee increase generates more than enough revenue to complete the task for which it was collected, it also is a t-a-x.
Remember, the voter-approved SQ 640 amended the state Constitution so that taxes can only be increased with approval of a super-majority of the Legislature -- or three-quarter vote in both the House and Senate -- or a statewide vote.
Creative bookkeeping can make it difficult to determine whether a fee is being used for its intended purpose or generating more revenue than necessary. But it's also possible (probable) that lawmakers are willing to gamble their creative financing can withstand scrutiny.
Both Murphey and Fent concede it is very difficult for someone challenging a fee to prove that it wasn't being used for its intended purpose or was generating too much revenue.
Ostensibly, the driver's license fee increases will pay for hiring more driver's license examiners to help shorten lines and speed the process. But analysis of the DPS budget suggests the higher fees will generate far more income than necessary. So where else could the new DPS revenue go? DPS needs money for a communication system it launched with federal dollars that dried up. The excess fees could fill the gap, except that might not meet constitutional requirements.
"The entire system's broken," says Murphey, who believes "there are plenty of state agencies that will disguise" how they're using fee income.
The good news, he says, is that lawmakers now require agencies seeking fee increases to obtain legislative approval. Until a couple of years ago, some agencies could simply decide on their own to hike fees.
"There's a very different feeling now than there used to be," says Murphey. "The presumption now is on side of debate and openness."
What would be even more honest and transparent is if lawmakers would drop all the anti-tax mumbo-jumbo and shoot straight with the public on what it costs to finance vital state services.
No one I know loves paying taxes. But no one I know wants to drive on the nation's second-worst bridges, send their kids to overcrowded schools, or put youngsters at risk because of an under-staffed, over-worked child welfare system.
My hunch is that a majority of Oklahomans would appreciate an adult conversation about what services we want, what they would cost, and how we can pay for them.
I won't hold my breath, but it doesn't hurt to dream, does it?
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