The Tulsa Forum by TulsaNow

Last year, Oklahoma had a $1.6 billion budget shortfall, and federal stimulus money covered $500 million of it.  I read somewhere - perhaps here on the forum - that the tax breaks handed out to the wealthiest Oklahomans and various businesses would have covered a substantial portion of the remaining $1.1 billion, but I can't find the figure or any references.  

Can anyone point me in the right direction?  (And, yes, that's an inadvertent pun.  I didn't catch it until after I typed it, but it's going in anyway!)

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.

Read more from this Tulsa World article at http://www.tulsaworld.com/news/article.aspx?subjectid=16&articleid=20101021_16_A1_Evenas823400&rss_lnk=11

Thanks, Michael.  If I understand this correctly, the three largest tax exemptions revolve around sales taxes on manufactured goods, sales taxes on items to be resold, and the standard and itemized deductions on income taxes.  While it might be tempting to say we could balance the state budget by collecting these, the reality would be that manufactured goods would inevitably increase in price.  Those prices would be passed on to consumers who would presumably buy the same goods from an out-of-state competitor at a lower price, and Oklahoma jobs would be lost as a result.

And if the state eliminated the standard and itemized deductions, people would march on the state capitol with torches and pitchforks in hand.

To close the shortfall, then, it seems that the state will have to both increase taxes and cut some budget items.  The big question is whose ox gets gored?

The biggest "deduction" we have had in just about forever was the 1% cut in the top tax rate from 6 to 5%.  Now there is a deal that has put us in the billion dollar hole!

I vote for the obvious: cut public school funding and limit the period for persons to receive unemployment benefits. In no case should we not increase money to build more prisons.

ducking

I propose we fill the prisons with lawyers then annex the area of Arkansas that includes Wal-Mart headquarters.

You know my point of view, Guido.  Let most of the roads go to hell, making them so bad that people won't drive on them.  I can simply weave around the potholes on my bicycle.

Seriously, though, we need good roads for commerce and to attract and keep people and businesses.  By those same measures, we need decent educations for our kids, too.  These are thorny problems and we need statemen willing to step up and make the hard choices.  Unfortunately, we're more likely to get political posturing where ideology substitutes for critical thinking. 

Come on Ed, you have to know I was kidding. Seriously though, during the SQ744 debate, we heard on TV about all the waste in government. Let's start there.

OK, I'll play.  One man's government waste is another man's essential program.  What wasteful programs would you cut? 

All of them.   ;D

What you say makes perfect sense as long as one agrees to the concept that all earnings belong to the government except the portion that the government allows the public to keep.  I do not prescribe to that philosophy.

You have tapped in to what is my problem with certain people's views on tax policy. I work for myself and those that pay me; I do not work for the government.

Oh guido. So naive.

Buy one of these, they roll over everything with the 29" wheels

(http://gallery.mtbr.com/data/mtbr/624/medium/78849IMG_1770.jpg)

The sales tax credits for manufacturers and re-sale goods is necessary in creating and keeping jobs.  We can scream "corporate welfare" until the world looks level, but the truth is, corporations and small business are always going to gravitate toward tax-friendly environs.  If we don't offer the credits, there's plenty of other states who manage their money better who can afford to offer them.  I hate to use the old cliche' but it's truly a Catch 22

Can't see that any state handles money any better than any other.  It's just mishandling in different ways.  And our way appears to concentrate on efforts to kill roads and schools.

Tax credits, etc don't really do much to attract anything - note Whirlpool and Kimberly-Clark.  They came for the slave wages and that is why they stay.  The "tax benefits" wore out long, long ago, but the low pay is the gift that keeps on giving.  Nationally, statewide, and locally - it's all about the cheap labor.  (Hence, 25 million illegals.)

Incorrect.  If they purchase a piece of machinery for the manufacturing process or raw materials which go into finished goods, they pay zip in sales taxes on those items.  I believe they also can take advantage of "quality jobs" tax credits.

