In its second annual consideration of state tax incentives, the Oklahoma Incentive Evaluation Commission considered reports on 12 incentives today, voting against an evaluating organization’s recommendations on multiple occasions.
The IEC contracted with PFM Group to analyze and recommend action on tax incentives, and PFM recommended ending Oklahoma’s capital gains tax deduction as well as the state’s coal tax credit program. The board adopted neither recommendation.
What follows are the 12 incentives reviewed by the commission this year, as well as comments made Friday about recommendations. (PDFs detailing the commission’s contracted findings are linked to each program’s subhead.)
The commission’s decisions on the recommendations are not binding, and any statutory action would need to be taken by the Legislature.
Quality Jobs payments
The recommendation from PFM Group was to retain this credit with modifications.
“We have to invest in data collection at some point,” said Incentive Evaluation Commission chairman Lyle Roggow.
The commission accepted the recommendations with “modification” from the Oklahoma Department of Commerce.
Small Employer Quality Jobs
The PFM Group’s recommendation was to retain with modifications, and the commission voted to accept it.
Oklahoma Secretary of Commerce and Tourism Deby Snodgrass said her department wanted to retain the eligibility of companies up to 90 employees.
“It is very hard to attract business to rural Oklahoma, and if we eliminate the mid-sized companies, it becomes even harder,” Snodgrass said.
21st Century Quality Jobs
The PFM Group’s recommendation was to retain with modifications, and the commission voted the same.
OU economics professor and commission member Cynthia Rogers expressed concern about the 21st Century Quality Jobs incentive.
“The cost-per-job was enormous,” she said. “I think that makes it a bit more problematic.”
PFM Group’s representative noted one company that has taken the incentive.
“Boeing has used this,” Randall Bauer said. “They are good jobs, I grant you.”
High Impact Quality Jobs
“If the incentives are being met, there is really no reason to keep this on the books,” Snodgrass said.
The PFM Group recommendation was to reconfigure the High Impact Quality Jobs program, but the commission voted to recommend its repeal.
“That does not mean that downstairs that will take place,” Roggow said.
Capital Gains Deduction
The PFM Group recommended that Oklahoma’s capital gains tax deduction be repealed, but commissioners voted to retain the deduction.
“We don’t find the rational for retaining it, but we understand that another determination could be to gather the data and make a determination at another time,” Bauer said.
Rogers was the only commissioner who voted against retaining.
“I really came up short as how we could look at this as we do right now as an economic development incentive,” Rogers said. “Even collecting data will not be able to help us (…) quickly assess whether it works or not. If we’re going to keep it going, we need to have some requirements that we can show taxpayers it is being used (as intended).”
Commissioners noted that the Legislature could view the capital gains tax deduction as a tax policy and not an incentive.
“It is available to anybody who has filed a tax return in the state of Oklahoma,” ex-officio member Steve Burrage said.
But Rogers noted that “we have no way of really knowing” the deduction benefits are being used to allow for more Oklahoma investments.
“Specifically, it’s limited to Oklahoma assets. You need to remember that,” Burrage said. “I live in a border town next to a state that does not have income tax at all.”
Snodgrass suggested holding over approval or disapproval of PFM Group’s “repeal” recommendation on the capital gains deduction until “more data” was available. But commissioners and Bauer said they were not sure if that data is available.
“One more time, I firmly believe this is tax policy,” Burrage said. “To me, more than consideration should be given to whether people are making an investment in the state of Oklahoma.”
Rogers made a motion to retain the deduction with recommended modifications, but that motion failed to receive a second. Ultimately, they voted to encourage the Legislature to retain the deduction.
Home Office Tax Credit
The PFM Group’s recommendation was to reconfigure the credit. The commission accepted that recommendation.
Clean-Burning Fuel Vehicle Credit
The PFM Group recommended retaining and reconfiguring the credit to focus on infrastructure by sunsetting the vehicle component of the credit. The commission voted to not accept that part of the recommendation.
Ethanol Fuel Retailer Tax Credit
The PFM Group recommended repealing the credit, and the commission voted to accept the recommendation of repeal.
“There’s really no benefit, unless you’re going to argue that people are going to come in and buy other stuff because they are buying ethanol fuel,” Bauer said. “But there really is no ethanol industry in the state of Oklahoma. From our perspective, it is something that is giving little tangible benefit to the state. You’d be better off just repealing it.”
Economically At-Risk Lease Tax Credit
Roggow noted that the Legislature had already taken action on this credit prior to the commission finishing its analysis of them.
Production Enhancement Rebate
Roggow noted that the Legislature had already taken action on this credit prior to the commission finishing its analysis of them.
Re-Established Production Rebate
Roggow noted that the Legislature had already taken action on this credit prior to the commission finishing its analysis of them.
Coal Tax Credit Program
The PFM Group’s recommendation was to repeal the credit, but the commission did not accept that.
“We just don’t see when you look at it in relation to other incentives that it stands up to those other incentives in terms of what it provides to the state,” Bauer said. “We also are not clear that this credit going away will make that industry going away.”
A banker from Antlers, Burrage disagreed.
“I beg the committee not to repeal this and to retain this credit. This is primarily available in rural Oklahoma, primarily around southeastern Oklahoma, and if you look at the analysis, these are some of the highest paying jobs in southeastern Oklahoma.
“Let’s not put another nail in the coffin of rural Oklahoma. This benefit to that part of the state is benefit as it relates to the filling stations, as it relates to the schools, as it relates to truck drivers, as it relates to sales tax, as it relates to withholding tax. We’re talking about some of the highest unemployment rates in the state where this credit is located, so I beg you to retain this credit.”
Rogers countered, saying that the incentive is not forward-looking.
“I don’t think coal is one of our future industries in terms of diversifying,” she said. “I’m not sure coal is the industry we should be targeting in terms of rural Oklahoma.”
Burrage and Roggow emphasized the need for southeastern Oklahoma jobs.
“When you understand the ramifications. When you have an environment of limited employment. When you have an environment of limited economic activity, any incentive helps,” Burrage said.
The commission voted 2-2 on a motion to accept the PFM recommendation of repealing the credit.
