August 10, 2011

Debate on Tax Breaks Continues

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OKLAHOMA CITY – A lawmaker heading a powerful task force examiningstate tax breaks on Wednesday questioned the need for reimbursingschools and counties for property tax revenue they lose to a five-yearexemption for manufacturers.

Rep. David Dank, R-Oklahoma City, is co-chairman of the Task Force forthe Study of State Tax Credits and Economic Incentives, which isstudying the effectiveness and need for an array of tax breaks alreadyon the books.

During the panel’s second meeting, Dank announced that he has heardrequests for new tax credits for charging electric cars, storm sheltersand low-income housing.

“By the way, it never ends,” Dank said during his opening remarks.

The panel spent the afternoon reviewing a program that lets qualifyingmanufacturing facilities forgo paying property taxes for five years.

The state has set up a fund to reimburse counties, schools, healthdepartments, libraries and other property tax recipients for lostrevenue.

But Dank questioned the need for the fund. He said the tax incentivesattract manufacturing facilities to areas where they would not otherwiselocate, which generates economic development through jobs that would nothave existed otherwise. And in five years, the schools and othersincrease their revenues when the property taxes do go on the books, hesaid.

Dank said Oklahoma is the only state that reimburses receiving entitieswith 100 percent of the lost revenue.

The state puts 1 percent of collected individual and corporate incometaxes into the property tax reimbursement fund, said Tony Mastin,

Oklahoma Tax Commission director.

In the last few years, payments into the fund have not brought inenough to cover what is owed, Mastin said.

So far, the fund has claims of $33.5 million, of which $20 million as been paid. The balance will be paid by February 2012, Mastin said.

Delays in payment create cash flow problems for schools, said ShelleyShelby, staff attorney and director of legislative services for theOklahoma State School Boards Association.

Dank said he was not questioning the need for the incentive, just thestate reimbursement to local entities.

“I don’t know how you lose something you never had,” Dank said.

The Legislature might reduce or abolish the reimbursements, the latterwhich would take a vote of the people, Dank said.

Preston Doerflinger, Gov. Mary Fallin’s secretary for finance, saidhe is not sure the fund should be eliminated, adding that the stateneeds to find a more stable funding source.

It will be a priority for Fallin to see that it gets funded, Doerflinger said.

Dank also questioned the need for tax credits going to builders whoconstruct energy-efficient homes that are 2,000 square feet andsmaller.

But Mike Means, executive vice president of the Oklahoma State HomeBuilders Association, said the costs of the credits are recouped whenhomeowners have more money to spend because their utility costs arelower.

He said builders cannot recoup the costs associated with constructingenergy-efficient homes.

“We are not getting the value from the appraisal industry,” Meanssaid, adding that many of the energy-efficient amenities cannot beseen.