Tax agreement near as opposition forms

Saturday, May 14th 2005, 11:57 am

By: News On 6

OKLAHOMA CITY (AP) _ Oklahomans could learn this week what kind of tax cuts they can expect lawmakers to approve for next year and whether they will get an income tax rebate check this year.

Three different approaches to tax cuts were thrown out early in January and February and are the topic of ongoing negotiations between the House, Senate and governor's office as the 2005 Oklahoma Legislature heads toward a busy end.

Taxes are just one of the major issues lawmakers must deal between now and a May 27 adjournment deadline. Others decisions revolve around such issues as workers' compensation, lawsuit reform and funding for roads, education and health care.

Legislative leaders already have agreed on a tax cut amount for next year _ $58 million. Tax-cut discussions now center around such issues as equity, the impact of reductions on future state budgets and which cuts will help the Oklahoma economy.

In February, Gov. Brad Henry proposed a $100 million tax rebate plan that would lead to taxpayers getting checks of $50 to $100 this year, plus $63 million in other tax cuts, including tax breaks for retirees and business.

House Speaker Todd Hiett countered by proposing a permanent cut in the maximum income tax rate from 6.65 percent to 6.25 percent, a $108 million reduction.

The Senate, meanwhile, advocated raising the standard deduction over a four-year period to the level allowed on federal income taxes. The cost would be only $58 million next year but would zoom to $252 million when fully implemented.

``Our negotiations are going very well and I would expect that we are going to reach an agreement and I think it will be soon, obviously. It's time to move these bills through the process,'' said Hiett, R-Kellyville.

Henry said he could not give any details about negotiations, but ``tax rebates are definitely still on the table.''

``I would anticipate there will be a number of agreements next week,'' Henry said Friday.

Besides the major tax cut plans, a variety of other tax cuts, mainly for business, have made it through the House and Senate and are part of the negotiations.

``At this point, I think any combination of things is possible,'' said Senate President Pro Tem Mike Morgan, D-Stillwater. ``We have a lot of communications going on at several levels, exchanging ideas, trying to find common ground for compromise.''

The size of the major tax-cut proposals has drawn concern from a coalition of 51 organizations, ranging from education groups to the American Association of Retired Persons, who are concerned the reductions could harm health, education and social programs.

The coalition, organized by the Community Action Project of Tulsa, an anti-poverty agency, sent a letter to lawmakers last week urging them not to do anything that would cripple needed services in future years if the state has another economic downturn.

``While it is late in the game, we hope that this letter by the coalition has had some success in making legislators aware of how tax cuts fit in the state's long-term budget needs,'' said David Blatt, policy director for the community action agency.

Blatt has favored raising the standard deduction if income taxes are adjusted, saying the proposed percentage cut in the maximum rate would only be significant for the most wealthy taxpayers.

Blatt adds, however, that increasing the Oklahoma standard deduction to the federal level in a short period of time would be costly for a state with many unfunded needs in such areas as health care, education and roads.

Oklahoma's standard deduction, as low as $1,000 for some taxpayers, is a fraction of the federal deduction and has not been raised since 1971, leading to many taxpayers paying a disproportionate amount of taxes, according to Sen. Jay Paul Gumm, D-Durant, Senate Finance Chairman.

Oklahoma's income tax kicks in at $10,000 and critics have long complained that it is regressive, especially in a state that does not exempt groceries from the sales tax.

The Oklahoma Tax Commission says most Oklahomans use the standard deduction in calculating their state income tax liability, meaning they do not itemize taxes on their federal returns.

The issue of tax equity aside, Hiett argues cutting the maximum tax rate will do the most good for the state in the long run because it will enable Oklahoma to better compete for jobs with surrounding states that have lower income taxes.