Saturday, June 16, 2012

Legislative ALERT

Legislative ALERT
June 16, 2012

Photo of the Capitol Building
State Representative Jeffrey Hickman has requested an Interim Legislative Study to look at options for income tax reduction, possibly using sales tax on services as way to supplement the reduction.  The Study number is 12-025.  Before this study goes forward it will need to be approved by the Speaker of the House and assigned to a study committee.  This study topic is likely to be approved, and that should occur soon.

As we predicted a few months ago as income tax reduction/elimination proposals emerged in the State Legislature, the natural progression from income tax cutting moves would be to look for revenue elsewhere, most likely from property taxes and by increasing sales tax revenue through applying sales tax to services.  The idea has been floated in years past.  It means charging sales tax on services like taxi, cleaners, home repair services, plumbers, electrical services, medical services, lawyer services, accounting and tax preparation, house cleaning, in-home services, auto repair, appliance repair and so on.  This type of taxation would shift the tax burden onto people such as the elderly and people with disabilities – those who use services to compensate for their disabilities.

It is not too soon to begin informing legislators and candidates about the effect a sales tax on services would have for people who require many services due to age or disability. 

The move to cut or eliminate the graduated personal income tax while increasing the scope of sales tax would effectively shift the tax burden away from well-to-do Oklahomans while increasing taxes for those who are elderly, have disabilities, are low income or on fixed moderate incomes. 

Although widespread legislative attempts to cut or eliminate the state income tax were not finalized in the legislative session that just ended, those attempts will be renewed in the coming year.  Now we know for sure that one of the ideas we  had feared – charging sales tax on services – is an idea that will be put forward in order to offset revenue that would be lost by reducing or ending the state income tax.

Jean Jones