Tax reform has been central to Senate Republicans’ efforts
By State Sen. Mike Mazzei
Facing a $1.3 billion shortfall, Senate Republicans have worked diligently this year to examine all available options to mitigate cuts to education, public safety, health care and transportation. The most efficient tax code is supposed to provide few, if any, special deals so that all taxpayers can pay the lowest possible income tax rate. This provides for greater productivity, higher job creation and a broader base of taxpayers, generating a growing revenue base to properly fund core services. That’s why the Senate is reviewing special tax breaks for businesses and individual taxpayers across all income spectrums.
We have purposely avoided any negative changes to the top four job creation incentive programs: quality jobs, new investment, aerospace engineering and historic rehabilitation. The special business tax breaks that don’t foster significant job creation and that are targeted for caps, reductions or eliminations include programs on affordable housing, coal production, compressed natural gas, energy-efficient homes, child care facilities, economically at-risk oil wells, railroad reconstruction and wind power. The projected savings from these reforms to business subsidies for fiscal year 2017 is approximately $160 million.
The Senate also has voted to eliminate the “double deduction” for higher-income earners who itemize deductions on their tax returns (only 22 percent of 1.6 million tax filers), saving $97 million. For middle-income earners, the elimination of the child tax credit, a small credit of approximately $70 per family originally meant to provide a credit to those families who don’t have day care expenses, will save $27 million. The day care portion of this tax credit amounts to $3.9 million. Obviously, no families in Oklahoma choose to have a child so they can collect this very small Oklahoma credit. The federal credit for child care can amount to more, but state lawmakers have no influence over federal tax policy.
We can no longer afford to make direct cash payments to individuals who owe no Oklahoma income tax through the earned income tax credit and the sales tax relief credit. Low-income earners who actually have tax liability will still benefit from these two programs. But given the current financial crisis facing the state, the combined savings of $49.4 million will significantly help us mitigate cuts to the core services upon which these families rely.