Budget Hole Fillers
House and Senate leadership has been so poor this session that they have been unable to secure a budget deal during the session time frame where a tax increase or new tax could be passed and that is actually a good thing because they will be forced to start cutting agency budgets and bringing state government down to the size the state can afford.
But here are some ideas that could be passed in the remaining week without a special session.
Transfer Bail Bond forfeitures to the state treasury
This would generate between 30 and 50 million dollars per year and the bail bondsmen would support this. And if you want to double or triple that income start forcing the judges to follow existing law on who can get out on an OR bond (Own Recognizance). It is state laws that are being broken, not county laws and as the state must pay the cost of prosecution why are bond forfeitures going into County coffers? Counties are releasing people without bail bond because it lowers the jail population but it also keeps more criminals on the street and on OR bonds they remain free until they happen to run into a cop during a traffic stop. Oklahoma County alone has over 600,000 outstanding warrants because of OR bonds.
Tax credits schemes, Oklahoma has dozens of them tailored for sometimes as few as one or two companies. The process is that the business does its business as usual, hiring people, making investments, then after paying a lobbyist and House/Senate leadership they received a generous tax credit, as much as 75% of what they spent returned as an offset to their own tax bills or a transferable credit that can be sold on the open market. Someone or some company that owes large amounts to the State of Oklahoma buys these tax credits at a substantial discount and uses them to pay off their tax debt. There are brokers that facilitate the exchange between tax credit owner and the user.
China does a similar thing with export tax credits. One of the reasons that Chinese companies can undercut U.S. companies is that they price their products at cost of production and the export bonus from the Chinese government is as much or more than the profit if they produced and sold the product domestically.
Who is making serious money off these tax credits? It appears that Carl Icahan owns a lot of entities in Coffeyville that are raking in millions, George Kaiser and the BOK , and of course the Mathis Brothers have done alright for themselves also. Keep in mind that a 5% tax bracket would mean that for every dollar of tax credit used there is twenty times that in income being sheltered. Between2012 and 2015 over $330 million dollars of these tax credits were surrendered to the state (paid by the state) so that is over $6.6 BILLION dollars of sheltered income. As an example, Bill Mathis would have had to generated over $37 million dollars in taxable income to be able to use the $1.87 million dollars of tax credits that he received.
This Democrat passed corporate welfare scheme allows a 20% tax credit on investments made in the state, investments that companies would be making anyway. In 2015 this tax credit removed $2,750,000 from the state coffers by allowing companies to pass along the tax credit by selling it to others.
RESEARCH AND DEVELOPMENT NEW JOBS CREDIT
Save around one million per year by killing this welfare program that pays companies for hiring workers they would hire anyway. In 2012 the annual payout was $443,000 but it has more than doubled to $887,000 by 2015. The Oklahoma State R&D Tax Credit is calculated based on the number of computer services, data processing, or research and development employees hired by a company in a given fiscal year. For each of these employees hired, the company is eligible for a $500 tax credit. The employee must be paid at least $35,000 and be employed during the final quarter in the applicable tax year to qualify for the credit. The credit is capped at 50 employees ($25,000) per year.
SMALL BUSINESS GUARANTY FEE CREDIT
This tax credit allows banks and credit unions to recover any fees paid to the Small Business Administration for guaranty fees on loans they make. In 2012 the payout by the Oklahoma Treasurer was only $5100.00 but by 2015 it has ballooned to $63,817.00.
INVESTMENT IN CLEANBURNING MOTOR VEHICLE FUEL PROPERTY
Clean Burning Fuel Vehicle Credit
While lower gas taxes have helped hold down the cost of these tax credits in 2012 Oklahoma spent $3,100,000.00 paying for 45% of the cost of converting vehicles to burn natural gas plus another $1500.00 and 75% of the cost of fueling stations. In 2015 Oklahoma paid outnearly $800,000.00 in subsidies.
