Republican leaders at the Capitol strike cautious but supportive tone in discussion of tax cuts, phaseout

 Republican leaders of the Oklahoma Legislature projected cautious support for the historic proposals to significantly reduce state income taxes and begin a phase out process of the unpopular levy.

In comments to Capitol reporters as the third week of formal legislative work ended, comments from Senate President Pro Temp Brian Bingman and Speaker of the House Kris Steele were — on the tax issues and related tax credit reforms — equal parts of caution and advocacy.

Bingman, a Sapulpa Republican, said the process would start in the House: “The speaker will be carrying the governor’s proposal.  I’ll be the sponsor in the Senate. The question we’ll be asking is what can we afford to do. I certainly want to move Oklahoma forward.”

One reporter pressed on funding needs for “core services,” and whether or not the income tax rate changes can advance during another tough budgeting year.

Bingman reflected, “Our job is to look at the whole picture. We want to be smarter and more efficient. And we have promised to be mindful of core services. The income tax message is an important one and I support the idea. We have to balance some things out,including funding the essentials.”

Bingman agreed that funding of education is one of those “core services” often referenced in the tax reform debate. He said, “I believe an educated workforce is important to the state. We supported education reforms. Sometimes more money is not the answer to every issue.”

Continuing the tax policy discussion, he reflected, “All plans have some good things, strong aspects in them. I’d like to see a working group on the issue, perhaps the governor, members from the House and Senate so we can begin to find the right approach.”

In response to a question specifically focused on the Oklahoma Council of Public Affairs (OCPA) vision prepared by economist Arthur Laffer, Bingman said that particular plan (a 10-year phase out of the income tax, with a big tax reduction this year to start the process) “would be difficult to achieve … without making serious changes in the way we fund government. Don’t forget, we still have some work to do on the tax credits.”

In response to question from from CapitolBeatOK concerning possible efficiencies, spending reductions in some areas, or even elimination of some government functions, Bingman commented, “I’d say the answer to that is ‘all of the above.’”

Bingman pointed to widely touted savings, at Oklahoma State University, of some $18 million from changes in energy management. He noted, “That is a tremendous amount of savings.” Bingman believes as much as $100 million in costs could be reduced by mirroring this pattern in other parts of government.

He continued, “There are seemingly little things to effect the bottom line in costs. At the end of the day it all adds up.”

Concerning the “dynamic” (growth-inducing) impact of income tax reductions, such as those seen during the Reagan presidency, Bingman did not challenge the question’s assumption, but said, “We can’t do dynamic scoring within a year. We have to balance the budget based on what we can see on the table, what the revenues are likely to be within a year.”

In Thursday afternoon’s discussion with reporters, Speaker Steele affirmed his support for tax reduction, while adding, “Concerning the various competing tax proposals, I believe we have to also proceed with cleaning up the tax code.” (One potential cost avoided for the near-term may come from the rejection of pay hikes for judges and statewide elected officials which advanced from House to Senate this week.) 

In discussion of tax issues, Steele said he would be lead sponsor for Governor Mary Fallin’s proposal (which would implement reforms more slowly than the OCPA vision). Steele said, “I want to keep all options on the table, I think we need to be sensitive to the budget impact. I’d like to see a revenue neutral approach. The proposals have to be tied to the reform of tax credits and exemptions.”

Reflecting on the matter, Steele was asked about the possibility that revenues would “go into the tank” after rate reductions, and whether or not voters might then increase taxes. Reflecting on the matter, he said the chances of a popularly-approved tax hike would, in his assessment, be “slim to none.”

Steele continued, “It is hard to tell what the outcome will be. My honest personal opinion is that it is very important to protect core services. I want all the proposal on the table.” He stressed, “We have to consider the dynamic effect on our economy that these kinds of income tax changes will have.”

Steele concluded, “I support the end goal. How do we get there? … Again, that dynamic factor we would also consider. It is essential to keep all options on the table.” Steele also believes “simplifying the brackets is a very good idea.” Gov. Fallin’s proposal would compact the number of income tax brackers from seven to three, and eliminate state income taxes for low income Oklahomans.