September 8, 2011

‘No Cap’ Tax Breaks Could Break State

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OKLAHOMA CITY – A lawmaker overseeing a panel studying tax credits and incentives was critical Wednesday of the amount some of them could wind up costing the state.

“One thing we have determined is that almost without exception, many of these tax credits have no caps,” said Rep. David Dank , R-Oklahoma City. “There are literally no caps at all on the cumulative amounts that can be used annually on all but two of these credits.”

Dank is cochairman of the Task Force for the Study of State Tax Credits and Economic Incentives.

“That’s like handing the keys to the car and a credit card to a 16-year-old boy and saying, ‘Have fun, son,’ ” Dank said. “You know he’s thinking that the sky is the limit.”

The task force will issue recommendations to lawmakers about which tax credits and incentives to eliminate.

Dank was particularly critical of the Investment-New Jobs Tax Creditfor either an investment in depreciable property or an increase in full-time employment for manufacturers and aircraft maintenance enterprises.

While the credit was put on moratorium until 2012, it lets those who qualify for it carry the amount forward. The amount to be carried over has no limit, Dank said.

Dank said there are no controls on the tax credit.

“There has got to be an end game and there is not,” Dank said, adding that there is no way to calculate how much the state will pay out in the tax credits.

“That is one we must review,” said House Appropriations and Budget Chairman Earl Sears, R-Bartlesville, adding that the state’s total liability remains unknown.

However, the Oklahoma Quality Jobs tax rebate program has controls and transparency, Dank said.

“The Quality Jobs model has been very successful,” Sears said.

Created in 1993, the Quality Jobs Program pays cash of up to 5 percent of new payroll for up to 10 years, said Richard Schwalbach, Quality Jobs program manager.

Jobs must be new to the state, he said. New jobs must average the county wage or $29,745, whichever is lower. The company must maintain an annual payroll of $2.5 million within three years and provide health insurance, he said.

Since its inception, 610 companies have participated creating a payroll of $15.6 billion, Schwalbach said.

Officials with the Tulsa Metro Chamber and Greater Oklahoma City Chamber urged the panel to keep both incentives alive to help lure and keep companies in the state. Both incentives make Oklahoma competitive with surrounding states, they said.

The panel’s next meeting is Sept. 28.