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Notes from the A&B Subcommittee on Revenue and Taxation 2-20-12

By   /   February 20, 2012  /   2 Comments

Below are notes taken during the meeting of the House Appropriations and Budget Subcommittee on Revenue and Taxation held on Monday, February 20, 2012. It is not a complete transcript of everything that was said. The bills are ordered as they appeared on the agenda, not in the order in which they were discussed during the meeting. Links provided take you to more information about the bill including the actual language and vote details.

HB2199 – Revenue and taxation; additional homestead exemption; qualifying income limit – Trebilcock* (Dorman presenting for Trebilcock)

Dank: I believe this is a fund we’re already in arrears to the tune of $40M so we’re just compounding a problem? Dorman: I believe that is the case. Rep. Trebilcock hopes that issue can be resolved. Dank: do you believe we should address the current problem before addressing this? Dorman: I think it’s an issue that needs to be addressed, yes.

Russ: does this have a fiscal impact? Dorman: Yes, in FY2014 it’s over $500K to local taxing districts. Russ; is most of that to schools? Dorman: that’s something OTC has to tell us.

Bill fails 4-7 (Newell, Jackson, Pittman Pruett voting for)

HB2486 – Revenue and taxation; special event permits; modifying definition – Casey*

Casey: registered farmer’s markets would still have to register, but not every single time.

Bill passes unanimously.

HB2528 – Revenue and taxation; Buy America First Act; sales tax; vendor discount; revolving fund – Brown*

Russ: do I understand this that anything made in America would get an exempted status? Brown: no, currently vendors keep 2% of taxes collected. This would raise that to 3% for products made in America. It’s an incentive program.

Russ: have you talked with Dept. of Commerce about overseeing this? Brown: Dept. of Commerce just helps the company document the Made in America products, the Tax Commission would oversee the program.

Reynolds: I used to sell computers and a friend refused to buy any computer other than an IBM. I pointed out that I could find the names of 26-countries inside that machine. They might have been assembled here, but not made here. What’s the definition under your bill? Brown: Made in America. Reynolds: so under my scenario, would that qualify? Brown: no.

Brown: the fund is for the Made in America tax and I told Rep. McNeil that it could be a source of funding for the quick action closing fund.

Bill fails 4-7 (Brown, Dank, Pittman Pruett voting yes)

HB2616 – Revenue and taxation; creating sales tax exemption for durable medical equipment – Johnson*

Johnson: this is a request bill from a constituent who is a surgeon. He thinks it will be a way to save money on medical services in the state. There are certain devices a doctor can put into a patient in his office, but due to the cost of the device, they push patients to hospitals. If we can remove the sales taxes on some of these devices, doctors would be encouraged to do the procedure in office.

Steve Martin: this wouldn’t apply to any permanent device? Johnson: we’re targeting specific outpatient devices. I understand some of these devices are already tax exempt. It’s a work in progress.

Reynolds: any time there is a sales tax exemption bill on the floor, there’s a danger of amendments being attached. Do you expect this will be fixed? Johnson: it’s my intent to keep this as clean as possible.

Brown: How many products are we talking about? Johnson: I can’t say specifically, but we’re limiting it to devices that are Medicaid reimburseable.

Russ: are we sure the hospitals are remitting the sales tax and therefore would towns be missing out on this tax if it’s exempt in these cases? Mastin: yes, hospitals do pay the sales tax.

Brown: the hospitals get to file for the exemption for a Medicare/Medicaid patient, so doctors cannot? Johnson: I know this doctor (his constituent) is not. Mastin: I don’t know why a doctor would not be allowed to get an exemption.

Bill passes 10-1 (Brown opposed)

HB2638 – Revenue and taxation; Business Activity Tax; reporting exemption – Schwartz*

Schwartz: in many cases, LLCs which don’t generate a lot of revenue pay the fee, but also have to submit a report. This allows the smallest business owners to not have to file the report.

Reynolds: what is the threshold for paying the tax? Schwartz: I don’t think there is one. It’s a $25 annual fee to register with the Secretary of State’s office.

Pittman: when was it changed from a fee to a tax and did it require a 2/3 or ¾ majority? Mastin: it passed in 2010.

Russ: are you aware of the additional problems where if you’re not an LLC or corporation, those people can’t be reimbursed? Would you consider addressing that as well? Schwartz: I understand there is a vehicle from the Senate addressing the constitutional issue and if we need to address unintended consequences, we should.

Bill passes 10-1 (Reynolds opposed)

HB2649 – Revenue and taxation; reducing income tax rate – Brumbaugh*

Brumbaugh: progressively reduces state income tax over a 10-year period.

Pittman: what happens to state’s ability to fund services? That’s the most common request I get. Brumbaugh: core services will be protected. We’ve identified tax credits and non-core services the state already funds. Pittman: will we need to raise property taxes? Brumbaugh: no, we can’t do that. It can only be done on local level.

Passes 6-2 (Brown, Pittman opposed)

HB2696 – Revenue and taxation; additional sales and use tax on violent video games – Fourkiller*

Fourkiller: now just creates a task force.

Reynolds: I don’t see many task forces that meet beyond the legislative session. What do you hope to accomplish? Forkiller: ways to curb childhood obesity and also bullying that go on today. Reynolds: so you’re saying video games lead to obesity? Fourkiller: they can contribute to obesity.

Ownbey: why just video games? Why not French fries or rap music or movies? Fourkiller: we have to start somewhere. There’s no magic bullet that will solve these issues, but I want to raise awareness of these two issues.

Dank: Rep. Ownbey may be on the right track with an interim study rather than a task force. It has a better chance of getting through.

Debate

Pittman: we have task forces called violence in the media on the Senate side. We have issues we need to address in the state and this is the only vehicle we have. It was suggested to him he make it a task force. I say we send it down the line.

