Note: This article was written 3 years ago, yet the point remains the same and the problem has significantly increased. The most significant change has been that with access to additonal tax credit information we now learn this program is far worse than previously imagined.
Tax breaks increase along with state's revenues
Tulsa World, October 16, 2006
The amount of tax money the state of Oklahoma collects has increased during the past few years.
So has the amount it doesn't.
Tax expenditures -- the technical term for the nearly 500 exemptions, deductions and credits in the state's tax code -- increased more than $530 million, to nearly $4.6 billion, for the two-year period ending June 30.
And that's just for the 133 expenditures for which the Oklahoma Tax Commission estimates lost revenue.
More than 350 other tax breaks listed in a biennial Tax Commission report issued this month have no dollar value assigned to them, either because of minimal usage or because the agency lacks sufficient data for calculations.
Lack of data, in fact, is a long-standing complaint about tax expenditures. Tony Mastin of the Tax Commission said it has no idea how much of the 13.2 percent increase in foregone tax revenues from the 2004 report are due to a more robust economy and how much are due to changes in tax laws and the way they are applied.
"You'd have to go through every one of them to figure that out," he said
That gets to the complaint of many economists, lawmakers, policy analysts and taxpayers. No one can say for sure what the real costs and benefits of tax breaks are -- or, in some cases, who gets them There ought to be as much transparency and accountability for tax expenditures as for any other government program," said David Blatt of the Community Action Project of Tulsa County.
In March, a committee evaluating a business incentive program that handed out more than $40 million in tax credits last year said it was "frustrated by the lack of available data" on the program and urged the Legislature to require the Tax Commission to collect more information about recipients.
The Legislature has not acted on the recommendation.
According to the reports published every two years by the Tax Commission, identifiable tax expenditures rose from $3.75 billion in 2002 to a little more than $4 billion in 2004.
That figure continued to climb to almost $4.6 billion in 2006, the Tax Commission reported.
The largest single item is the $1.5 billion sales and use tax exemption given to manufacturers and recently extended to some distributors. That's up $106 million, or 7.4 percent, from 2004.
The most drastic change had to do with alterations in tobacco taxes that resulted in a notable increase in sales at American Indian smoke shops. The tax agency estimated that the state lost $108 million more in 2006 than in 2004, an increase of 342 percent.
Exemptions to the state's gross production tax more than doubled in the past two years, from $56 million to $118 million, largely because of a three-year, $62 million break for deep-well drilling approved in 2005 at the behest of Chesapeake Energy Co. of Oklahoma City.
The value of the sales tax exemption for wholesalers rose 7.5 percent, to $774 million, and income tax deductions were up 13 percent, to $563 million.
Income tax credits increased by nearly 50 percent, to $171.4 million, and have more than doubled in the last four years. Tax credits are particularly bothersome to policy analysts because state and federal law makes them hard to trace.
"Imagine," said Blatt, "if these were grants to private organizations and they were asked, 'How much was spent?' and they answered, 'We can't tell you.' 'Who got them?' 'We can't tell you.' "
See October 2008 Tax Expenditures, update by Randy Krehbiel. Breaks on taxes are adding up - Report shows "tax expenditures" increased 44 percent since 2002