According to this website...

http://www.hoovers.com/company/Chesapeake_Energy_Corporation/rtfcsi-1-1njea5.html

Chesapeake Energy has 30 billion dollars in assets and revenue for 2009 of 7.7 billion dollars yet paid a negative 3.5 million in taxes last year.

Why are we giving millions and millions in tax breaks to Chesapeake?

Because by the books you list, they lost about $9.2 bln.

They may have posted revenue of $7.7 bln, but posted an operating income of -$8.9 bln.  Income after taxes was still
-$5.80 bln.

Agreed, this is probably all accounting sleight-of-hand and makes a great argument for simplified tax codes.  I'm of the mindset that raising tax rates has no serious affect on the wealthiest as long as loopholes and accounting gimmicks exist to help them avoid paying higher rates. 

Interesting. I thought in most states the things they buy for resale are exempt from sales tax, but anything they consume in their own business gets taxed. So the copier paper and machinery would be subject to sales tax, but the materials they turn into dishwashers or whatever wouldn't be.

Maybe I misunderstand. I only "sell" tax-exempt services, so I've never had to be certain.

Services and labor are exempt from sales tax.  If you have your car repaired in Oklahoma, you pay sales tax only on the parts used for the repair.  If you ever get charged taxes on the labor, the shop is gratuitously gigging you on that sales tax.

Actually, if they are on a manufacturer's exemption permit, machinery they purchase to manufacture goods is exempt from sales tax.  If Wayerhouser bought a corrugating machine to make box board, that piece of equipment is exempt as would be the raw materials used to make the box board.  Office supplies, cleaning supplies, or plant maintenance items and tools would not be exempt.

That's a fixed gear 29er!  Gosh, that would be fun.  I can only imagine what it would do to what's left of my knee joints.  Too many years on track bikes and road conversions, you know.  Still, like a hot-tempered Italian mistress, it would be fun for a little while.  After that the pain arrives.

Ireland and some other European countries have Value Added Tax.  It's added at each step in the manufacturing process.  For example, when a sheep shearer sells wool to a yarn maker, he pays the tax.  When the yarn maker sells his product to a sweater manufacturer, he pays tax again.  This is all added in, so when the sweater reaches the consumer, the price may reflect as much as 40% in hidden taxes.  That 40% would have been my discount for purchasing a sweater in country and having it shipped to the US without taking ownership of it in Ireland. 

VAT is a very bad idea.

Every taxation method has it's drawbacks (...and gasp...benefits).  For VAT being a bad idea, it's in use throughout virtually the entire EU and a large portion of the developed world.  It's most definitely a more transparent tax system.  Consumers in the U.S. pay sales taxes ranging upward of 10% plus they pay a butt-load of imbedded costs as a result of corporate taxes which have been factored in to pricing, payroll taxes spent on the employees who make the goods, tax compliance costs companies spend on dealing with convoluted tax codes as well as road taxes, fuel taxes, and taxes on energy used to produce and transport items along the supply chain.

The argument for consumption taxes is it takes away accounting gimmicks which have traditionally favored large corporations and also lowers compliance costs as it removes any benefit in employing elaborate accounting schemes designed with the sole purpose of tax avoidance.  Everyone pays their fair share in the supply chain.  Consumers ultimately pay the tax costs on goods they purchase no matter the system used though.  Only with our system of profits-based corporate taxes, if the corporation can claim enough depreciation and amortization or other expenses in the COGS, they simply keep funds they priced in to the good sold as what they estimate they would pay in taxes.

Honestly, there's enough to dislike about either system, so I'm not claiming one method is better than another for the purpose of our discussion.  My main concern is our tax code is far too complicated and requires far too many people to enforce and collect the taxes and creates costly compliance burdens on owners and operators of small businesses.

Yeah, the piper gets paid either way. The question is does the federal government even have the power to collect a sales tax? I suppose given the Supreme Court's expansionist interpretation of the commerce clause starting in the 1930s, it's possible.

I believe Congress has the power to overhaul the entire tax code. 

