September 18, 2011

Coal Tax Credits Cost $60M in 8 Years

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Figures compiled by Oklahoma Watch from several sources show that coal tax credits cost the state more than $60 million in lost tax revenue during the eight years ending June 30.

Jaclyn Cosgrove/Oklahoma Watch

Figures compiled by Oklahoma Watch from several sources show that coal tax credits cost the state more than $60 million in lost tax revenue during the eight years ending June 30.

Figures compiled by Oklahoma Watch from several sources show that coal tax credits cost the state more than $60 million in lost tax revenue during the eight years ending June 30.

That averages more than $15,000 a year for each of the estimated 500 people directly employed by mining companies or working for businesses that contract with the mines, such as trucking and welding firms.

The cost exceeded $10 million in two fiscal years, 2007 and 2008. The impact has declined since then because the coal credit was suspended for a two-year period ending in mid-2012, when benefits will begin accruing again.

Although the coal tax credits have been on the books 23 years, no one in state government could tell Oklahoma Watch how much they have reduced state tax collections over that time period. Until a few years ago, the Legislature never directed anyone to provide an annual accounting of their impact.

Administration of the credits is divided between the Oklahoma Tax Commission and the Oklahoma Insurance Department. That’s because some of the credits are applied to corporate and personal income taxes, and some to insurance premium taxes. The two agencies do not get involved in each other’s record-keeping.

Oklahoma Watch asked both agencies to provide annual totals for coal credits claimed since the first coal tax credit took effect in 1989.

The Insurance Department provided totals for the 2004-2011 fiscal years. It said it could not provide figures for earlier years because it switched computer systems several years ago, and prior-year figures were not transferred.

“Nobody looked at it from a historical standpoint of keeping the information for future research,” spokesman Shawn Ashley said.

The department provided spreadsheets listing insurance companies that used the credits to reduce their premium taxes from 2005 through 2009.

The Tax Commission said it did not have annual tallies of the reduction in state income tax collections caused by the credits. It directed a reporter to the state’s OpenBooks website, which identifies taxpayers who “claimed” credits — but didn’t necessarily use them — for three years only: 2007-2009.

“The calculation of the annual revenue report for the early years of the coal credits would be very labor intensive because the credits claimed on each return would have to be manually totaled,” Tax Commission Administrator Tony Mastin said in an email.

Both agencies acknowledged the data they have released publicly does not show whether credits were claimed by the original recipients or by other taxpayers who bought them at a discount.

Some state officials say the lack of historical data makes it difficult for them to assess the value of tax incentives such as the coal credit.

“There aren’t any numbers available for a lot of those. When you can’t even tell what a program cost, you’ve got an issue there,” said Robert Dauffenbach, associate dean of the University of Oklahoma Price College of Business and a member of the Incentive Review Committee created by the Legislature to evaluate incentives.

House Speaker Kris Steele, R-Shawnee, said the Legislature deserves much of the blame because it didn’t demand more accountability in past years.

“We’ve got to know exactly how much the state of Oklahoma is spending in these various credits to know where we’re at and how much money we would save,” Steele said. “It’s time that the Legislature step up and take responsibility.”

Related stories:

The tale of the transferable tax credit

How the budget woes affect coalminers