POSTED ON FEBRUARY 24, 2010:
One Touchy Subject
A review of some of our tax breaks is needed, but legislators want to keep riding the same high hog
By the time you're reading this, state lawmakers should be nearly finished plugging the holes in Oklahoma's Ship of State, keeping it afloat financially through the final four months of the 2010 fiscal year.
The governor, the House speaker and the Senate president pro tem used spending cuts, federal stimulus dollars and Rainy Day funds to patch a hull mangled by the world's worst economic crisis since the Great Depression, collapsing oil and gas tax revenues and nearly three-quarters of a billion dollars in foolhardy tax cuts.
As complex and intense as those decisions were, however, it wasn't the fiscal triage that Oklahoma really needs--or deserves.
It's time--way past time, actually--that Oklahomans engage in a serious, selfless debate over tax policy, specifically the corporate welfare that lawmakers routinely dole out in a state that nonetheless fancies itself as a bastion of free market capitalism.
New research by the non-partisan Oklahoma Policy Institute (okpolicy.org) identified more than 450 tax breaks in state law, carving a breathtaking $5.6 billion--yes, billion--in potential revenues from the state's budget.
That's darn near as much as the entire state budget in recent fiscal years.
Some of the breaks--such as homestead exemption and standard deduction--benefit taxpayers across the economic spectrum. But an increasing number of lawmakers are concerned many of the business incentives are of dubious value--nothing more than a legal looting of the state treasury.
Imagine what Oklahoma would look like if state lawmakers weren't compulsively rewarding their well-heeled campaign donors with corporate welfare.
You certainly wouldn't have the nation's worst bridges or 48th lowest paid teachers. You wouldn't have child welfare workers juggling twice the recommended number of cases or senior meal programs closing for lack of money.
Heck, you probably wouldn't even hear me complaining as much about the $771 million in recent tax cuts that went disproportionately to the state's wealthiest citizens.
"We simply cannot afford to be giving billions away at a time when we are struggling to find a few hundred thousand dollars to fund our senior citizens nutrition program," notes Tahlequah Rep. Mike Brown, the House Democratic floor leader.
The problem is, every one of these exemptions is somebody's sacred cow.
Did you notice, for example, how my colleagues in the Fourth Estate nearly came unhinged when Sen. Tom Adelson, D-Tulsa, suggested eliminating the sales tax exemption on newspapers, magazines and advertising?
The mighty Tulsa World pitched a ring-tailed fit on its editorial page, huffing and puffing and sputtering that Adelson's proposal really was nothing more than a tax increase.
"Adelson is free to propose any tax measures he wishes," the editorial said. "But it is disingenuous to pretend that adding sales taxes to the cost of products and services such as newspapers, periodicals and advertising is not a tax increase."
I have a different 'D' word in mind after reading the editorial: demagoguery.
The truth is, any decision to eliminate the sales tax exemption on newspapers, magazines and advertising would not occur in a vacuum. It almost certainly would be part of a broad strategy to make the state's tax system fairer-- reviewing each of the 450-plus tax breaks to determine which work and which don't, which should be preserved and which ought to be eliminated.
Sure, you may end up paying sales tax on your newspaper subscription, but you might be spared other sales taxes. Can you spell g-r-o-c-e-r-i-e-s?
I have a dog in this hunt. My wife and I own a small, twice-monthly journal that has offered analysis and commentary on Oklahoma politics for more than 40 years. Eliminating the sales tax exemption would directly affect us. We would have to decide whether to try to absorb the added cost or pass it along to our subscribers and advertisers and risk losing their business.
Frankly, I don't think it's right or fair that we have such an exemption when Oklahoma others are taxed on the purchase of milk for their babies.
Every so often we hear horror stories of corporate welfare gone wild--tax incentives that cost the state treasury significant money, yet failed to produce a single job as promised or that essentially end up lining some schemer's pockets.
There's an initial burst of outrage, then ... nothing.
And when lawmakers like Sen. Mike Mazzei, R-Tulsa, attempt to persuade their colleagues to thoroughly review the tax breaks, one-by-one, they're quickly rebuffed.
House Speaker Chris Benge said he likes the idea of reviewing the tax breaks to ensure they're working as anticipated. But he needs to do more than merely express support for the notion--he needs to put the muscle of his office behind it.
I haven't polled the House on the subject, but from visiting with some lawmakers and listening to floor speeches, it's a good bet a majority would back an exhaustive review of the tax breaks.
So why doesn't it happen? The Legislature's powers-that-be typically give lip service to the idea, but never permit it to be considered because it would rankle too many of their leading financial backers.
For the record, it's not just in Oklahoma that legislators are too wimpy to take a hard look at corporate welfare.
Several years ago, two North Carolina state representatives, Republican Phillip Frye and Democrat Pryor Gibson, worked to create an interstate compact that would stop the use of economic development incentives like tax credits and cash grants that create bidding wars between states.
Their efforts won some positive media attention but went nowhere. Oklahoma, for one, continues to dole out mega-tax breaks to a vast array of businesses that range from natural gas producers to tire manufacturers to the Oklahoma City Thunder NBA team.
We can wrap ourselves in the flag every day and hum "God Bless America" to the point of exhaustion, but the reality is we don't have a true system of free market capitalism.
We have a regulated system aimed at--among other things--protecting workers and consumers and restricting predatory and other unfair business practices.
It may well be that some of these tax breaks work splendidly, providing the state treasury a substantial return on a modest public investment. But given the state's fiscal crisis--including a projected $1.2 billion hole in next year's budget--isn't it time to take a serious look at tax policies that cost the state treasury $5.6 billion a year?
On Another Note
A friend recently posed a (somewhat) serious question: Who's done more to retard Oklahoma's development--the Gaylords, publishers of America's worst newspaper (the capital's Oklahoman), or the liquor lobby?
The newspaper doesn't wield the political clout it once did, but the state's liquor retailers still pack a wallop: They muscled just enough senators recently to defeat a plan to allow grocery stores to sell wine and high-point beer.
The fact is, liquor retailers fear the competition. They have a sweetheart deal: Unless you're willing to drive to another state to stock up, and carry it back yourself, you have no choice but to patronize a state-licensed package store.
In other states, if you're picking up dinner supplies at your local grocery, you also can purchase a bottle of your favorite wine. Not in Oklahoma, where arcane, restrictive liquor laws are relics of a long-passed Puritanical era.
The bad news is that legislative rules make it difficult, but not impossible for Sen. Andrew Rice's SJR 62 (or some variation) to be revived this session.
The good news is that some equally, if not more powerful interests--including deep-pocketed land developers-- want the law modified so they can finalize deals to bring upper-end, specialty grocers to Oklahoma such as Whole Foods Markets, Trader Joe's and World Market--all of whom offer wines for sale.
Notice who's conspicuously absent from the debate?
The state's preeminent teetotalers, Southern Baptists and other religious conservatives, who long have fought against any liberalizing of the state's liquor laws.
Neither Rice nor Rep. Al McAffrey, who offered a similar proposal in the House, has heard from any denomination opposed to the idea.
The battle is far from over, despite the legislative session's procedural hurdles. Don't be surprised if Oklahomans are given the opportunity--perhaps as early as November--to vote to change the state Constitution, allowing grocery stores to sell wine and high-point beer.
It may be a decade late, but Oklahoma finally would be joining the 21st Century.
-- Arnold Hamilton is editor of The Oklahoma Observer; www.okobserver.net
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