Governor’s Salary should be lower

According to howmuch.net, Oklahoma’s governor makes $147,000 which is one of the highest in the region. Here’s what other surrounding state’s governors make:

Texas: $150,000

Arkansas: $86,890

Missouri: $133,821

Kansas: $99,636

Colorado: $90,000

In fact, the governor in Oklahoma is the 20th highest paid in the country (as of 2016) and makes more money than the governors in North Carolina, Florida, Minnesota, Utah, and many more.

If I ran for governor, I would ask the Board of Legislative Compensation to change the salary to $87,000 which would rank about 48th in the nation. Representing your state in any capacity should be a service, not a career.

Total cost savings: $60,000 or 6 raises at $10,000 each

Tax credits for teachers

I want to live in a world where DonorsChoose.org doesn’t exist. I want to live in a world where teachers don’t spend anywhere between $500 to $1000 (in some cases much more) of their own money to have the supplies they need to educate our children.

Today, educators can deduct approximately $250 of their costs on their taxes. However, I propose a tax credit of up to $500 reimbursed by the state.

Additional costs: As of 2013, there were 41,775 teachers in Oklahoma. At $500 per teacher, the additional costs would be approximately $21,000,000.

Why add additional costs? We need to stop losing great teachers to other states. I’m not aware of any other state that provides such a benefit. Simply giving a pay raise to teachers isn’t enough. The state legislatures can write off a multitude of expenses incurred during their 4-month session. There’s no reason why teachers shouldn’t be credited back for expenses that are necessary to perform their jobs.

Update on 1/24/2019: OK HB1359 bill was introduced to provide $500 tax credits to teachers: https://legiscan.com/OK/bill/HB1359/2019

Remove the Capital Gains Tax Deduction

According to Dr. Cynthia Rogers, a professor of economics at the University of Oklahoma, the capital gains tax deduction is a tax loophole that averages over $100 million in lost tax revenues per year. In fact, the net cost between 2010 and 2014 was $465 million dollars. In 2014, only 2.4% of individuals with a federal adjusted income of $50,000 or less claimed the deduction. Individuals with incomes over $1 million claimed about 64% of the deduction available.

You can read more about the proposal from Cynthia Rogers here: https://okpolicy.org/capital-gains-deduction-expensive-loophole-benefiting-small-number-oklahomans-guest-post-cynthia-rogers-ph-d/

Total cost savings: approximately $100,000,000 per year or 10,000 raises at $10,000 each.

More information on the Capital Gains Tax Deduction

In 2015–2016, according to the Oklahoma Tax Commission Tax Expenditure Report, there were 18,586 returns that claimed the “Oklahoma Source Capital Gain Deduction” to the tune of $105,325,000. There were 507,329 Itemized returns that year along with 1,259,220 Standard Deduction returns. Therefore, out of 1,766,549, about 18 thousand people claimed the capital gain deduction. That’s about $5,666 per return. 1.052% of the taxpayers in Oklahoma claim this deduction.

Increase Mixed Beverage Tax by 0.5%

Mixed beverages are currently levied at 13.5% on the total gross receipts. According to the 2016–2017 review of taxes and collections, this brought in approximately $54,351,062.49 worth of revenue to the state. I propose we increased this by 0.5% to 14%.

Total additional revenue: 0.5% increase on $54,351,062.49 would be approximately $271,755.31 per year or 27 raises at $10,000 each.

Increase Cigarette Tax by $0.75 per pack

Currently, cigarettes are taxed at $1.03 per pack. Little cigars are taxed at $0.72 per pack. According to this article, a $0.75 per pack increase to cigarettes would generate an estimated $135 million annually. Additional revenue could be obtained by increasing the tax on little cigars. According to House Bill 1033xx, if little cigars were taxed at the same rate as cigarettes, there would be an estimated increase in tax collections at about $1,665,000. Since House Bill 1033xx estimates cigarette tax collections increases at approximately $243,125,000 (much higher than in the article noted above), it’s safe to assume that the little cigar tax collections would net closer to approximately $700,000.

Total additional revenue: approximately $135,000,000 per year from the cigarette tax or 13,500 raises at $10,000 each. An additional $700,000 per year from the little cigar tax would provide for 70 raises at $10,000 each.

Flip Oklahoma Lottery Split to 30% for Winners and 70% for Education

According to the financial report June 30, 2017, and 2016:

Revenues from lottery games totaled $151,502,503 and $189,621,594, respectively, for the fiscal years ended June 30, 2017 and 2016. The OLC returned $73,342,027 and $95,517,232 to winners of lottery games; paid commissions and incentives to retailers totaling $10,042,954 and $12,421,019; incurred other game related expenses of $8,665,829 and $7,985,458; and had operating expenses of $4,818,714 and $4,465,112 for each of the respective fiscal years of 2017 and 2016

Of the $151 million in revenue from lottery games, $73 million went to the winners of the games. That means 48% of the revenue went to the game winners alone. 6% of the $151 million went to paid commissions and incentives for retailers. Game related expenses accounted for about 5.72% and operating expenses accounted for about 3.181%.

