I Could Not Let That Opportunity Slip Away
May 7th, 2010
DURANT, Okla. – Hello again, everyone! The hottest topic at the State Capitol this week was “tax credits.”
Tax credits are dollar-for-dollar credits against a tax liability, often the income tax. Oklahoma has several tax credits, most targeted to help create jobs.
Some believe ending tax credits is an easy way to balance the budget. On the surface, maybe – dig deeper and one quickly sees that is not necessarily true.
The first tax credit on the chopping block was the Rural Investment Tax Credit, which encourages investment in businesses and industries locating in rural Oklahoma. Ending this credit would generate an extra $27 million. That is about 2 percent of the $1.2 billion shortfall; it would hardly make a dent.
This credit was targeted because it was the easy one. It helps small towns attract, retain and create relatively small businesses. No high-dollar lobbyists or big city interests would work to protect this credit.
However, ending this credit would devastate job creation efforts in rural Oklahoma. One only has to look to a county I represent for clear and convincing evidence of that.
One of the communities in our area is about to close a deal to create dozens of new jobs with an average salary of $52,000 plus benefits. That annually would be more than $2 million in payroll going into the pockets of local families and the cash registers of local businesses.
I could not let that opportunity slip away. Working with other rural lawmakers, we mustered the votes to prevent the bill from taking effect immediately – giving the community a chance to close the deal.
Wholesale efforts to end tax credits would reduce our ability to grow revenues back to where they once were. If we balance this year’s budget with measures that weaken our ability to grow the economy, we will have been penny wise, but dollar dumb. The net result would be Oklahoma again lagging behind other states when the recovery takes hold.
That fact was driven home when I visited with an economic development finance professional I know from Seattle, someone with no vested interest in Oklahoma. Few, if any, states are discussing the end of tax credit programs, I was told, despite budget challenges every state faces.
Taking the discussion a step further, I asked what would be said about a state that ends existing tax credits. The professional’s answer was immediate and firm: “That state is closed for business.” It is the worst label we could carry as we work to restore our economy.
Some tax credits should be reviewed for effectiveness, and those that fail that test should end. To do that, we should use a microscope and a scalpel, not a blindfold and a stick. So, our challenge over the next three weeks is clear: Solve the short-term budget crisis while positioning Oklahoma and her people for a new renaissance of prosperity.
Thanks for reading this week’s “Senate Minute.” Have a great week, and may God bless you all.