Commentary: Tax panel hears differing lyrics on tax cuts

Journal Record, The (Oklahoma City), Oct 8, 2007 by William O Pitts

Some songs thrive on repetitious lyrics. The same is true regarding taxes. Those who pay them sing a tune of reduced taxes, prioritized spending and slower growth of government. Tax spenders warble a dirge for more tax revenues to spend for more and bigger government programs.

A recent meeting of the Sub-committee on Revenue and Taxation of the Appropriations Committee of the Oklahoma House of Representatives followed the same musical composition as it began an examination of Oklahoma's tax code.

Members of the panel chaired by state Rep. Randy Terrill, R- Moore also heard suggestions for imposing new taxes on services, as well as a flat tax similar to Colorado's, which may be discussed further at later meetings. But the greatest argument was over additional tax cuts by the legislature following their actions the past three years.

David Blatt, public policy director for the Tulsa based Community Action Project CAP), which essentially is funded by taxpayer dollars, and spokesman for the Alliance for Oklahoma's Future, a coalition of organizations many of which also are taxpayer supported had dire warnings for the committee about tax cuts.

"Because of recent decisions enacted by the Legislature, Oklahoma's revenue growth has slowed dramatically and we are facing long term budget shortfalls." He said.

Yes, it has slowed, but the revenue growth averaged nearly 12 percent annually over the past three years. It resulted in more than a $1.5 billion in increased revenue while spending grew by more than $900 million during the same period. The remainder increased the state's Constitutional Reserve Fund to the maximum (nearly $700 million) and left $150 million in surplus to be used for the current fiscal year.

That the tax cuts may slow revenue growth in the first year or two may be reason for caution but not panic. In the long term the resulting economic growth should reverse the trend.

Phil Kerpen, national policy director of Americans for Prosperity told the committee the "relationship between lower taxes and higher economic growth is one of the most proven relationships in all of economics."

Blatt's group and similar organizations which use tax dollars to lobby for more government spending believe there never is enough money and whatever there is should be spent. The result from such a premise is accelerated growth in government programs and obligations that increasingly burdens the tax base.

Even with long term planning, shortfalls can occur because of unforeseen economic factors. They also can occur when the legislature over commits to government programs. Establishing long term economic pictures can be difficult and accuracy often depends more on luck than any realistic crystal ball.

The basic theory of taxation is to provide revenues to adequately fund the proper functions of government. The problem with big spending theorists is they believe in taking as much of the taxpayers' money as possible to fund government growth agendas.

The Alliance offered a number of recommendations to the subcommittee, including one to preserve and ensure equity in the state income tax.

That is what the legislature has done in the past several years, often over the objections of tax spending groups. Reducing the maximum income tax rate for those having a net taxable income in excess of $10,000 annually from seven percent to 5.25 percent certainly has improved the equity for most of the state's tax payers.

Another recommendation is for the legislature to "take a breather from further tax cuts." The Alliance does not say whether it should be a long breath or a short breath, but I suspect it hopes such activity will become comatose.

There is much work for the subcommittee to do prior to the legislative session, but it will be interesting to see what tax adjustments it recommends and if they result in reduced rates.

Terrill said the panel will look to balancing demands for growth in government spending with the "clear need for wise policies that promote economic development, growth and job creation."

William O. Pitts may be reached by phone at (405) 278-2880 or by e-mailing bill.pitts@journalrecord.com.