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Is It Really A Gift - Or Is It A Curse?

 

March 12, 2020

Last week, the Senate approved Senate Bill 1619. What was hailed as a gift for taxpayers is far from it in my opinion, given our current fiscal situation. State revenues are falling, and we have significant expenses looming in our near future. 

When revenues fall, state agency budgets have to be cut, which can negatively affect services. I’m all for providing tax relief when revenues are up but when they’re not, we, as legislators, have to make fiscally responsible decisions. Our responsibilities are no different than a family’s when their income gets cut – tough decisions must be made. Like them, we have to figure out how to create new revenue to pay all of the bills.

SB 1619 modifies how sales tax is calculated for vehicles. Currently, when you buy a car, you’ll pay a sales tax of 1.25 percent on the full price of the vehicle. This sales tax was added in 2016 during a revenue failure – tough decisions had to be made to get all the bills paid. We’re a balanced budget state. We must do whatever necessary to balance the budget each year.

However, SB 1619 changes that calculation to subtract the amount of someone’s trade-in, so they’ll only pay sales tax on the remaining balance of the vehicle, not the original price. 

Again, this would be a great thing if we had a surplus of revenue but instead we have nearly $86 million less than we had last year, and that number is likely to continue growing. The energy sector is struggling. Fear over the coronavirus is wreaking havoc on the national economy and stock market. There is fear that it will eventually negatively impact our state economy as businesses are unable to get products from affected countries. We need to be cautious this session and not make any decisions that take revenue away from the state. 

From all the polling, it appears obvious that Medicaid expansion is inevitable. The cost is estimated at around $130 million to pay for the expansion yet the state question doesn’t provide a revenue source to cover the cost. The legislature is going to have to come up with a plan to create that new revenue. Plans are currently being discussed on how to fund the governor’s SoonerCare 2.0. 

Medicaid expansion approved with a state question would be placed in Oklahoma’s constitution. Any changes to the program could only be made through another statewide vote. 

However, actions brought about with the passage of state questions trump any action taken by the legislature.

We’re also facing the possibly of losing tribal gaming revenue, which is another $150 million or so annually. The tax cuts and tax credits that have been passed by both chambers so far this session undermine the governor and his position that our state needs this additional revenue. Already, the potential loss of revenue from bills working their way through the process is proportional to that which would be gained by the sought-after increase in tribal gaming contributions. 

SB 1619 passed by a 51% vote. However, it takes a legislative supermajority vote of 75% or a vote of the people to raise taxes under our state constitution. Once taxes are lowered, it’s nearly impossible to increase them until the state is facing a dire economic situation.

I’m nervous that both chambers of the legislature have already voted to create new tax credits and tax cuts. We must be consistent and think long-term when making financial decisions. We could very well see revenue continue to fall for the next couple of years. How are we going to efficiently support our state agencies when the legislature is cutting revenue left and right? This is a bill that should have been held until a year when our economy and revenue was stronger or at least stable, which it currently is not.

Speaking of our tribal nations, I want to take a moment to thank them. The Indian Nations contribute $1.3 billion in revenue to the state each year along with thousands of jobs. All I need to do is ask, and every tribe in our Senate District 17 is happy to help a local school that needs assistance. They’re doing wonderful things for our state, and I want to thank them for all they do for our local communities, their citizens and all people of Oklahoma. Oklahoma would not be what it is today without our tribal brothers and sisters.

To contact me at the Capitol, please write to Senator Ron Sharp, State Capitol, 2300 N. Lincoln Blvd. Room 412, Oklahoma City, OK, 73105, email me at sharp@oksenate.gov, or call (405) 521-5539.

 

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