After an unsuccessful attempt last session to eliminate hundreds of millions of dollars worth of state tax credits offered to various industries, a state lawmaker resumed his effort on Wednesday.
Rep. David Dank, R-Oklahoma City, and members of the House Tax Credit and Economic Incentive Oversight Committee, quizzed officials with the Oklahoma Tax Commission and the Commerce Department on how some of the tax credits are claimed.
Dank headed a similar panel last year that recommended numerous changes to the tax code, including the elimination of many of the credits, but those efforts failed in the Legislature after bitter resistance from lobbyists hired to protect them. Dank blamed the inability of the Legislature to overhaul the tax code as a key reason lawmakers failed to enact Gov. Mary Fallin's top priority last session — reducing the state's income tax.
"In short, our task force said Oklahoma has handed out hundreds of millions of dollars every year to businesses and industries that didn't deserve them, did little to justify them and often manipulated them by such practices as selling the ones they didn't need," Dank said. "Most of all, our task force found that the real losers were the taxpayers who had to make up the difference."
Among the tax credits that have come under the scrutiny of Dank's panel are those offered to wind energy producers constructing facilities, mostly in western Oklahoma. Dank outlined a scenario under which a hypothetical, 150-megawatt wind facility that cost $240 million to construct could qualify for as much as $151 million in federal, state and local tax breaks.
According to the Oklahoma Tax Commission, the state paid about $3 million in tax credits for wind farms in Oklahoma in 2010, the most recent year for which data was available. But Dank noted such facilities also qualify for federal subsidies, exemptions from local property taxes and a separate investment tax credit through a program administered by the Department of Commerce.
But Curt Roggow, a lobbyist for the Wind Coalition, an association of wind companies operating in several states including Oklahoma, said lawmakers enacted the tax credits as a way to keep the state competitive and lure wind energy companies to the state.
"Years ago, when the tax credit for wind energy was developed, they did it so that we'd be competitive with Kansas and Texas," Roggow said. "After all, when we're looking at the (Oklahoma) Panhandle for major wind development, it's very easy for companies to develop their project within a 50-mile radius in three different states."
Roggow noted wind producers also employ hundreds of construction workers when the facilities are being developed and provide millions of dollars in local property taxes once the state's five-year exemption expires.
"Wind energy has brought over $4 billion worth of assets to Oklahoma. As a result, those are added to the ad valorem tax rolls," he said. "That's a significant contribution to the state."
Page 2 of 2 - Dank's effort to end transferable tax credits, one of the recommendations of last year's task force, was derailed early in this year's legislative session when a bill was shot down in Dank's own committee. He urged members during the upcoming legislative session to consider the ramifications of continuing to support tax giveaways that he says are becoming increasingly unpopular among citizens.
"Some of you may have noticed what happened in Kansas this year. Nine Republican senators, including their Senate president, were defeated in primary elections by opponents who said it was time to get serious about economy in government," Dank said. "I know the lobbyists are circling. You are going to come under a lot of pressure to leave things as they are.
"I suggest we might want to call some of those unemployed senators up in Kansas to see if that is a good idea."