According to this article, for every ticket sold, 70% goes back to the jackpot and 30% goes to education. That leaves about $60 million for education. $30 million goes to Oklahoma’s state colleges and $30 million for schools.

I propose that we flip it and have 30% of each ticket sold go to the jackpot and 70% go to education. Why are the winners of the lottery games receiving more money than is going to education?

Total additional revenue: putting approximately 40% extra into education would net an additional $24,000,000 in education funding. Since that’s split between schools and state colleges, it’s about $12,000,000 per year or 1200 raises at $10,000 each.

Decrease Oklahoma Lottery Funding to Higher Education

With the increase in educational funding noted above for the Oklahoma Lottery, I propose that the split between schools and state colleges change from 50/50 to 75/25.

Total additional revenue: With the additional $24,000,000 in education funding, instead of only receiving $12,000,000 per year, there would be an additional $6,000,000 in funds per year or 600 raises at $10,000 each.

Why decrease funding for higher education? Many of these institutions can generate revenue through other means like tuition and fundraising. The primary source for funding K-12 schools is state funding. Between CareerTech and 15 different public universities sharing the revenue equally (including, OU, UCO, OSU, Langston, Cameron, and others), I don’t know what kind of difference this would make from year to year. Perhaps the funds generated from the Oklahoma Lottery specific to higher education are evaluated on a needs-basis from year to year to ensure that each institution is getting the funding they need.

Reduce prison population and implement Oklahoma Justice Reform Task Force recommendations

According to Vera in 2015, it costs $16,497 per year per inmate in Oklahoma. Over a six-month period, the Oklahoma Justice Reform Task Force developed 27 policy recommendations that will reduce the current prison population by 7% and save $1.9 billion in prison costs over the next ten years. The report was published in February 2017.

Total costs savings: $1.9 billion per year over 10 years is $190,000,000 per year or 19,000 raises at $10,000 each. There is definitely more that can be done here. Some of the recommendations are linked to the private prison system. Also, the Oklahoma Department of Corrects has requested $1.53 billion in state funding for the 2019 fiscal year to pay for two new medium security prisons at a cost of $813 million. This is a step in the wrong direction. We should be reducing the number of prisoners.

Create a new tax bracket for high-income earners over $400k for couples, $200k for singles

Currently, individuals with a taxable income of $7,200 are in the same tax bracket as an individual with a $200,000 taxable income. We need to modernize our tax brackets to ensure that high-income earners are taxed more appropriately.

In Nebraska, if your adjusted gross income is higher than $261,500 (single), you’re subject to an “Additional Tax Rate Schedule.”

In Arkansas, the highest tax bracket is 6.9% for single earners over $35,100.

I propose a 7% tax bracket for high-income earners that make at least $200k for singles and $400k for couples.

Total additional revenue: Unsure. A recent proposal from Step Up Oklahoma and reviewed by Erica York estimates that households with an adjusted gross income of $200,000 or higher would account for 50% of the estimated funds from that proposal netting around $87,850,000 in additional revenue.

According to that proposal, those high-income individuals would pay 4.8% on taxable income. It’s safe to say that my 7% proposal would net closer to $100,000,000 in additional revenue without impacting 93.6% of the current taxpayers. That’s 10,000 raises at $10,000 each.

Consider forcing Overstock, Wayfair, and Newegg to collect sales tax

While I’m not a huge fan of online companies before forced to collect sales tax for states where they have no physical presence (after all, this is essentially a tax for anyone that is their customer), it’s becoming a necessary reality in order to level the playing field with our local small businesses. The Oklahoma House just passed a bill that is projected to raise $20 million for the state’s education fund by forcing Amazon to collect and remit sales tax from third-party vendors. Again, this is essentially a tax on anyone that shops at Amazon, but it is proving to provide generous revenues for our city. In fact, according to this article, the city of Edmond was projected to receive $600,000 from Amazon over the next fiscal year (as of May 15th, 2017).

There’s currently a bill in Congress that will give all States the authority to enforce sales and use tax laws on remote transactions. Thus, paving the way for states to collect tax for companies with no physical presence in their state.

