Raising revenue not as hard as we’re told
June 21, 2012
On March 10, 1992, a majority of Oklahoma voters approved State Question 640 (SQ640). The state question amended the state constitution to require:
- All bills for raising revenue shall originate in the House of Representatives
- No revenue bill shall be passed during the five last days of the session
- Voter approval of bills raising revenue, or
- ¾ approval of bills raising revenue by both the House and Senate and action on the bill by the Governor
Oklahoma judicial interpretation of this provision and its application to “fees” is at times muddled, but generally SQ640 has been accepted to apply to “revenue bills” wherein on the bill’s face, it appears to have a primary purpose of raising revenue for the general funding of government. So a fee strictly for the reimbursement of expenses for regulation, or to provide copies or reimburse the state for a direct service provided, are not subject to this provision. A “revenue bill” or a fee that has a secondary purpose of the reimbursement mentioned above, but a significant purpose of providing revenue to the state, would be subject to this provision.
Overall, this provision has provided some protection to Oklahomans by requiring more broad support and careful consideration of measures that raise revenue. For example, during the last five days of the 2010 legislative session, the legislature and the governor in a bipartisan manner tried to sneak past a one percent "fee" on most health insurance claims purely for the purpose of funding the state's Medicaid program. The "fee" was overturned after a successful challenge of the law by then-state Insurance Commissioner Kim Holland. (Full disclosure: I worked for Commissioner Holland at the time).
But contrary to what progressives, tax users, and even rating agencies might have you believe, SQ640 has not prevented the state from raising revenue or even raising taxes.
For example, House Bill 3152 passed by the legislature in 1998 reduced the top income tax rate from 7 percent to 6.75 percent. The final vote on the bill was 99-1 by the House and 45-0 by the Senate. One of the bill's provisions required the state Board of Equalization to review revenue increases or declines after a year of the tax cuts. If future revenue amounts fell below a certain level, the rate automatically increased back to 7 percent. In 2004, six years after the bill's passage, of the bill, the rate increased back to 7 percent because of the findings of the state Board of Equalization. So even after SQ640, state personal income taxes have been lowered and subsequently increased.
This is not the only time that a "revenue bill" has passed the Legislature since SQ640. A review of legislation from 2009 to 2011 reveals that when lawmakers determine revenue increases are "really necessary," lawmakers can make it happen. In 2009, at least four bills were enacted that raised undedicated revenue for the general revenue fund. The total amount expected to be generated from these funds for the general revenue fund exceeded $22.4 million (for one fiscal year).
In 2010, at least four bills were enacted that raised undedicated revenue for the general fund. The total amount expected to be generated from these funds for the general revenue fund exceeded $50.3 million (for one fiscal year). The 2010 legislative session also included a host of other "revenue enhancements." In 2011, a provider tax was overwhelmingly passed by the Oklahoma legislature with over ¾ majorities in both the House and the Senate and signed by the governor. This new tax is expected to generate $152 million in state funds and $268 million in federal funds per year.
Clearly, if the Oklahoma legislature wants to raise revenue it can do so and has done so. It should be noted that this ability to raise revenue hasn't helped Illinois' rating.
Progressives, tax users, those who believe that state income tax rates don't matter, and those who believe that progressive income taxes are necessary to redistribute income will probably continue their scare tactics. Some of these naysayers opposed Right to Work, lawsuit reform, repealing the death tax, cutting the state personal income tax more than 20 percent over the last decade, and other pro-growth policies.
Raising revenue is not as hard as we've been told. SQ640 has allowed this to happen in the past. The legislature or a vote of the people can raise taxes or revenue when they deem necessary. If the legislature can't meet the provisions of SQ640 and voters reject a measure raising revenue, that's a pretty clear sign. The 2012 legislative session actually showed that cutting taxes is a lot harder than promised.