Reynolds: It’s not a good idea. We could have a task force on a multitude of reasons children are obese. Why we’re pickling violent video games was because it was originally a tax.

Fourkiller: title is off, it’s no longer a tax bill. I’m willing to work to move this forward. This is a start and unless you take the first step, nothing will happen.

Fails 5-6.

HB2710 – Revenue and taxation; Tax Analysis Act – Jackson*

Jackson: there are retailers that purchase tobacco products and wrapping papers and the machines pack the cigarettes for personal use. They don’t have to pay the excise tax now and this brings them into compliance. This is a problem in other states and we want to bring it under control before it gets out of hand.

Bill passes.

HB2726 – Revenue and taxation; income tax credit; residential dwellings; natural disasters – Inman* LAID OVER

HB2936 – Revenue and taxation; income tax credit for teachers – Trebilcock* (Dorman presenting)

Reynolds: why doesn’t every citizen get a tax credit for helping students? Dorman: This just helps teachers who want to help their students to get some of that money back. Reynolds: what about private schools, should those teachers get a break? Dorman: I would have no problem with that.

Bill passes 6-5.

HB2975 – Revenue and taxation; income tax; exemptions; age 65 or over; capital gains – Dank*

Reynolds: why are we just exempting this age group? Dank: our seniors aren’t getting COLAs, their expenses are going up while their incomes are going down. This allows them more income to keep them in their homes. Reynolds: let’s say Mitt Romney was over 65 in OK, he would get to keep millions more and he’s certainly not hurting. Shouldn’t it be only for those who are truly hurting? Dank: I don’t know where you’d set that. We don’t want to get into class warfare. Reynolds: there are a lot of people facing problems similar to seniors. I don’t see why you don’t exempt all capital gains. Dank: I don’t know we can take the hit to the treasury. And once the income tax is phased out, capital gains tax will be as well.

Bill passes 8-2 (Martin, Reynolds opposed)

HB2976 – Revenue and taxation; tax credits; moratorium; reauthorization of tax credits – Dank*

Dank: Extend the moratorium on tax credits for two years and let those getting the credits come back and justify them against a set of criteria like job creation, transparency and non-transferability.

Martin: this completely eliminates new transferable tax credits, right? Dank: no, this is just the moratorium. Hopefully the legislature will adopt criteria by which tax credits can meet the standards.

Jackson: do we need a two year moratorium if we adopt criteria in place sooner? Dank: no they can come back next year and say they’ve met the criteria and the tax credits can be reinstated by resolution.

Pittman: how many tax credits would this affect? Dank: somewhere around 30.

Reynolds: reading the bill summary, I don’t see small business and rural small business credits. Are they affected by the moratorium? Dank: those sunsetted, so it doesn’t make sense to keep them on the list.

Pruett: seems the original intent for tax credits was to bring jobs. It seems we’re trying to get new jobs w/o spending money. How much tax credits do we need to save while still being able to compete? Dank: Mark Rubio said there were a lot of tax credits that were the result of good policy and a lot that were the result of good lobbying. I’d say that’s true in OK. What we’re trying to get a handle on is a cost-benefit analysis. It’s the taxpayer’s money. What are they getting in return? We want to take a look at each of these in the light of day, apply criteria to them and then decide if the benefits outweigh the cost.

Bill passes unanimously.

HB2978 – Revenue and taxation; tax credits; criteria; restrictions – Dank*

Dank: this is the bill dealing with criteria. One is non-transferability, another sets caps, another brings transparency to who gets the credit.

Martin: transferability does provide a service. We can’t write people a check for certain activities, so the tax credits were developed. Does this leave us no tool whatsoever if we want to encourage an activity that doesn’t return a taxable profit? Dank: I don’t know how you’d go about giving that half a loaf. When tax credits are sold, we have no idea what the money is used for. Sometimes it’s for salary increases which isn’t what we intended. I have no idea why the end user, who has no affiliation with the industry getting the tax credit, should benefit from it.

Pittman: are these the criteria for existing and new tax credits? Dank: it deals with all credits because they will all sunset.

Jackson: the way I read this, transferability is no longer on the table rather than every tax credit is looked at individually. Dank: it gets rid of transferability completely.

Reynolds: this appears to be unconstitutional because I don’t think this legislature can bind future legislatures. Wouldn’t you agree? Dank: I think this legislature can determine criteria that apply to tax credits. I’m not a lawyer and can’t judge what is constitutional. Reynolds: we haven’t followed the Fund Education First law since it was passed.

Bill passes 7-3 (Jackson, Newell and Reynolds opposed)

HB3069 – Revenue and taxation; Oklahoma Quality Jobs Program Act; definitions; remanufacturing; sales tax – Dorman*

Dorman: extends Quality Jobs to remanufacturing companies. Remanufacturing is creation of a new item like retooling an item that has already been manufactured. We have a company in Rush Springs that takes old wheels and refurbishes them.

Reynolds: can you tell me any other Quality Jobs that doesn’t have to be described in the NACIS manual? Dorman: for remanufacturing there are no codes.

Russ: there is also language that says material no longer has to be warehoused. Why is that? Dorman: that was a request by Dept. of Commerce. With today’s shipping, there are a lot of companies that don’t qualify, they are outdated standards.

Reynolds: did you say there are many companies that don’t qualify? Dorman: yes. Reynolds: so there are companies doing fine that we are going to be giving this tax credit to? Dorman: this is one of the best reinvestment tools for companies out there. Reynolds: but it’s reinvestment that’s not needed for these businesses that are already doing well. Dorman: That’s up for debate, I think it’s a good idea.

Bill passes 9-2 (Newell, Reynolds opposed)

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