HEADING TOWARD TAX REDUCTION - IS THERE A FLAW?

++ AGENDA FOR THIS WEEK’S MEETING
++ ANNOUNCEMENTS
++ HEADING TOWARD TAX REDUCTION - IS THERE A FLAW?


++ AGENDA FOR THIS WEEK’S MEETING

Our 12 noon luncheon for Wednesday, March 14th will be held at
Italiano’ restaurant, 4801 North Lincoln in OKC. A huge thanks to
Richard Engle for conducting our meeting this past Wednesday and sure
hope everyone enjoyed Avi Lipkin. I had to be at an Aunt’s funeral in
Southwestern Oklahoma, and therefore really missed hearing Avi. Also,
thanks to the 30 or so volunteers who went to the Capitol a week ago
Thursday to lobby Senators regarding SB 1629 and SB 999. It appears as
though those efforts were well received as there was an announcement
on Thursday of last week that SB 1629 will be taken off the docket
until after the U.S. Supreme Court rules on Obamacare. Depending on
that outcome, Oklahoma lawmakers will review other options regarding
the health care insurance exchanges.

Toward that end, I have invited State Senator Gary Stanislawski (R-
Tulsa) to speak at our meeting regarding what was trying to be
accomplished through SB 1629 and going forward what might be some of
the other options. We have had Amanda Teegarden present valuable
information on this subject and I believe it is important to hear
Senator Stanislawski’s perspectives on the issue as I had nearly an
hours conversation with him a week ago Thursday. We will try to keep
this segment to 20-25 minutes including Q&A.

Our main speaker this week will be Jonathan Small, talking about
surplus monies and how they might be used to repair the Capitol and
build a new Medical Examiners’ office in Edmond, rather than incurring
additional debt. In addition he will also discuss the real
possibilities regarding the elimination of the state income tax, how
that fits and why it is likely to have a positive impact on our
economy. This meeting will be jam packed with information, so arrive
early if possible as we will try and hit the ground running right at
12 noon.

++ ANNOUNCEMENTS

* TUESDAY EVENING - ADA AREA - The Ada-Seminole area tea party
will hold their monthly meeting this Tuesday evening, 6:30 p.m. at the
Ada Chamber of Commerce building, 209 West Main street in Ada.
Speaking will be State Senator Gary Stanislawski, on defending the
Republic and then 2nd District Congressional candidate Wayne Pettigrew
will speak about his campaign.

* WEDNESDAY NOON - TULSA AREA - The Tulsa County Republican Men’s
Club will hold their monthly meeting, 12 noon, on March 14th at the
Hibachi Grill & Buffet, 8110 East 74th Street on Memorial Drive.
Speaking will be Lt. Col. (USAF ret.) Jim Mazzei. Jim is the father of
State Senator Mike Mazzei (R-Tulsa).

* THURSDAY EVENING - TULSA AREA - OK2A (Oklahoma 2nd Amendment)
will hold their monthly meeting, 6:30 p.m. at 2A Shooting Center,
located at 4616 East Admiral Place in Tulsa.

* THURSDAY EVENING - OKC AREA - Dr. Steve Kern, pastor of Olivet
Baptist Church in OKC, will be debating an OU graduate student this
Thursday evening, 7:00 p.m. on the question, “Should Intelligent
Design be taught to our children in public schools? The debate will be
held in the College Union on the campus of Oklahoma City Community
College (OCCC), located just South of I-240 on May Avenue in OKC. The
previous debate on a different subject produced a packed room, so you
may want to arrive a little early. This will be an excellent
opportunity to understand what Intelligent Design really is and what
it is not. I doubt you will hear the truth of the matter from the
graduate student.

++ HEADING TOWARD TAX REDUCTION - IS THERE A FLAW?

Between the Governor, Senate and House members there are several tax
reduction ideas that have become bills to consider. They generally
want to reduce the state income tax over time, perhaps even
eliminating the tax altogether. They basically propose savings through
government modernization, reducing or eliminating non-core government
functions, reducing or eliminating tax subsidies and a dependence on
new growth monies produced from a growing economy. The idea is that
the reduction or elimination of state income taxes will stimulate the
economy and leave more of people’s hard earned money in their own
pockets to do with as they see fit, rather than have government spend
their money the way government wants to spend it.

However, I question if the personal income tax is a higher priority to
reduce or eliminate than reducing or eliminating our corporate income
taxes, that is if you really want to stimulate the economy?

As the debate is developing, those receiving government subsidies are
working overtime to convince lawmakers as to how valuable and needed
their subsidy or special tax treatment happens to be toward the
economy or people of Oklahoma.

An interesting case in point is the Hollywood corporate welfare made
available to film makers who determine to shoot all or parts of a film
in Oklahoma. There is currently a cap of $5 million dollars each year
to be used as an (economic development) kick-back scheme for film
makers producing movies in Oklahoma.

The advocates of the program point out that these (generally) out of
state film producers spend a lot of their capital in Oklahoma, paying
for the construction of sets, furnishings and equipment as well as
salaries for the large numbers of locals used as extras in the movies.
They also point out how much is spent in local restaurants, stores and
lodging for employees during the time spent shooting the films. In
addition, a lot of sales taxes are collected and state income taxes
are paid to the state from the salaries of those working on the film.
Therefore, the advocates want the $5 million cap to be more, even much
more, as they “claim” the kick back money spent is far less than the
value it produces.

