Governor focuses on overhauling state tax codes
OKLAHOMA CITY — Gov. Mary Fallin proposed changes to state sales tax exemptions and use taxes, as well as applying a new tax on cigarettes Monday as legislators started dealing with at least a $900 million budget hole this session, and a revenue failure that has already caused state agencies to make cuts.
In her sixth State of the State address, the governor proposed a $3,000 pay raise for teachers and reforms to Oklahoma’s criminal justice system that imposes strict mandatory sentences for minor drug offenses.
Fallin said the state’s sales tax code is antiquated, and provides too many exemptions under its current structure. Instead of raising sales tax rates to make Oklahomans have the highest tax burden in the country, Fallin proposed looking at the current structure and reforming it, generating $200 million a year for the state.
“If we don’t adjust our tax structure to reflect this change in commerce, there will be increasing pressure to raise government revenue in less palatable ways,” Fallin said. “If structured properly, this approach could present an opportunity to reduce the state sales-tax rate, which is currently the sixth-highest in the nation.”
Fallin said the state has $8 billion in sales tax exemptions, something lawmakers must address, she said.
“We’ve asked around, and nobody can remember any of these ever getting repealed, let alone reviewed,” Fallin said. “Surely some of that $8 billion can be revisited.”
Fallin also proposed increasing the tax on cigarettes to $2.53 from $1.03 per pack, something she said would generate $181.6 million in revenue.
Modernizing the tax code and increasing taxes on cigarettes would not solve all the problems, Fallin said. Her executive budget also included reductions in funding to most state agencies by 6 percent, with 3 percent cuts to agencies that provide what she called critical core services.
Fallin also proposed major changes to the sentencing guidelines for minor offenses related to nonviolent drug convictions.
“Oklahoma’s drug possession sentences haven’t deterred substance abuse and have filled our prisons to over capacity,” Fallin said. “These sentences, while well intentioned, tend to send some nonviolent offenders into prison for years and years, where they live alongside violent offenders whose bad influences can make nonviolent offenders worse.”
Fallin’s proposal would lower mandatory minimum sentences for drug convictions from anywhere to no jail time to up to 10 years, where under current law mandatory sentences can sometimes carry a life sentence.
“My 40-member task force of law enforcement professionals recommended these proposals, which if fully implemented could prevent thousands of people annually from being a felon for life, which makes it harder for them to get a job and many times leads to the breakup of their family,”Fallin said. “State prisons are at 119 percent capacity. We just can’t keep doing what we’ve been doing. It’s not working.”
Fallin said her top priority is education. Her budget would allow for teachers to receive a permanent $3,000 raise by appropriating an additional $178 million. She said she would be able to do that without raising sales tax by 1 percent. Additionally, Fallin proposed consolidating some school districts in the state that are underperforming, while implementing a plan to allow parents the ability to use state aid dollars to send their children to private schools.
“All students learn differently and should have the opportunity to attend a school that has the best environment for each student to be successful,” Fallin said. “This can be accomplished through Education Savings Accounts, while still protecting school finances.”
Fallin also asked lawmakers to approve an additional $120 million to repair the crumbling state Capitol. That is on top of the $120 million bond issue that lawmakers already approved in 2014. Fallin pointed out that the Capitol building will be turning 100 years old in 2017, and that it is time to finish the job of restoring the building to its former glory.