I've never read the book, I've simply read excerpts of the proposal for the "Fair Tax".  It even includes "pre-bates" for those earning under certain levels so it entirely removes the argument of being regressive.  The math used to justify it makes it look like a very equitable way to increase tax reciepts.

Targeted correctly (iow, not on food, rent, and a few other things) a pre-bated sales tax wouldn't be the end of the world. The sad thing is that we'll probably end up having both an income tax and a sales tax.

My main complaint is that folks who don't have their smile together, whether by their own doing or unfortunate happenstance, won't be getting any pre-bate. The most marginalized in our society don't file tax returns anyway, because they don't make enough money or know enough to care about the income tax they paid but didn't owe or don't have jobs at all. Thus, distribution of it could be a big issue for the people who need it most.

Figure out a way to solve that problem and I could get on board with it, presuming that there's no other major issues I haven't thought of.

Tell someone they will get a check from the government and they will figure out how to sign up.  If they can't figure it out, I'm pretty sure there are community-based organizations who will help sign people up.  This is where it might get sticky, is unscrupulous people who would sign people up for a share of it.

You'd think, but there are a lot of people who refuse to go get food stamps when they're starving either because they've got more pride than sense or because they've got a mental illness or because they lack the requisite documentation. There are a lot of folks (I've known a few over the years) who won't file tax returns even though they are owed money. I have a hard time writing them off, even if their problem is one of rank stupidity rather than ignorance.

Here's where I see the base problem is as it lies with the way the left and the right decipher 'social services'.. i.e, those things that help people who are truly in need.

The left think that those people that deserve it should get it.  That's fine, they should if they deserve to.

The right seem to think that those who don't deserve it are out to job the system, even if they DO deserve it.  Until it comes time for said right leaning person to actually have to think about using that service.  Then, they're all for it.

When you are flat broke and in need of feeding your three kids because your job was outsourced to India, I don't think you care which side of the aisle your representative on Senator sits on.  You need help.  You need work.

And before you RWRE crooners start talking about pulling yourself up by your bootstrap, think about this:  if you lost your job and really only had a high school diploma, how easy would it be for YOU to do that before you've depleted your savings (if you have any, given that a lot of Americans live paycheck to paycheck)?

I got into that situation for about three months.  I didn't go the government, and I was able to pull myself up by the bootstraps.  But I had just me to look after.  No children, no wife, no mortgage.  I can't even fathom what some of these other families are doing.  What if they lost their vehicle because they could no longer maintain payments on even a used car?  Do you seriously think that Tulsa's transit is good enough to get the job done for job seekers?  I know it isn't because I used it exclusively for about 12 months.

Still not sure what RWRE means but you are invoking Heironymous now. You're scaring me. ;)

I don't personally know any conservatives or Libertarians who begrudge someone seeking help from the gov't who truly needs it. I don't automatically assume someone on welfare, SSI, or U/E is gaming the system.

I had an ex sister in law who was scamming Sooner Care, but it made sure she got her crazy meds, so it was a benefit to all society as I saw it. ;)

Let me help you with that. RWRE are people that give way into 4-5 figures every year to clothe, feed, and shelter the poor, provide gifts to children for homeless and wounded vets, and to search for cures for devastating disease through charity.

  Wouldn't it be a benefit to us no matter what taxes were cut at the state or lfederal level?  If said amount was not collected and then shipped to the state and federal bureacracies (where some of it gets siphoned off to pay for those bureacracies)... wouldnt that mean that Tulsa itself could pay for its own bureacracies here lol, and pick and choose what roads, schools, services, etc. IT wanted to pay for and do so how it wanted to? Keeping the taxes "in house" seems to be a better way to me so, state and feds, cut away to your hearts content, and let us locally tax and spend as we the people in each area choose to. Why should my money go to pay for jobs in OKC and Washington? Why should my money go to OKC only for me to have to wrangle it back and beg for funding for each and every project. Let all them danged little towns pay for their own roads/highways, colleges, schools, healthcare, etc. Let Tulsans vote on how they want to spend their own money.

