Budget & Tax, Law & Principles

Free Market Friday: A threat to prosperity

October 17, 2014

Michael Carnuccio

This week, state Supreme Court justices heard arguments regarding the constitutionality of Senate Bill 1246, which cuts the state personal income tax if revenue targets are met. Those who oppose personal income tax cuts in Oklahoma are voicing their support for this challenge.

Many have forgotten March 10, 1992, when a majority of Oklahoma voters decided with State Question 640 that state lawmakers’ ability to raise taxes and revenue needed to be restrained. The subsequent constitutional restraint requires that bills creating or increasing taxes, or making new revenue sources for the purpose of funding government, start in the House of Representatives. Also, they must be submitted to a vote of the people or receive three-fourths approval by both legislative bodies.

The initial challenge was filed by attorney Jerry Fent. Fent has challenged several provisions passed by lawmakers. Some of Fent’s prior challenges have been supported by fiscal conservatives. However, Fent is echoing what he did when challenging House Bill 2562, which prevented a 600-percent gross production tax increase. Fent is making the case that any bill related to taxes or revenue, regardless of whether or not it increases taxes or decreases taxes or revenue, is subject to SQ 640. Fent’s interpretation violates the plain wording of the amendment, intent of voters and precedent of previous court rulings on the matter.

What’s alarming is the new line of questioning by state Supreme Court justices regarding the intent of SQ 640. Based on news reports, a number of questions seem to indicate they believe SQ 640 applies to any bill dealing with revenue. Such thinking violates precedent. If a subsequent ruling reflects such rationale, this will have grave consequences on the ability to provide taxpayers relief in the future.

If the court rules according to Fent’s interpretation, there could be serious consequences. Appropriation bills, minor or technical amendments to revenue-related statutes, bills lowering fees and prior personal income tax cuts, business tax cuts, estate tax cuts, credits and deductions for seniors, and retiree and veteran tax cuts could all be challenged and undone.

A ruling in Fent’s favor sets a precedent benefiting only those who want to undue previous tax relief, such as the gross production tax cut. This tax-cut challenge, and any ruling in its favor, is most assuredly a threat to all.