Oklahoma tax breaks rose despite budget shortfall
By RANDY KREHBIEL World Staff Writer
Published: 10/21/2010 2:19 AM
Last Modified: 10/21/2010 7:55 AM
Even as Oklahoma went through some of the most difficult state budget years in its history, the number and dollar amount of tax breaks through exemptions, deductions, credits and other devices continued to increase.
The Oklahoma Tax Commission's most recent Tax Expenditure Report, released Oct. 1, lists 473 such items. That's 28 more than in the last biennial report, issued in 2008.
The total value of just the 166 expenditures for which the Tax Commission said it could provide an estimate increased $470.9 million, to $5.87 billion - or about $1 billion more than was certified for general fund appropriations this budget year. Expenditures are the commission's somewhat Orwellian name for revenue not collected because of tax exemptions and other breaks.
The Tax Commission said it could not provide estimates for 280 expenditures; the estimate for 27 expenditures was zero, in some cases because the expenditure in question had never been used.
Some of the entries cause a little head scratching, at least at first glance. There is, for example, a tax credit for damaged bingo cards. There is another for excise tax paid on private aircraft sold for $5 million or more.
Buy some poultry litter and you may be eligible for a $5 per ton income tax credit.
Most of these, however, amount to little or nothing in the scheme of things. Most tax expenditure dollars are locked up in a few exemptions and deductions not likely to ever change.
The biggest single tax break $1.74 billion is the sales tax exemption granted manufacturers. The second largest $1.5 billion is the sales tax exemption on sales for resale.
Third on the list are itemized and standard deductions at $733.1 million. All three are fairly standard nationwide.
Fourth and rising fast on the list is Oklahoma's exemption on Social Security and other retirement income. Originally limited to low-income households, the exemption's cap has been steadily raised in recent years and will come off entirely next year.
Because of that, and the state's aging population, the cost of the retirement exemption nearly doubled from 2008 to $143 million.
Also rising sharply were the estimates for the sales tax exemption on prescription drugs ($132.2 million, up more than 117 percent) and oil and gas incentives (almost doubling to $112.8 million).
The oil and gas incentives actually eight separate rebates counted as one by the Tax Commission have been targeted by those who think the state is leaving too much tax money on the table.
Efforts by governors and the Legislature to chip away at even the tiniest tax break, however, has proved almost completely unsuccessful. An attempt this year to eliminate a long list of tax credits ended with the liability for most of them being deferred meaning the state's still on the hook, just not this year and the rest were left alone.
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