Just for the sake of argument, lets say they are correct in their
declaration that the kick backs are a net positive for the state. So
how will eliminating the personal state income tax stimulate the film
making industry and grow our economy?

I will suggest it will not stimulate the economy, at least not in the
film industry, since the principle business is located out of state
and the principles of the film company (which will likely be the stock
holders of a corporation) will probably not pay any personal state
income taxes in Oklahoma. They are likely to pay corporate taxes, but
the stock holders are not likely to pay personal income taxes. Of
course directors, set crew, actors and extras will all have to pay
state income taxes, but that is out of their pay checks, the
corporations don’t pay those taxes, the working people do. So again,
how does eliminating the personal state income tax help the
corporations?

It does not help. So if there is no tax advantage to the corporation
and no kick back incentives for the corporations (remember we are
proposing the elimination of the kick backs), what is to keep them
from producing their films in another state that gives them corporate
tax deductions or other direct incentives? Many other states are
offering some kind of incentives, so the film industry is likely to
move on, that is unless we can find a way to offer incentives in
another way.

I have said all that to say this, perhaps we have the cart before the
donkey. Maybe our first priority should be the elimination of
corporate taxes, before we start eliminating personal income taxes? If
we were to do so, we could trade away the kick back scheme for the
elimination of corporate taxes. Eliminating corporate income taxes
would benefit the movie industry, whereas eliminating personal income
taxes would not.

Currently, there is one movie production planned for this year that
could consume all the $5 million tax credit. If that occurs, what is
left for the other dozen or so prospects wanting to make movies here?
If however, we eliminated their corporate income taxes, there would be
no limit on the number of movies made in Oklahoma as they would all
have an incentive to produce here and not only would we not need to
raise the cap of $5 million, we could eliminate that expenditure and
still have an incentive for every movie produced in Oklahoma.

Another point, eliminating the corporate tax would be an incentive for
every kind of corporate industry, whether their corporate office was
located in Oklahoma or out of state. Every profitable corporation
would benefit by having a lower cost of doing business in Oklahoma.
That would make everything we make or do in Oklahoma more competitive
in a national or international economy. This would really be a free
market way to stimulate our economy and really see job growth for
Oklahoma. Also remember, when unemployment goes down and employers
compete for a smaller number of workers, worker salaries increase,
which is good for those in the work force.

Another thing to consider, the state of Oklahoma receives much less
revenues from corporate taxes than it does from the personal income
tax. Therefore, it would be an easier deal to eliminate the corporate
income tax than the personal income tax.

In fact, it would fit on the balance sheet so much better, that we
could get there much faster and then start working on the personal
income taxes. Perhaps we could do some of each at the same time,
though it would make more sense as far as improving the economy and
producing more jobs, to totally eliminate the corporate income tax
first.

This is especially true for any kind of manufacturing corporation,
large or small, while a small service business, like what I operate,
would be better off, tax wise, to eliminate the personal income tax
first. However, I would gladly give up some benefit for myself for the
better way and see our economy boom. Especially, if I also knew we
would start working on the personal income tax after we eliminated the
corporate income tax.

So why have we gotten our tax cutting priorities out of order? I can
only speculate, but most likely, it is because many citizens have been
conditioned to have “wealth envy” toward those “evil corporations”.
Many people see the wealth of corporations such as Chesapeake or Devin
and foolishly believe that corporations should be taxed more, not
less. Their economic ignorance, blinded by their wealth envy, causes
them not to understand that corporations consider taxes as overhead
and as such they adjust the price of their goods or services to cover
that overhead, and thus the purchaser (we the people) actually pay the
tax, not the corporation. The corporation simply becomes the funnel or
tax collector, not a tax payer, for the government. Always remember,
the consumers are the only ones who really pay taxes, not
corporations.

Therefore, it would not be nearly as popular in the minds of citizens
for politicians to cut corporate taxes. It will be far more popular to
cut personal income taxes rather than corporate income taxes, even
though cutting the latter will be far more valuable for the sake of
the economy, more jobs and increased salaries.

Governor Fallin has said eliminating our state’s personal income tax
will send a message to the rest of the nation that Oklahoma is serious
about becoming business friendly. Just think what kind of a message it
would send if we announced that within, say 3 years, we would
completely eliminate corporate income taxes as well as all franchise
taxes in Oklahoma (in some cases franchise taxes cost more in
compliance and collection costs than they produce in taxes).

Of course in that scenario, it would take real leadership. It is a
harder sell to an economically ignorant public. The Governor and
Republican lawmakers would have to go out into the highways and byways
educating the public on the superiority of eliminating corporate taxes
first and then work on cutting personal income taxes later.

It would take work on the part of Republicans and all the while the
Democrats will scream and holler about how much the Republicans cut
taxes for their rich buddies and keep the tax burden upon the backs of
the poor and middle class, yada, yada, yada. In other words it is a
harder sell politically to the public but a much easier and more
valuable fit economically.

Changing direction now will be harder than if they would have started
out on the right path to start with. Also, based on the many
candidates we have interviewed over the years, many Republican
lawmakers don’t even understand the superior value of cutting
corporate taxes over personal income taxes and that is a disturbing
problem.

I look forward to seeing everyone this Wednesday.

Charlie Meadows
Charliemeadows7@gmail.com