(68 O.S. § 2357.22)
For tax years beginning before January 1, 2020, a one-time income tax credit is available for 45% of the incremental cost of purchasing a new original equipment manufacturer AFV or converting a vehicle to operate on an alternative fuel. The state also provides a tax credit for 10% of the total vehicle cost, up to$1,500, if the incremental cost of a new AFV cannot be determined or when an AFV is resold, as long as a tax credit has not been previously taken on the vehicle. Equipment used for conversions must be new and must not have been previously sed to modify or retrofit any vehicle. The alternative fuels eligible for the credit are compressed natural gas, liquefied natural gas, hydrogen, and liquefied petroleum gas (propane). Tax credits may be carried forward for up to five years.
Clean Burning Fuel Vehicle Infrastructure Credit
(68 O.S. § 2357.22)
For tax years beginning before January 1, 2015, a tax credit is available for up to 75% of the cost of alternative fueling infrastructure. Eligible alternative fuels include compressed natural gas (CNG), liquefied natural gas, liquefied petroleum gas (propane), hydrogen, and electricity. The infrastructure must be new and must not have been previously installed or used to fuel alternative fuel vehicles. A tax credit is also available for up to 50% of the cost of installing a residential CNG fueling system, for up to $2,500. The tax credit may be carried forward for up to five years. Legislation enacted in 2013 extends the one-time income tax credit for investments in qualified clean burning motor vehicle property from 2015 to 2020 and is effective November1, 2013.
OKLAHOMA INVESTMENT/NEW JOBS CREDIT
In 2012 Oklahoma paid out around $19,000,000.00 in these tax credits for expanding or hiring workers, something that the companies would have done anyway. In 2015 that cost had nearly tripled to nearly $51,000,000.00. That is the same as writing a check from a state checking account for fifty one million dollars.
CREDIT FOR THE CONSTRUCTION OF ENERGY EFFICIENT HOMES
In 2015 this program paid $2.3 million dollars of your tax money to builders to build energy efficient homes, something they were already doing without the subsidy. This is $2000 to $4000 per home just for building a home to modern standards. By 2015 the program had almost twice as many hogs feeding out of the trough and paid out $5.5 million dollars that year.
ELECTRICITY GENERATED BY ZERO-EMISSION FACILITIES
While Fallin signed a bill that will end the enrollment of new wind power projects in June of this year the program paid out $28 million in 2012, $113 million in 2013, $29 million in 2014, and estimates of the total impact on the state treasury is at around $50 million per year. These corporate welfare programs generate millions upon millions in tax credits when the wind farms would have been built anyway as the amount of available wind is the most important factor in siting a wind farm. What is needed is to terminate the entire subsidy program immediately.
CREDIT FOR QUALIFIED REHABILITATION EXPENDITURES
This corporate welfare scheme was limited to a select group that paid well for their tax credits I suppose. It doubled the Federal credit for remodeling history properties including:
"Certified historic hotel or historic newspaper plant building" means a hotel or newspaper plant building that is listed on the National Register of Historic Places within thirty (30) months of taking the credit pursuant to this section. "
The tax credit cost Oklahoma almost $7 million dollars in 2012 and almost $4.7 million dollars in 2015
This corporate welfare scheme was costing Oklahoma over $60 million per year, a direct $5.00 per ton rebate for coal burned in the state mainly because natural gas was cutting into coal companies profit margins. They were suspended for two years starting in 2010 but had grown ten times the original estimated cost. The Coal Credit is still around it appears but only if the price of coal drops below $68.00 per ton. In 2014 over $6 million dollars were paid out in coal credit subsidies.
A good report a few years back was this article that covered the damage that these corporate welfare schemes were doing to the state.
Paste this are the hundreds of surplus agencies and commissions that Oklahoma runs including the OMES, Preston Doerflinger's very large empire, one that he gave huge raises to last year despite the ongoing budget crisis. The Quick Closing Action Fund, a slush fund for Fallin used to bribe companies to come to Oklahoma is another welfare scheme that could be cut.