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Tax increase would help close budget deficit, under proposed bill

OKLAHOMA CITY - A plan to bring the state nearly $500 million in recurring revenue relies on tax increases and closing loopholes that benefit businesses and the wealthy, a state lawmaker said.

Rep. Jason Dunnington (D-Oklahoma City) has introduced House Bill 1279, which takes aim at closing a budget shortfall that's nearing $900 million.

The bill would raise taxes on individuals making at least $200,000 and families bringing in at least $400,000, which Dunnington said is only about three percent of Oklahomans.

If passed, the bill would also require businesses to combine all their tax returns and pay corporate tax on one return.

Right now, Dunnington said, businesses can skirt the laws by setting up subsidiary companies in tax-free states and moving their assets so they pay less.

"All we're saying is if you've made money in Oklahoma then pay the corporate tax in Oklahoma, because that benefits all Oklahomans," he said. "It benefits things like infrastructure, it benefits things like education, public safety."

Basically, Dunnington said, Oklahoma is giving more than it's getting.

He points to statistics that show the state paying more in business tax credits than it received in corporate income tax four of the last 12 months.

"We've just gotten out of balance," he said. "We've given a lot of breaks to businesses and corporations in Oklahoma, and it's time for them to pay their fair share."

A voter-approved program, pushed by Democrats more than a decade ago, is also in Dunnington's crosshairs.

He's also taking aim at the Oklahoma Capital Gain Deduction - a tax break for individuals and companies that sell things like stocks or rental properties.

In 2014, 18,000 people filed for the credit he said, costing the state $157 million.

By contrast, the Earned Income Tax Credit slashed last year cost the state $27 million.

About 330,000 people filed for the EITC.

"It just seems a little out of place that we gave such a ginormous tax reduction to some of the wealthiest Oklahomans and penalized some of the most vulnerable," Dunnington said.

Dan Bomhoff, a tax partner at HoganTaylor LLP, said capital gain deductions can benefit individual investors but typically help businesses the most.

"It's definitely saved taxpayers primarily in Oklahoma-based companies and Oklahoma residents," he said. "A lot of times, those small business owners will start a new company, a new business and use the tax savings to invest in the economy even more."

The Oklahoma Council on Public Affairs disagrees with the Democratic lawmaker's approach.

"Increasing taxes is always the wrong policy to try to help the most vulnerable," said President Jonathan Small. "Where do jobs come from? They come from entrepreneurs who take risks."

Oklahoma's unemployment rate is already higher than the national average, which Small said indicates businesses still need help.

"Penalizing work is always the wrong solution," he said. "It would definitely be devastating to the most vulnerable who are trying to seek job opportunities in Oklahoma to increase taxes."

Instead, Small would rather see lawmakers eliminate things like subsidies for wind energy.

Dunnington said the idea is definitely not off the table.

He still has hope though for his bill, which would only require simple majority votes on two of its three aspects.

Revenue-generating bills and tax increases generally require a three-fourths majority to pass.