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Fallin Outlines New Tax Plan At State Of The State

Oklahoma Governor Mary Fallin at her 2017 State of the State address on Feb. 6, 2017.
Joe Wertz
/
StateImpact Oklahoma
Oklahoma Governor Mary Fallin at her State of the State address on Feb. 6, 2017.

 

Coming into Mary Fallin’s7th state of the state address as governor of Oklahoma, there was one big question: How will the state deal with another revenue shortfall, and not cut funding to agencies that provide services. The state faces an estimated $870  million budget gap in the upcoming fiscal year. That comes after clawing out a 1.3 billion dollar deficit last year.

Fallin hinted last week she would present a series of changes to the sales tax system. On Tuesday, she outlined her plan.

The governor wants to eliminate the state sales tax on groceries, which she calls “the most regressive tax on the books today.”

She also called on lawmakers to get rid of the corporate income tax. She says that would reduce paperwork for businesses and boost economic development.

“Eliminating this tax provides more transparency as it also eliminates the need for the Legislature to pick winners and losers with specific tax credits,” Fallin said.

To  cover the cost of losing these two revenues streams - and to fill in that big budget hole - Fallin wants to modernize the state’s sales tax system. She says it’s modeled on a manufacturing-based economy, not a service-based economy. Adjusting the tax system to that economic reality would bring more money by taxing services that currently go un-taxed. She also wants to raise the tax on cigarettes, diesel and gasoline, and dedicate fuel taxes to roads and bridges. Furthermore, she plans to introduce a wind power production tax and sunset the zero emission credit ahead of schedule.

 

She also asked lawmakers to fund a $1,000 teacher pay raise.

“It is what the public and families want. The pay raise may need to be phased in and it may be targeted, but it must be done,” Fallin said.

On public safety, Fallin wants to start a trooper academy, and provide enough funding to the state highway patrol to avoid furloughs and 100 mile per day driving restrictions.

She also called for $50 million in bonds to build prison wings for substance abuse and rehabilitation.

“Seventy-five percent of new admissions in prison are nonviolent offenders per statute,” Fallin said. “The number of drug-possession offenders sentenced to prison with no prior convictions has more than doubled in five years.”

Fallin’s proposal holds most department budgets flat and gives increases for some. Among the largest increases are appropriations to education and transportation.

Republican state representative Glen Mulready says, out of all of Fallin’s ideas, the cigarette tax hike has the most energy behind it.

“It’s not just a revenue enhancement but as far improving healthcare and the number of young people it will prevent from beginning to smoke,” Mulready said.

In her address, Fallin challenged lawmakers to make Oklahoma a Real ID compliant state, or else the state driver’s license won’t be an accepted form of identification to board an airplane or enter a federal facility. Mulready expects quick action.

“That will be one of the first things we get done within the first couple weeks of the House, I can tell you that,” Mulready said. “That’ll come out quickly out of the House.”

House Minority leader, Democratic representative Scott Inman, criticized Fallin for maintaining income tax cuts that he says only benefit the wealthiest Oklahomans.

“And she’s going to shift the tax burden from those folks who can best afford to pay for it to the middle class families who can least afford to pay for it because today she offered up more than 1 billion dollars worth of new taxes on the backs of middle class and working class Oklahomans,” Inman said.

While Inman was heartened that Fallin wants to get rid of the grocery tax, he says families won’t win if fuel tax rates also  go up.

“In essence, taking money out of the right pocket of working class families and putting it back in the left-hand pocket, is not a fiscally responsible way to fund government,” Inman said.

But Inman isn’t completely dissatisfied with all of Fallin’s proposals. He likes the call for more changes to the criminal justice system, a new trooper academy and the teacher pay raise.

“However, the governor failed to lay out how she wanted to afford a teacher pay raise, if she’s going to try to pay for a teacher pay raise by raising taxes on middle class families, she’s going to find some opposition and pushback from the House Democratic caucus,” Inman said.

Keep in mind, the governor doesn’t set the budget; that’s the legislature’s job. But it lets her express what she sees as important. The next couple months will determine if lawmakers have the same priorities.

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Jacob McCleland spent nine years as a reporter and host at public radio station KRCU in Cape Girardeau, Mo. His stories have appeared on NPR’s Morning Edition and All Things Considered, Here & Now, Harvest Public Media and PRI’s The World. Jacob has reported on floods, disappearing languages, crop duster pilots, anvil shooters, Manuel Noriega, mule jumps and more.
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