September 29, 2011

Industries Defend Tax Breaks

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OKLAHOMA CITY – Insurance and oil and gas companies lined up before a joint panel Wednesday to defend tax breaks for their industries.

The credits likely are safe as the Task Force on State Credits and Economic Incentives evaluates an estimated $500 million in tax breaks for a variety of entities.

“I have no frustration with any of those tax breaks,” House Appropriations and Budget Committee Chairman Earl Sears, R-Bartlesville, said of the credits for the two industries.

Bert Marshall, president of Blue Cross and Blue Shield of Oklahoma, said the company uses the home office tax credit to lower the premiums of those it insures.

The home office credit goes to insurance companies that maintain offices in the state.

“For example, our premium tax rate is 2.25 percent,” Marshall said. “Through the home office credit in 2010, we took $5 million in credits, which yielded an effective tax rate of 1.72 percent. This amount was factored into our pricing and saved our customers – Oklahoma families and businesses – $5 million a year.”

The company has an annual economic impact on the state of $530 million in salaries, benefits, taxes and local spending by employees, Marshall said. It employees more than 1,000 Oklahomans, of whom about 800 are in Tulsa, the company’s state headquarters, he said.

To qualify for the credit, “you not only have to create a job, (but) you also have to keep that person working long term,” said Rep. David Dank, R-Oklahoma City, who is chairman of the task force.

But the credit has room for improvement, Dank said.

Currently, a company can receive an annual tax credit on a perpetual basis, which is an open-ended commitment that should be looked at, he said.

Dank praised the oil and gas industry for its contributions to the state and defended incentives for that industry.

Gross production taxes are the third-largest contributor to the state budget, coming in at around $1 billion in some years, Dank said.

“The bottom line on oil and gas incentives is that this industry really is our whole state’s bottom line,” Dank said. “I think we will all agree that without those industries and the jobs they stimulate, we’d be mired deeply in the national recession that exists today and have little hope of bettering our future economic picture.”

Incentives play a role in determining where a company will drill, said Tom Price Jr., senior vice president for corporate development and government relations at Oklahoma City-based Chesapeake Energy Corp.

“All states are very competitive in terms of tax policy and inducements to companies who are able to bring the capital and innovation into their states that lead to the creation of a high volume of jobs that our industry creates,” Price said.

Sen. Tom Adelson, D-Tulsa, said the state is subsidizing behavior that would occur regardless of the subsidy for an industry that is already doing quite well.

The state is foregoing $100 million a year or more in revenue that could go to schools, public safety and health care, he said.