August 28, 2011

Results: Residents Polled on Tax Breaks

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Oklahoma voters say they don’t know a lot about tax breaks, but they don’t like the sound of “transferable” credits that can be sold by one taxpayer to another.

A survey by SoonerPoll.com on behalf of Oklahoma Watch shows that nearly two in three likely voters are not familiar with the 480 credits, deductions, exemptions and other incentives currently contained in the Oklahoma tax code.

“I’m 78 years old, and I’ve been in business dang near all my life,” said Barbara Kerr of Okmulgee, who in years past operated a beauty shop, a bar, a grocery store and a service station. “I didn’t get any special breaks that I know of.”

Despite their unfamiliarity, three in four respondents either opposed tax breaks altogether or said the state should stop letting recipients sell their credits to other people.

Only a handful of Oklahoma’s tax incentives are transferable. But they include several tax breaks with significant political support, such as subsidies for rehabilitating historic buildings, making new homes more energy efficient, restoring old railroads and supporting eastern Oklahoma’s shrinking coal industry.

Transferability is an important feature to businesses and investors who don’t have a large enough state income tax liability to take full advantage of the credits they receive.

For example, a homebuilder might receive $100,000 in energy-efficiency tax credits for installing more insulation and better heating and air conditioning systems in 25 new homes.

If the builder only owes $10,000 in state income taxes, however, it can’t use all of the credits to reduce its tax bill. Transferability allows the builder to sell the credits to anyone else who pays state income taxes, typically for about 80 cents on the dollar. The buyer can then use the credits to reduce his or her income tax bill.

Advocates insist that transferability is essential to ensure that subsidies can be used. Critics contend it dilutes the value of the incentive by shifting some of the benefits to people who had nothing to do with the subsidized activity.

A legislative tax force is examining transferable credits as part of a review designed to evaluate the effectiveness of tax subsidies and identify candidates for elimination.

The survey shows that many Oklahoma voters are willing to support tax subsidies under certain circumstances:  51% endorsed the view that some individuals, corporations, interest groups and associations should receive tax breaks, compared with 36% who opposed all state tax incentives.

At the same time, just 22% of survey respondents said they had a generally positive opinion of Oklahoma’s existing tax breaks, while 34% said their general impression was negative.

“It doesn’t sound like good business to me,” said Bill Jones, a retired locomotive engineer in Drumright. “They shouldn’t be giving those tax breaks, unless it’s a small, start-up business. They might give tax breaks to them to create new jobs. But a well-established business, no.”

Allen Leaird, a community official in Coalgate, is among those who support subsidies. Leaird said he has been involved in a number of civic projects financed in part with tax credits and believes the benefits far outweigh any shortcomings.

“A lot of those tax credits promote economic development in areas where the free market just can’t,” Leaird said. “They do some good.”

A majority of voters, however, said they hadn’t given the matter much thought: 61% said they were unfamiliar with existing incentives, almost double the 31% who expressed some familiarity with the issue.

University of Oklahoma political scientist Keith Gaddie said most Oklahomans tend to file short tax forms and don’t claim as many deductions and credits as people and firms who benefit from tax subsidies.

“Most folks don’t get out there into the weeds with these complex exemptions,” Gaddie said. “They never encounter them. They don’t know what they are.”

There are exceptions, such as Arthur Conkright of Checotah, a disabled Air Force veteran and Federal Aviation Administration engineer who believes the government should impose a flat tax rate on everybody.

“Even on my pension, I don’t mind paying taxes,” said Conkright, 65. “I know there are a lot of tax breaks for disabled individuals. I’ve been told, “You should take advantage of this.’ But I don’t. I don’t use any of the tax breaks that I qualify for.”

Legislative leaders have estimated that pruning ineffective, obsolete or misused state tax breaks could generate $200 million or more in additional annual revenue for the state.

Poll respondents expressed mixed feelings about what should be done with the proceeds: 45% said the new revenue should be used to reduce or eliminate the state income tax, while 41% said the money should be used to restore funding for state services.

The responses varied significantly by party affiliation: 54% of Republicans said the money generated by trimming tax breaks should be used to cut the income tax, compared with 39% of Democrats.

During the past three sessions, the Legislature dealt with recession-related revenue declines by reducing funding for virtually every category of state spending, including education, health, transportation and public safety. This year’s cuts totaled $255 million, according to the Oklahoma Policy Institute.

In the poll, 57% of likely voters said they were “very concerned” or “somewhat concerned” about the effect of budget cuts on state government services, compared with 35% who said they were “not too” or “not at all” concerned.

House Speaker Kris Steele, R-Shawnee, said some lawmakers favor using the proceeds of tax reform to reduce or eliminate the income tax, some want to restore funding for state services and some prefer a combination of the two.

“I suspect the answer will be both,” Steele said. “We could potentially give the money back in the way of reducing the personal income tax, but we also ought to consider adequate funding for core services of government.”

SoonerPoll.com conducted the scientific poll July 25-Aug. 11. Likely Oklahoma voters were selected at random and given the opportunity to participate by phone or online. Of the 587 respondents who participated, 17 took the survey online and 570 responded via telephone interview. The margin of error is plus or minus 4.04 percentage points. The poll was commissioned by Oklahoma Watch, a non-profit reporting team that collaborates with other news organizations.