OKLAHOMA CITY — The announcement last week that most Oklahomans will see a slight reduction in their income taxes in 2016 has renewed the debate about the criteria used to determine whether a tax cut would occur.
On Thursday, the Board of Equalization certified that the state had enough projected income growth to trigger the income-tax reduction. The rate will drop to 5 percent from 5.25 percent on Jan. 1, 2016.
Designers of the law setting up the process used projected revenue growth over a period of time as criteria to determine whether the rate would drop.
One of the critics of that method is State Treasurer Ken Miller, who as a former House member has voted in the past for triggers. He said he was a freshman member who had no experience with state finance when he voted for a measure with a trigger.
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“I just don’t see any financial reason to pass a measure predicated on future revenue growth when they could have waited to preserve flexibility for challenges like the ones we are facing today with a $300 million budget hole (for fiscal year 2016),” said Miller, a member of the state Board of Equalization.
He said that if a tax cut is passed during a revenue shortfall, it is better to use a trigger than not.
“But the most responsible thing is wait until that revenue growth occurs and make a decision based on other factors at the time,” he said.
The state has revenue growth, but it also has a $300 million budget hole because policymakers used one-time money to balance the fiscal year 2015 budget and the price of oil has dropped, Miller said.
State Auditor and Inspector Gary Jones also voiced concerns about the formula. He said it is based on comparing the estimate of February 2013, predicting the 2014 budget, to the December 2014 estimate of the 2016 budget.
Jones, also a member of the Board of Equalization, said a lot can happen between when the criteria are met and when the tax cut goes into effect. The process does not make sense, he said.
It should be based on actual revenues, he said, adding that it is more than likely that the figures will change between now and the date the tax cut goes into effect.
In addition, a tax cut should be based on a surplus of revenue on hand, he said.
Alex Weintz, a spokesman for Gov. Mary Fallin, who chairs the Board of Equalization, said the trigger is designed to make sure the state has enough revenue to fund state agencies before a tax cut takes effect.
“The bottom line is we are going to have quite a lot of revenue to build our budget off of this year,” Weintz said. “It is a responsible time for a tax cut that Oklahoma families and businesses benefit from.
“That tax-cut legislation was created to ensure the bottom didn’t drop out from under our revenue sources before the tax cut went into effect.”
Rep. Earl Sears, R-Bartlesville, is chairman of the House Appropriations and Budget Committee. He said he would prefer that tax cuts be based on actual revenue rather than estimates of future revenue. He said he is not a big fan of triggers, but he voted for the bill.
Sears said he had doubted that there would be enough projected growth revenue to trigger a tax cut and was surprised to learn that the criteria had been met.
