Okla. lawmakers resume study of state tax breaks

OKLAHOMA CITY -- Certain state tax credits offered to the coal and wind power industries in Oklahoma came under scrutiny Wednesday by a task force examining some of the hundreds of tax breaks, incentives and deductions the state hands out each year.

The panel of lawmakers and other state officials analyzed a $5-per-ton state tax credit for the production and purchase of Oklahoma coal, as well as tax credits offered to producers of electric power at zero-emissions facilities and for the manufacturing of small wind turbines.

The task force is studying the economic impact of incentives to determine if some could be eliminated to help support a state budget that has seen revenue shortfalls of hundreds of millions of dollars in recent years.

Rep. David Dank, chairman of the Task Force on State Tax Credits and Economic Incentives, said the fact that the tax credits being analyzed are transferrable is particularly troubling. This means the tax credits are frequently sold for less than their value to reduce the tax liability of companies in an unrelated industry.

"You all know that this is a major concern," said Dank, R-Oklahoma City. "State policy has apparently created a whole new industry of brokering and buying and selling transferable tax credits, like a big swap meet with millions being traded back and forth.

"Is it really good stewardship of tax dollars to have these tax credits handled this way?"

Clay Hartley of Phoenix Coal Company, one of the state's largest coal producers, said the tax credits are needed to keep the industry competitive with other states and help companies remain viable with increasing costs associated with government regulations. Hartley predicted the coal industry, which employs about 1,150 full-time workers in the state, would be dramatically reduced without the tax credit.

"We would gradually die off here in Oklahoma," he said. "I think we'd still have some type of business in Oklahoma, but it would be on a much smaller scale."

Dank said industry projections show the coal tax credit is costing the state an estimated $10 million annually, depending on the amount of coal produced, and that about 30 insurance firms bought about $56 million in coal credits from 2005 to 2009 to reduce their state tax liability.

"These credits are used with no accountability, no transparency, no auditing and no controls," he said. "We have no idea what this money is used for and we see no evidence of any jobs created with it."

House and Senate leaders, along with Republican Gov. Mary Fallin, have said they support Dank's effort to examine the various tax expenditures offered by the state and to eliminate those that are not definitively linked to job production.

Facing a budget shortfall of $1.2 billion in 2010, GOP leaders in the Legislature and then-Gov. Brad Henry, a Democrat, agreed to a two-year moratorium on more than a dozen tax credits to help plug the budget deficit, but many of those credits are scheduled to come back on line next year.