The Tax Credit Task Force’s Nine-Part Plan

• Joe Wertz
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  Joe Wertz was a reporter and managing editor for StateImpact Oklahoma from 2011-2019. He reported on energy and environment issues for national NPR audiences and other national outlets. He previously worked as a managing editor, assistant editor and staff reporter at several major Oklahoma newspapers and studied journalism at the University of Central Oklahoma.

Joe Wertz / NPR StateImpact

(from left) Preston Doerflinger, Office of State Finance director, Gary Jones, State Auditor & Inspector and Ken Miller, State Treasurer, made recommendations for a final report at the Nov. 9 tax credit task force meeting.

The tax credit task force is winding down.

On Wednesday, the panel discussed its final report and the criteria by which it would evaluate tax credits and economic incentives, which are estimated to cost the state between $250 million and $500 million in revenue each year.

State Rep. David Dank, who co-chairs the Task Force for the Study of State Tax Credits and Economic Incentives, listed nine ideas for the panel’s final report, the content of which will be voted upon at the task force’s Nov. 30 meeting.

Task force members took turns offering up ideas for the final report, but the bulk of the suggestions mirrored Dank’s.

In his opening remarks, Dank, R-Oklahoma City, reminded the panel that they represent taxpayers, not special interests. He reiterated that not all tax credits and incentives were bad. Some, like the Quality Jobs program, are effective and well-managed, he said.

“We are not against business. We don’t oppose growth. We believe that government policy can help create jobs,” Dank said.

Dank’s ideas:

1. End transferability
   Tax credits and incentives should, at a minimum, benefit only the recipient.
2. Eliminate last-minute legislation
   No more enacting or changing credit or incentive legislation in the final days or hours of the legislative session.
3. Insist on clear fiscal analysis
   A clear and accurate fiscal impact study should accompany any future credit or incentive.
4. Ensure jobs are the focus
   Creating or saving jobs is the only acceptable reason for a tax credit.
5. Consider alternatives first
   Tax credits and incentives should be a last resort when businesses ask legislators for help.
6. Add auditing
   The State Auditor should be required to examine every tax credit, both in the drafting stage and on a regular basis.
7. Add limits
   There must be enforceable caps and limits on tax credits and incentives.
8. Create sunset provisions
   If tax credits and incentives have an expiration date, they will come up for regular legislative review and examination.
9. End automatic approval
   Each tax credit and incentive should be individually examined and approved.

Most of the task force’s debate and discussion centered on two of Dank’s ideas: transferability and the auditing requirement.

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“I’m not yet opposed to enhancing the auditor’s authority, but I’m not yet convinced.”

-State Treasurer Ken Miller

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On Transferability

Transferable tax credits have drawn the ire of many task force members. At an October meeting, the panel discussed Coal Production Tax Credits, which are purchased by insurance companies for 80 to 90 cents on the dollar and used to offset money owed in state taxes.

The coal credits have cost the state more than $60 million in lost tax revenue over the last eight years, according to a report by nonprofit journalism outfit Oklahoma Watch.

State Treasurer Ken Miller agreed that “stricter controls” were needed to curb abuses, but argued for more research before a final decision was made on recommending the elimination of transferable tax credits.

“If we’re legislatively willing to offer a certain cost for a certain benefit, and the incentive is meeting its desired effect, I’m not sure it matters who claims the benefit,” he told the panel.

Joe Wertz / NPR StateImpact

Senate Minority Leader Andrew Rice, D-Oklahoma City, urged the task force to "err on the side of protecting" state tax credits and economic incentives.

On Auditing

Philosophically, all the task force members agree: There needs to be a robust financial analysis and examination both before and after businesses start receiving tax credits and incentives.

The debate is over the details.

It was suggested that the State Auditor and Inspector’s Office might be in charge of such analysis, but State Auditor and Inspector Gary Jones said he wasn’t sure, functionally, if his office was set up to handle the pre-approval records examination.

Jones said his office would take on the responsibility of auditing tax credit and incentive recipients — either annually or every other year — but would likely need additional funding to do so.

Some task force members, Miller in particular, worried that adding authority and money to the Auditor’s Office was an unnecessary expansion of government.

“I’m not yet opposed to enhancing the auditor’s authority, but I’m not yet convinced,” Miller said.

Senate Minority Leader Andrew Rice, D-Oklahoma City, a task force member who is resigning Jan. 15 to move to Nashville, Tenn., where is wife recently accepted a job, echoed Miller’s concern, but suggested that any auditing process not let lawmakers “off the hook.”