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Time for tax credit reform

Rep. David Dank February 29th, 2012

Oklahoma was forced to trim its state budget in recent years, and as the recession eases we still face a standstill budget next year. Why?

One reason was laid bare in a recent series of legislative hearings I was privileged to chair: We waste too many of your tax dollars on unnecessary, giveaway tax credits to businesses.

The tax credit task force examined how and why past legislatures had granted tax credits to specific industries. We found little rhyme or reason behind many of them, other than that the beneficiaries had hired effective lobbyists or donated to campaigns.

We also found that the most questionable tax credits cost our state between $150 million and $250 million a year. Those lost dollars could have helped plug budget holes of recent years, or be returned to taxpayers.

There are valid reasons for creating tax credits and other incentives designed to attract and retain business and jobs in Oklahoma. Oklahoma’s Quality Jobs program works well, as do incentives to basic industries like oil and gas. We found no evidence that those programs are abused.

The key question about any tax credit is: Does it benefit the economy more than it costs taxpayers? If the answer is “yes,” the tax credit essentially pays for itself as workers buy homes and cars, pay income and property taxes and otherwise grow our economy.

But many of the tax credits we examined simply failed to pass that test. To remedy this, the task force suggested criteria to measure any future tax credits, and to repeal existing credits that don’t work.

First, we should stop issuing transferable tax credits like the coal industry credits we examined, which were sold to insurance companies that then used them to cut their premium taxes. These insurance companies get a taxpayer-funded handout for providing no service to the state.

That’s just wrong. We also should insist on full transparency, careful auditing and clear cost-benefit analyses for any tax credit.

We should stop the practice of approving tax credits during the final days of a legislative session, when some lobbyists hope no one notices the sweetheart deals being added to legislation.

Most of all, we should insist that any tax credit create real, lasting jobs.

This state is constitutionally required to balance its budget. With a finite amount of money to do so, giving up $150 million to $250 million in unjustified tax credits can cause two things to happen: Either individual taxpayers must pay more, or state services to those same taxpayers must be reduced.

One thing we learned from our hearings is that powerful interests and their lobbyists will fight tooth and nail to defend their credits. That’s why it is so important for the taxpayers to contact their legislators now to urge their support for real and lasting tax credit reform.

We all have a direct stake in this debate, so we must make our voices heard.

Dank is a Republican representing House District 85 in Oklahoma City.

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