That's not how to get re-elected Artist.

I was always told it meant 'right wing republican elite', and I had seen it used pre AOX..err...Heironymus....in the same context.  Not all Republicans are created equal.

There are the 'Rabid Right', who think this country should be a Theocracy, there are the 'Tea Partiers', who are not much different.

Then the mainstream Republicans, what I like to call 'Reagan Republicans' because they aren't too kooky.  I'd like to think most of them fall along that line, but the problem now is that the previous two sects get more air time because of their antics.

Then of course what the Republicans like to call RINOs.  I can think of just one off the top of my head.  Olympia Snowe.

Wow.  You've completely lost the meaning of what I was trying to get at.

But so be it.  That's par for the course for you, Tony.  Someone tries to make a civil argument, you feel the need to parade out your perceived accompllishments in the charity sector, as well as making sure everyone remembers your service to this country.

We've heard it before.  Many times.  Some of us make mid 5 figures, and we're perfectly content with that.

I've also been President for my Company's sponsorship of MD.  Does that count?

I guess modesty isn't one of your strong suits, is it?

 ::)

No, Guido, that ain't it or I would be one.

It is "Right Wing Religious Extremist" and the earliest usage I heard of it was back in the late sixties.  But they really didn't know what it was even then.  We have a new version today (and the last 30 years or so) with Rupert Murdoch, Jerry Falwell, Pat Robertson, and their ilk.  Includes people who put convicted felons (twice) on a pedestal and call them "great American heroes" - Hannity about Oliver North.


Did everyone hear the the Crystal Comic Book Cathedral filed for bankruptcy a few weeks ago?  I drove by there literally the day before they filed.

That is my understanding of what RWRE stands for.

Under our tax codes only the working poor who receive a W2 or 1099 form pay the taxes.  Incorporate in a business and receive all the perks such as clothing, cars and the other things that the working poor are taxed on.  When the governing bodies have the power to set their salaries and perks with paper promise notes then you plant the seeds of rebellion as it is the nature of the species.  Inflation is friendly to increased tax collection but reduces the buying power of the working poor.  In house collecting and spending limits would be set because the city/state can not print its money.  Thus thousands of dollars are spent on sending persons to Washington to get some of that free money printed for local government to spend.  It is a  great system and is working for now. 

Lithium, anyone?

Don't think lithium will be enough.

Maybe the stitches are loose and in need of a tightening?

As I recall, newspapers and periodicals are exempt from sales tax. I bought some greeting cards at Reasors tonight and not certain sales tax rang through on them. Anyone else know the extent of this exemption?

I recall the same, C.  Magazines are exempt, unless that's changed recently.  I wouldn't know, I subscribe to Time and the Smithsonian Magazine and really have no need to purchase one-offs.

Magazines, periodicals, newspapers...the whole 'freedom of speech' thing.  Don't tax free speech....

Tax exemptions are a function of power.  What ever industry has the most power over politicians will reap the most exemption from government control and taxation.  This is as old as politics.

What industries are the most important to politicians:
1. Those that deliver the most votes through employment or membership.
2. Those with control over the message.
3. Those with moral authority.

There are ways to control this, but we don't have the guts.

Wow, another point of agreement.

I voted no on everything, especially incumbents.  I bet most here did not.

I bet most here would say it's none of your business who we voted for.

Notice how I didn't ask?
Don't really care.
I do see the results all around us, though, so know for a fact that the odds are with that statement.

The IRS has a book of instructions and the state and city use it as a guide in their tax codes.  Still it all depends on whether the one flipping through the pages was a “child left behind” in TSD and cannot understand what they read.

You are going to get it again from the post police.

Your point is well made.   I am in trouble again with the post police.

I must take an insurance notice addressed to the house across the street back to my mail box so the mail carrier can take it and put it in their mail box. (about 10 yards apart).  Postal regulations prohibit me from just putting it in his box. ;D