Total additional revenue: Hard to say. Until Congress passes the bill, it’s possible Overstock, Wayfair, and Newegg would challenge the proposal in court. Also, there’s no real data on the amount of sales tax Amazon has collected for the state. However, if Edmond alone was projected to receive $600,000 in 2017 from Amazon sales, there’s potentially a considerable amount of sales tax to be collected. When the original Amazon tax bill passed, it was estimated to have revenues of $300 million. Since this proposal includes three separate companies, let’s lean on the safe side and say there’s a potential of collecting another $100 million from these additional three companies.

That’s another 10,000 raises at $10,000 each.

Investigate the use of Tax Credits by some companies

For the Fiscal Year ending in 2017, Apple received the following tax credits:

$8,126,076 for CREDIT FOR ELECTRICITY GENERATED BY ZERO-EMISSION FACILITIES in 2014

$7,584,019 for OKLAHOMA INVESTMENT/NEW JOBS CREDIT in 2013

$6,361,371 for CREDIT FOR ELECTRICITY GENERATED BY ZERO-EMISSION FACILITIES in 2012

$2,298,257 for CREDIT FOR ELECTRICITY GENERATED BY ZERO-EMISSION FACILITIES in 2015

Currently, the only facility that I can find for Apple is the retail store at Penn Square Mall. As of 4/5/2018, there are13 job openings at that store.

If those tax credits are correct, we gave over $24 million in tax credits to an Apple retail store in a mall. I didn’t dig too deep into the spreadsheet available at the link below, but I’m guessing that this isn’t the only questionable instance of tax credits we have provided to some companies:

For comparison, OGE Energy Corp and Subs received 5 separate credits for OKLAHOMA INVESTMENT/NEW JOBS CREDIT in the following amounts:

147,966,122

142,724,945

132,282,173

93,760,018

52,424,628

Thus, 5 out of the top 8 largest tax credits went to OGE and they amount to over $569 million worth of tax credits. That doesn’t include the other 7 tax credits that they received at the end of 2017.

Total costs savings: No idea. I’m not an accountant, but I really hope someone at the state level is auditing at least the top 100 tax credits. They amount to over $1.8 billion of the total $2.7 billion that was paid out in FYE17. Dr. Rogers also mentioned another approach to tax credits:

perhaps a buffet-style approach to incentives would be useful. This way firms would select the incentives of most value to their operations. The state then would simply cap the total amount.

Change the Pay of Oklahoma’s 149 state senators and representatives

In November 2018, the state legislature received pay cuts that amounted to 8.8%. The base salary was reduced from $38,400 to $35,021. When you include benefits, the total average total annual compensation for legislators before the change was $62,000.

In Alabama, legislators receive taxable compensation equal to the median annual household income. From NCSL:

Alabama legislators receive a taxable compensation equal to the Alabama median annual household income, as ascertained and adjusted yearly by the State Personnel Board. The board met on Oct. 27, 2015, and set the median annual household income amount at $44,765.00. This current median annual household amount will begin on Jan. 1, 2017 and will continue through Dec. 31, 2017.

While Oklahoma lawmakers have set per diem of $156, Alabama legislators no longer receive a set per diem:

Alabama legislators no longer receive a set per diem rate while in session. Legislators are reimbursed for in-state travel expenses which include mileage and per diem in accordance with rates and procedures applicable to state employees. All out-of-their-district reimbursable travel must be for official business and in the interests of the state or in the performance of official duties, as approved by the applicable Presiding Officer.

By tying legislature compensation to the success of the population in Oklahoma, you’re giving lawmakers an incentive to help make the state better.

Total costs savings: No idea. In 2016, the real average median household income for Oklahoma was $49,176. Depending on mileage owed, total compensation between this system and the current one could be a toss-up. With the current pay system, legislators in rural areas receive the same per diem as individuals that live closer to Oklahoma City. Thus, those distant legislators get a lower effective pay rate due to travel costs. Finally, the per diem is also potentially an incentive to extend sessions. Again, I like the idea of tying their pay to the success of the state. However, more research would be necessary to make a logical conclusion here.

Summary of proposed changes:

With these changes alone, we have paid for 43,803 teacher pay raises at $10,000 each. We have also paid for 20,000 pay raises for support staff at $5,000 each. We have also implemented a tax credit of $500 for each teacher for their expenses. We’ll lose fewer teachers to other states and we have created an incentive that makes Oklahoma much more competitive. The Oklahoma Lottery will return to the roots by which is was founded by truly funding education. Implementing justice reform not only reduces our current costs, but our future costs as well. There’s also some untapped revenue by requiring certain companies to collect sales tax. Instead of hiking taxes for everyone, creating a new tax bracket for high-income earners will only impact 6.4% of all taxpayers. Auditing the top 100 tax credits paid out in 2017 may yield additional funds. Finally, decreasing the governor’s salary and tying legislature pay to the average income of Oklahoman families shows the nation that we’re committed to improving the well-being of all citizens.