History Of Tax Break For Wealthy Undercuts Some Lawmakers’ Claims

Apr 10, 2018

For the fifth time since Oklahoma teachers left their classrooms, House Republicans refused to hear a bill that would end a lucrative tax break for high earners and potentially bring an end to the one-week-old teacher walkout.

Eliminating the capital gains tax deduction – something that largely benefits the wealthy – would free up $100 million or more a year that could be used for education and to shore up the state budget. A state-commissioned consulting group last year recommended the tax break be repealed.

The Oklahoma Education Association announced Monday that the teacher walkout will end when the Legislature eliminates the capital gains deduction and Gov. Mary Fallin vetoes a measure that strips a $5-per-night hotel tax.

As thousands crowded inside and outside the Capitol Monday, teachers intensified their lobbying around the two demands.

But with a 26-58 partisan vote, the GOP-led House once again rejected the procedural maneuver from Rep. Scott Inman, D-Del City, that would have brought the bill straight to the floor. It previously passed the Senate with a bipartisan majority.

GOP leaders have repeatedly said they won’t hear the capital gains bill because House Republicans were promised they wouldn’t vote on it if they backed the 5 percent oil and gas production tax rate that was part of the big tax package that passed before the walkout began.

Undoing Voters’ Will?  

Several top Republican lawmakers, along with groups that support keeping the capital gains tax, have also argued that they are trying to respect the will of the voters.

House Budget Chairman Kevin Wallace, R-Wellston, said last week that he regularly hears complaints from lawmakers on both sides of the aisle about attempts to meddle with voter-approved ballot measures.

Just as lawmakers, special-interest groups and citizens complained about legislation last year to alter two criminal justice-related state questions approved by voters in 2016, he said he believes people would “stand up” and say lawmakers “went against the will of the voters” if they repeal the capital gains exemption.

He was joined by others, including the Oklahoma Cattlemen’s Association, which made a similar argument about why the tax break should stand.

The full story, however, is more complicated.

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In 2004, Oklahomans did indeed approve a state question that created the capital gains deduction, among a number of other changes to the tax code. State Question 713 passed with 53.4. percent of 1.4 million voters supporting it.

But only 15 words of the 185-word ballot measure related to capital gains.

The rest of the state question revolved  around an unrelated proposal that increased taxes on tobacco products and lowered the top income rate to 6.65 percent – a rate that was eventually lowered to 5.25 percent.

A University of Oklahoma archive of state question political advertisements and state Ethics Commission records shows that in media coverage and public debate, the tobacco tax and income tax provisions overshadowed the capital gains portion.

Many of the ads highlighted the debate about the cigarette tax, the OU archives show.

The bulk of the campaign contributions against the measure were from tobacco companies. Health-care companies were the biggest supporters, according to a breakdown from the National Institute on Money in State Politics.

Regardless of the history, however, GOP House lawmakers have shown no signs of reversing course and acceding to the teachers’ demand.

Educators, however, indicated that the walkout will enter at least its seventh day as they continue to pressure lawmakers to take up the bill or find equivalent funds elsewhere.