Oklahoma Tax Commission calculations show the cumulative cost of recent tax cuts approved by the Oklahoma Legislature will hit $1.3 billion next year and top $2 billion by the 2011 fiscal year.


Oklahoma Tax Commission calculations show the cumulative cost of recent tax cuts approved by the Oklahoma Legislature will hit $1.3 billion next year and top $2 billion by the 2011 fiscal year.
Legislative leaders are divided on whether the tax reductions were a mistake, considering tight revenues this year. Some Democrats say they were too costly and are hampering the Legislature’s ability to adequately fund schools, highways and other essential services.
Republicans generally said the cuts are helping the Oklahoma economy and will pay off in the long run with increased revenues caused by economic growth.
The Associated Press obtained the Tax Commission figures on Friday after they were supplied to the office of state Treasurer Scott Meacham.
They show that tax cuts cost $57 million in the 2006 fiscal year, an extra $251 million the next year and an extra $455 million the year after that. The additional cost will be $548 million for the fiscal year beginning July 1, $581 million for fiscal year 2010 and $337 million for the fiscal year 2011.
Most of lost revenue is tied to reducing the income tax from 6.65 percent to 5.5 percent and by increasing the standard deduction to the federal level over a period of years. The income tax will drop to 5.25 percent if the state achieves revenue growth of 4 percent.
The latest Tax Commission figures do not count more than $40 million the state treasury lost because of estate tax cut that will continue to grow as the tax is eliminated.
“When all is said and done, we’ll be over $2 billion (in tax cuts),” Meacham said.
Gov. Brad Henry signed off on a pair of Republican-sponsored record tax cut packages in 2006 and 2007 as part of a negotiated budget agreement. Henry helped push through a smaller tax package in 2005.
Meacham, Henry’s top financial adviser, said it remains to be seen whether the tax cuts were a mistake.
“When you do these deals, it is like anything else at the Capitol. It’s a political compromise. I think only time will tell whether it was too fast or not,” Meacham said.
Senate President Pro Tem Mike Morgan, D-Stillwater, is among those who think the Legislature went overboard on tax reductions.
Morgan said he had not talked to anyone who has said “they noticed and appreciated the tax cuts” but he has heard complaints of the state not funding needed programs.
“I do believe we’ve gone too far in cutting taxes,” Morgan said. “As anyone who has been around here will have observed, we’ve not been as Democrats nearly as excited about those tax cuts as our Republican colleagues have been.
“We’ve gone along with some of those to make things work and keep the process going and keep doing our job. But I don’t think there is any question that many of us wish that we had not gone as far we have and somehow could undo that.
“You know, the money that we spent in the form of taxes and appropriated dollars is the lifeblood in the economy of the state and we’ve withdrawn all that.”
Roy Bishop, Oklahoma Education Association president, said the state’s standstill budget for next year, which did not include any new operational money for education, is a “direct result” of the tax cuts.
“Tax cuts are the reason we are in this mess. We would have had had enough money to invest in our schools, roads and bridges and other vital state agencies if our legislators hadn’t enacted” the large tax reductions, Bishop said.
The Legislature passed a $7.1 billion budget this week that contained no funds for teacher or state employee pay raises, as proposed by Henry. Neither did it contain extra cash to beef up repair and maintain roads and bridges, the goal of both Republican and Democratic lawmakers.
Senate Co-President Pro Tem Glenn Coffee, R-Oklahoma City, defends the tax cuts. So does Rep. Chris Benge, R-Tulsa.
“I think they’ve been a positive for growing the economy,” Coffee said. “Now that being said, I think you can’t totally eliminate your tax base and expect to take care of things.”
Coffee is among the GOP leaders who would like to further reduce the state income tax. Some would like to eliminate it.
“I think income tax elimination is difficult without restructuring (of the state tax code). I think we have to be cautious about how we go about it, but I don’t regret that,” he said.
“I still stand behind the policy of tax reductions,” Benge said. “Putting more money into the pockets of taxpayers never contributes to economic downturn.”
But critics say tax cuts can contribute to budget shortfalls and Morgan is concerned lawmakers may have set the stage for further deficits in the years ahead.
“I think that is entirely possible,” he said. “Those who are for those tax cuts would argue that the economy is doing better because of it and all that, but I think that is voodoo economics. I’ve always thought that.”
The Legislature had $114 million less to spend this year, despite positive economic growth largely attributed to high energy prices.