Tax-cut bills roaring out of committees

Saturday, March 4th 2006, 12:18 pm

By: News On 6

OKLAHOMA CITY (AP) _ Hundreds of millions of dollars in tax-cut bills are roaring out of House and Senate committees in this election year, but most do little to help low- and moderate- income Oklahomans who need tax relief the most, critics say.

The main emphasis so far this session has been on cutting the maximum state income tax rate of 6.25 percent and reducing or eliminating the estate tax. Both measures would mostly aid the wealthiest taxpayers, but their sponsors say the bills are vital to economic development.

Tax equity has been hardly mentioned and that's unfortunate, says David Blatt, policy director for the Tulsa-based Community Action Project, an anti-poverty agency.

Blatt said a report released last week by the Washington-based Center on Budget and Policy Priorities shows Oklahoma is one of 19 states where a family of four living below the $19,400 federal poverty level owes state income taxes.

``None of these proposals provide much benefit to the average, low-to-moderate income working family,'' he said. ``If you are taking home $7 or $10 or $12 an hour, these proposals are not going to help you deal with rising costs and growing needs.

``Low-income working families are noticeably absent from measures that both chambers have been pushing.''

Republican House Speaker Todd Hiett, R-Kellyville, has proposed a $235 million tax reduction package which would pare the income tax to 5.85 percent at a cost of $130 million and eliminate the estate tax, an $87 million item.

Democratic Gov. Brad Henry has offered a more modest plan, about $62 million, which would eliminate the income tax for most retirees, a $35 million cut, reduce estate taxes by $23.4 million and establish a sales tax holiday for back-to-school purchases, a $3.8 million cut.

The Democratic Senate leadership signed off on the sales tax holiday and also a sales tax exemption for NBA tickets and tickets to other pro sports and has kept its options open on other tax proposals.

Among the tax-cut bills approved by the Democrat-controlled Senate Finance Committee is a $481 million income tax reduction sponsored by Sen. Scott Pruitt, R-Broken Arrow. The committee also approved another GOP-backed bill to eliminate the estate tax over three years.

``We have decided that we're going to leave all the options on the table for negotiations later in the session,'' said Sen. Jay Paul Gumm, D-Durant, finance chairman.

Sen. Kevin Calvey, R-Del City, chairman of the House Revenue and Taxation Committee, has a similar approach. He said he would try to keep most tax cuts alive ``unless it is an outrageous deal.''

Most of the tax bills are expected to easily pass on the House and Senate floors since they will be headed for joint conference committees for further work. That will allow lawmakers to brag about voting for the tax cuts, even though those bills may not emerge later in the session for a final vote.

One bill that did not make it out of the Senate committee, to Blatt's dismay, was a proposal to double the state's Earned Income Tax Credit that is now set at 5 percent of the federal EITC. It would have cost $27 million.

``We know that the EITC is the single most effective public policy in helping raise working families with children out of poverty,'' Blatt said.

Some lawmakers do not like the EITC because it allows the working poor to get large rebates, sometimes more than taxes that were withheld. Supporters see it as an important tool in keeping families off welfare.

``That was a party-line vote when all of our (Democratic) members were not in the room,'' Gumm said of the defeat of the EITC bill in his committee.

In the past, Republicans in the House have proposed eliminating the sales tax on groceries, which would greatly benefit the working poor.

But that proposal has not been advanced by the GOP leadership since Republicans took over the House in 2004 for the first time in 80 years.

Rep. Thad Balkman, R-Norman, is one Republican who has been advocating that change since he came to Legislature six years ago, but he says it hasn't been a priority of either the Democratic or Republican leadership.

``I've been kind in a lonely position,'' Balkman said. ``Everybody says they like the idea, but I've had a hard time getting the grocery tax plan atop the tax-cut agenda.''

However, he said Calvey has agreed to allow his measure to be heard in committee this week.

Most states exempt groceries from the sales tax or have no sales tax, but Balkman said its $200 million cost has made it a difficult proposition to sell in the Oklahoma Legislature.

Another reason, he said, is that ``there is no special interest group that is lobbying for this. Typically, the big donors are more concerned about income and estate taxes. The average Joe can't afford to take off work and come to the Capitol to lobby the Legislature to abolish the sales tax on groceries.''

Balkman said with a $600 million budget surplus, this is the year when policy-makers could approve the exemption, which he said would save the average family of four at least $200 a month.

Blatt said on the positive side, the Legislature included in a record $150 million tax cut last year a plan to double from $2,000 to $4,000 the standard deduction most low and moderate income taxpayers use on their income tax forms. The deduction is still far below the deduction allowed on federal income tax returns.

Calvey said his emphasis on cutting the top income tax rate is geared toward generating economic activity in the state that will eventually lift the standard of living of all Oklahomans.

For his part, Gumm said Senate negotiators will insist on a balanced tax-cut plan when final decisions are made. ``Senate Democrats are more concerned with empowering the middle class and lifting up working families,'' he said.