Cost Of Corporate Tax Breaks Explodes In Oklahoma
Corporate tax breaks have more than doubled in Oklahoma since 2010, according to an analysis by Oklahoma Watch, a nonpartisan interest group.
Using data from the Oklahoma Tax Commission and other state agencies, Oklahoma Watch found that the combined cost of the state’s tax incentives “grew from $356 million in 2010 to $760 million in 2014,” which represents “just over 10 percent of the state’s $7.2 billion budget, and more than the state spends every year on prisons and public safety.”
Most of the increase “has been fueled by incentives provided to oil, gas, and wind-power producers,” which together “reduced state revenue collections by $486 million in 2014.” (RELATED: States May Have to Disclose Business Subsidy Costs)
“It’s the largest corporate welfare giveaway in the history of Oklahoma,” said Senate Finance Committee Chairman Mike Mazzei, who worries that the tax breaks will “crowd out our ability to do other levels of tax reform.”
“Leaders in both parties have voiced concern about the growth in tax breaks,” but while they have “repealed, capped, or attached ‘sunset’ dates to several dozen business tax breaks,” they have also “rejected efforts to rein in others.”
In May, for instance, NPR reported that the legislature “approved a bill that makes permanent a generous tax incentive for oil and gas production” which had been due to expire in 2015. (RELATED: Research Sheds Light on Corporate Welfare in the States)
The existing law taxed oil and gas production at 1 percent, rather than the statutory 7 percent, for the first four years of production, while the new law imposes a 2 percent tax for the first three years of production, representing a compromise, of sorts.
However, Oklahoma Watch notes that “many of the biggest breaks benefit very broad constituencies and enjoy widespread popular support,” such as an exemption for prescription drugs that cost the state $136 million in 2014. (RELATED: Politicians Eager to Subsidize Craft Brewers)
An exception is the wind energy credit, which Oklahoma Watch says, “is in the crosshairs of reformers who say its rapid growth is imperiling state revenue collections without a big economic payoff.”
When the program was created in 2003, it only provided income tax credits, but it was expanded a year later to include property tax exemptions, with the state reimbursing local governments for the lost revenue.
Supporters argued that wind energy would provide long-term benefits to the state, but “critics contend the industry generates few long-term jobs once the wind farms are up and running,” and point out that its cost has “ballooned from $7 million in 2010 to $50 million in 2014.”
Oklahoma has been represented in the U.S. Senate by Tom Coburn, who annually publishes a guide to wasteful government spending.
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