Governor calls tax plan key to state's future

Tuesday, December 11th 2001, 12:00 am

By: News On 6

OKLAHOMA CITY (AP) _ Gov. Frank Keating proposed a tax overhaul Tuesday that would abolish the state personal income tax, repeal sales taxes on groceries and replace lost revenue with a 5.9 percent sales tax on a broad range of services.

Keating called the Texas-style tax plan the key to Oklahoma's future.

``Tax reform is the final piece of the prosperity puzzle for Oklahoma,'' Keating said as he announced his plan at a meeting of the state Chamber of Commerce.

``By shifting our tax system from one that penalizes productivity and investment to one that allows Oklahomans to spend more on the wealth they create as they see fit, we will liberate our economy,'' the governor said.

Keating called on legislative leaders to consider the tax plan at a special session in January with the hopes of a statewide vote in the spring.

Keating stressed that state schools and government services would not be penalized by the change. ``We wouldn't give up a penny in state revenue,'' he said. ``Not one government service will be cut.

``What we are doing is giving every economic family a raise and an increase in purchasing power at the grocery store. Economic freedom works and it's time to put it to work building a stronger, more prosperous Oklahoma.''

If approved by voters, the plan would mean that Dec. 31, 2002, would be the last day income taxes would be withheld from Oklahomans' paychecks. The sales tax on groceries also would end then, but city sales taxes would not be removed.

House Democrats and Republicans were briefed on the plan last week.

In addition to eliminating the income tax and 4 1/2-cent state sales tax on groceries, the plan would junk the corporate franchise tax and make the state estate tax mirror the federal estate tax.

To make up for an estimated $2.7 billion loss in revenue, it would apply a 5.9-cent sales tax to scores of services not now taxed.

Senate President Pro Tem Stratton Taylor, D-Claremore, first proposed adopting the Texas tax code early in the 2001 legislative session as a way to make the state more competitive in recruiting companies to locate in the state.

That led to a study by a group of tax experts at the University of Oklahoma and Oklahoma State University of how to implement a new tax code without losing state revenue.

The group listed several options, including raising property taxes. That idea was quickly rejected by both Republican and Democratic officials.

Some of the professors seemed to lean toward adopting a gross receipts tax on business of about 1 percent to replace money that would be lost by doing away with the income tax and food tax.

But Keating administration officials said further study showed that would create problems for some state businesses with slim profit margins and could hinder recruiting out-of-state companies.

House Speaker Larry Adair, D-Stilwell, said last week he is wary of overhauling the tax code during what is expected to be a tight budget