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Tuesday, August 21st, 2018Last Update: Tuesday, July 31st, 2018 11:05:57 AM

Gov. Fallin Signs Massive Tax Increase

By: Constitution Staff

On March 29, Governor Mary Fallin signed a tax increase package to fund a pay raise for state government school teachers. The package provides a $6,100, or 16 percent, average pay raise for Oklahoma teachers. “This is a very historic day in Oklahoma,” said Fallin. “By signing these measures, Oklahoma will move to second-highest in the region, up from the lowest, in average teacher pay. It is the largest teacher pay raise in the history of the state.” The pay increaxe moves Oklahoma’s teacher pay from 49th place nationally up to 29th place. And, Oklahoma’s teacher-pay ranking improves to 12th in the nation when adjusted for the cost of living. The package also provided for a smaller pay raise for state employees, $2,000 for those making under $40,000 and smaller raises for those with higher pay scales.

HB 1010XX, provided most of the revenue to fund the pay raises. It included an increase of $1 per pack of cigarettes; taxing little cigars at the same rate as cigarettes; raising the fuel tax by 3 cents per gallon on gasoline and 6 cents per gallon on diesel; and raising the gross production tax from 2 percent to 5 percent on all oil and gas wells. The bill passed the House with a $5-per-room tax on lodging establishments with three or more rooms. However, after the tax package was unable to secure enough votes for passage in the Senate, Gov. Fallin and legislative leaders pledged to remove the increased hotel/motel tax via an amended version of HB 1012XX. Taken with other measures passed, the tax increases are expected to provide over$500 million in additional revenue.

The tax increase and pay raise legislation came days before a previously announced “walkout” by teachers and state employees. Despite largely meeting their demands, Oklahoma Education Association (OEA) president Alicia Priest said teachers would continue with their planned walkout and Capitol rally the following Monday.

On April 2, teachers in Oklahoma began the strike (euphemistically called a “walkout” as a labor strike by government school teachers is illegal under state law). The strike continued for two full weeks with teachers demanding additional concessions. But, it came to an end without further concessions from lawmakers. After polling its members, the OEA reported that 70 percent of respondents indicated they were unsure that continuing the strike would lead to further achievement of their goals. They will instead concentrate on electing legislators who will support their demands.

While supposedly an isolated event in the Sooner State, the fact is the Oklahoma teacher strike is just part of a national movement by the left-wing National Education Association (NEA) to energize the national Democratic Party and progressive causes generally. The effort began in West Virginia and spread to Oklahoma, Kentucky and Arizona. It is not surprising, and even understandable, that teachers in Oklahoma are frustrated at a decade of a stagnant economy with no raises (except for annual “step” raises for years of service), but the hard reality is the positions of the NEA and its Oklahoma affiliate are virtually indistinguishable from those held by the Democratic Party and other “progressives.”

One of the new demands of the OEA during the strike was that the governor veto the repeal of the new $5 tax on hotel and motel rooms included in the tax package. But, on April 10, Governor Fallin signed House Bill (HB) 1012XX, which repealed the new tax. She also signed two other bills designed to replace the lost revenue. Fallin signed HB 3375, which allows tribal casinos to use traditional roulette and dice games, which were specifically prohibited since a 2004 vote of the people. Exclusivity fees generated by the change will put substantial additional dollars into state coffers. The governor also signed HB 1019XX, which will require third-party online retailers to collect and remit sales tax back to state coffers. It will affect purchases made through sites like Amazon, when the seller is someone other than Amazon. It is estimated to bring in about $20.5 million.

After the OEA scolded Gov. Fallin for signing the repeal of the hotel/motel tax, the governor explained that it was part of the agreement to pass the pay raise. “The revenue package that funded the teacher pay raises would not have passed the Senate with the required super majority, or three-fourths support, had a bipartisan agreement not been struck to repeal the hotel/motel tax,” Fallin said.

The OEA also wanted an Oklahoma capital gains tax exemption repealed. But, the governor made it clear she supports the voters’ decision in a 2004 statewide election of encouraging investment in Oklahoma through the capital gains tax deduction. The capital gains tax deduction, which was a tax reform measure approved in a statewide vote in 2004, is an exemption from capital gains taxes for property and business located in the state of Oklahoma. The idea was to increase the incentive for people to invest in Oklahoma, and to put Oklahoma properties and businesses on an equal footing with other states.

Fallin said that signing this last group of bills should complete the funding for K-12 public schools for the 2019 fiscal year. She encouraged legislators to turn attention now on other issues, such as criminal justice, and address the financial needs of other core services, such as public safety and health and human services, in finishing work on the 2019 fiscal year budget.

During the strike the governor also signed the $2.9 billion appropriation bill for common education for the upcoming 2019 fiscal year which begins on July 1. The funding marks the largest amount ever appropriated in Oklahoma for K-12 public education and a 19.7 percent increase over the $2.4 billion appropriation bill for the current fiscal year, which ends June 30.

The $2.9 billion education funding contained in HB 3705 includes an additional $353.5 million for teacher pay; $52 million for support personnel pay: $33 million for textbooks: $17 million for the state aid formula; and $24.7 million for flex health care benefits. “This shows again that education is a priority with legislative leaders and me,” said Fallin.

HB 1010XX, the main tax increase bill, passed the House 79-19 on March 26. The 19 representatives who opposed the tax increase were: Bennett (J), Calvey, Cleveland, Coody, Downing, Dunlap, Enns, Faught, Ford (Roger), Gann, Hardin, McEachin, Murphey, Ritze, Roberts (S), Strohm, Teague, West (K), and West (R). It passed the Senate 36-10 on March 28. The ten senators who opposed the tax increase were: Allen, Bass, Brecheen, Daniels, Dahm, Dossett, Ikley-Freeman, Silk, Standridge, and Sykes.

Speaking at a Capitol news conference, former U.S. Sentor Tom Coburn blasted state legislative leaders for pushing through the tax increase. He also helped launch a group vowing a ballot box fight against higher taxes. Coburn, a popular conservative voice for more than 20 years, said state legislators could find the money for teacher pay raises by conducting proper oversight of government agencies and eliminating waste, fraud, and duplication.

The group backed by Coburn is called Oklahoma Taxpayers Unite! and among its leaders are conservative Republican, tea party, and libertarian organizations. Members of the group said they will seek a statewide vote to repeal the tax increases included in HB 1010XX. A veto could be placed on a statewide ballot with 42,000 signatures, which is less than required for most initiative petitions. The group may also oppose the reelection of legislators that voted to raise taxes.

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