House eyes suspending back-to-school sales tax holiday, cutting state agency sales tax exemptions

Oklahoma State Capitol building

Oklahoma State Capitol

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OKLAHOMA CITY – House members voted narrowly Monday to pass several bills out of a budget committee, including two that would suspend the state’s back-to-school sales tax holiday and eliminate sales tax exemptions for state agencies.

The House Joint Committee on Appropriations and Budget narrowly passed SB 862 Monday evening by 13-12 margin that would suspend the state’s sales tax holiday for back-to-school shopping. Five Republicans joined the committee’s seven Democrats in opposing the measure.

According to Rep. Kevin Wallace and budget committee vice-chair, suspending the holiday for 2017, 2018 and 2019 would bring in about $7.4 million, annually.

“It’s a three year suspension; it’s not permanently doing away with it,” said Wallace.

“Is this ideal? No,” he said. “Can we make some big votes for one revenue measure? Yes.”

Frustrations between House Democrats and Republicans bubbled up throughout the meeting, with much of the bickering centering on the house’s failure to pass a $1.50 tax increase on cigarettes into law after lawmakers on both sides broke party ranks on the vote hours earlier.

After the house vote, senate Republicans passed their own $510 million budget package; a mostly symbolic vote as — by law — all revenue-raising measures must start in the House.

Democrats have called for an increase on the oil and gas well production tax (Gross Production Tax) in exchange for votes on the cigarette tax.

With the state facing an $878 million budget shortfall, legislators have until Friday to pass any revenue raising measures out of the house.

Wallace says the money to fill the budget hole has to come from somewhere if “we cannot get a consensus and a majority of 76 votes” to pass a cigarette tax.

“I’m going to be very to the point,” said House Minority Leader Scott Inman. “Restore our gross production tax to the rate of 7-percent and make it apply to all currently discounted wells and you’ll bring in about $500 million. If you do that, you don`t have to raise taxes on working moms who buy clothes for their kids when they go back to school.”

Wallace says measures like the sales tax holiday suspension wouldn’t require 76 votes to pass on the house floor as they would not be considered revenue measures, but changes to tax policy.

A total of 11 bills, eight from the house and three from the senate, were passed out of the Joint Committee on Appropriations and Budget Monday evening. Two required tie-breaking votes from House Speaker Charles McCall and Rep. Harold Wright.

One of the bills that needed a tie breaker, HB 2404, would eliminate Oklahoma agencies from their sales tax exemptions.

“This is an effort to try to make agencies more efficient with the proceeds of the state; better stewards of the state’s money,” said Rep. Terry O’Donnell, speaking in favor of the bill. “It puts them on the same playing field as every other vendor out there.”

The state’s Tax Commission estimates the bill would bring in approximately $106 million each year. During the meeting, O’Donnell said it’s unclear how much more the bill would cost the agencies in additional sales tax costs, but did say it would essentially cut an agency’s expenditures.

“I think the agencies will survive,” said O’Donnell. “I hope that they’re wise in what they purchase.”

In addition to eliminating the sales tax-exempt status from state agencies, HB 2404 would also include sales to contractors with the Oklahoma State System of Higher Education, Oklahoma Municipal Power Authority and the Office of Management and Enterprise Services. The bill passed out of committee 14-13, with six Republicans joining all Democrats in opposition.

“These gimmicks, these cockamamie ideas, all because we won`t raise the Gross Production Tax (on oil and gas producers)?” said Inman. “At some point you guys got to give in and say, ‘uncle,’ and put the dadgum thing on the board and we can end this madness.”

The committee also passed bills that would tax vehicle title transfers between family members; place fees on cable providers, on-demand video services, digital audio, digital books and fur clothing storage; and tax cigarettes at $0.67 per pack with revenue going towards the general fund instead of being earmarked for healthcare.

The other bill that required a tie breaker, SB 861, would reportedly repeal sales tax exemptions for the wind farm industry. It passed 15-13. A full text of the measure wasn’t publicly available through the Oklahoma legislature’s bill information page, a point Democrats identified as they voiced frustrations about the hastily hearing of the bill. As of early Tuesday morning, the full text had not yet been posted.

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