House Speaker Kris Steele’s resolution to place tax credit criteria in the Oklahoma Constitution passed the House Rules Committee today, 11-1.
House Joint Resolution 1089 would create a ballot question allowing voters to decide whether to place the tax credit criteria adopted by the Task Force for the Study of Tax Credits and Economic Incentives in the Oklahoma Constitution.
“It gives taxpayers constitutional protection that makes sure every tax credit in Oklahoma benefits them more than it costs them,” said Steele, R-Shawnee. “If it gets before the voters, I’m confident they will approve it just as the Rules Committee did today. It’s common sense fiscal conservatism that Oklahomans support and expect.”
HJR 1089 now goes to the full House for consideration. If approved by the House and Senate, the state question would be placed on the November 2012 statewide ballot.
The task force developed the criteria after months of intensive scrutiny of Oklahoma’s tax credit system revealed widespread shortcomings that can lead to credits costing taxpayers more than the credits actually benefit the economy. The task force found the shortcomings are largely due to a lack of accountability and structure within the tax credit creation process.
“There has never been any rhyme or reason to how Oklahoma tax credits are created. Under this resolution, objective criteria would be established, which will go a long way to plugging all the random holes and cutouts that have left our tax code looking like a block of Swiss cheese,” Steele said.
Under the criteria:
- All credits must create or retain jobs;
- All credits would require pre-approval by the state;
- No tax credit would be transferable;
- All tax credits would be subject to full transparency and regular auditing by the State Auditor;
- Any proposed tax credit would have to be accompanied by a fiscal impact statement detailing how it would affect the state budget;
- All tax credits would be subject to caps and specific termination dates;
- No tax credit could be enacted within the final five days of any legislative session.
The resolution does not apply to tax deductions or exemptions for individuals.
“If a business is getting a tax credit that meets these criteria, the credit stays. If it doesn’t meet the criteria, it goes,” Steele said. “Businesses can either find a way to meet the criteria or take advantage of other incentives. Oklahoma has several responsible, taxpayer-friendly ways for businesses to receive incentives to create jobs here, including the Quality Jobs program and other economic development programs run by state and local entities.”
The resolution has the support of Rep. David Dank, chairman of the task force and the House Revenue and Taxation Committee.
“First and foremost, it’s the right thing to do for taxpayers,” said Dank, R-Oklahoma City. “It will also help Oklahoma grow by creating a better tax credit system that is constitutionally required to generate tangible economic growth. It’s a pro-growth, fiscally responsible reform that fits well with the pro-jobs agenda this Legislature has championed.”
The resolution is part of a larger tax credit reform package proposed by House Republican leaders that is designed to save between $250 and $300 million in fiscal year 2013 and millions of dollars more in the future. It proposes:
- Extending the current moratorium on all tax credits another two years;
- Enacting a constitutional amendment establishing specific criteria for tax credits;
- Ending transferability of tax credits;
- Requiring all future tax credits and all credits placed on moratorium to meet the constitutionally-required criteria and receive legislative approval in order to be enacted or removed from moratorium.
Steele and Dank said meaningful tax credit reform is an important first step for the Legislature to take as it works to reduce and phase out the state’s personal income tax.
“The income tax reduction process has to start first with tax credit reform. We took a good step today and will keep moving forward from here,” Steele said.