Last week I wrote about two new taxes that were recently approved by the Legislature. Because these new taxes did not meet the requirements of the Constitution, I believe they will be thrown out by the courts.
The damage from this legislative session was not limited to just these two items. There were a series of smaller tax increases that were also unconstitutional, but might not draw a legal challenge simply because they are much smaller in scope -- a fact that does not make them any more acceptable.
Here is just a small sample selection.
When they approved House Bill 2348, legislators decoupled Oklahoma's standard income tax deduction from the federal standard deduction. Currently Oklahoma's standard deduction increases whenever the federal standard deduction increases. This increase takes place when the value of your money drops due to inflation.
The effect of this action appears intended to deprive Oklahomans of their ability to claim a standard deduction that reflects the impact of inflation and the true value of money.
Legislators believe this will take nearly four million dollars away from taxpayer in the next year alone. In future years, as inflation continues to grow, so will the amount taken from Oklahoma taxpayers.
Additionally, Oklahoma lawmakers were very concerned about the potential impact of federal tax reform efforts. The current tax reform plan in Congress will increase the standard deduction and Oklahoma lawmakers didn't want to risk joining in with the federal counterparts in the effort to reform the tax code. Ironically enough, Congress appears much more cognizant of the plight of taxpayers than does the Oklahoma Legislature.
House Bill 1845 added a $5 increase to the cost of a driver's license. This new increase is expected to take just under 20 million from Oklahoma taxpayers each year. It's the continuation of a multi-year trend by which legislators have continually increased the taxes that motorists must pay. As legislators have increased these taxes, they have simultaneously raided the funds that pay for the state and county road construction projects that would have improved the roads upon which motorists drive.
House Bill 2357 is indicative of a gimmicky legislative cash grab that I don't believe will be effective. It increases a particular business fee from $15 to $150.
In my view, these types of massive fee increases risk unintended consequences. They discourage business activity and potentially result in a loss of revenue to state government. Those businesses that would otherwise pay the $15 fee might choose to not pay the fee once it increases to $150.
This is a fee related to businesses that reinstate their organizational documents after they have been suspended by the Tax Commission. These are likely small businesses which may just barely be surviving and the new $150 reinstatement fee might be the final straw that keeps the business from reconstituting and staying legal.
When the state puts these businesses out of business they are potentially ending the life of a business that might have gone on to turn the corner, become a great success, and generate millions in economic activity.
While state legislators are counting on this new fee to generate 750,000 dollars per year, in my view it could actually end up costing the state millions and depriving the state of both jobs and free market activity.
These are just some of the bad decisions made by the Legislature this year.
There is good news, too, though. Next week I will write about punitive tax proposals that did not win approval.