Budget & Tax

Free Market Friday: HB 2562 is constitutional

August 15, 2014

Michael Carnuccio

On March 10, 1992, after a number of efforts by state lawmakers to increase taxes and revenue for government spending, 373,143 Oklahoma voters decided state government needed restraint. The constitutional amendment they passed, State Question 640, requires bills creating or increasing taxes, or creating new revenue streams for the purpose of funding government, to originate in the House of Representatives, as well as be submitted to a vote of the people or receive three-fourths approval by both legislative bodies and approval by the governor.

Those who desire to increase the size and scope of tax-and-spend government have long criticized the measure, asserting that it hampers government. In reality, multiple tax and revenue increases – including personal income tax increases – have passed since the amendment, meeting the criteria. Today, state government revenues and spending are at all-time highs.

Given how much the opposition detests SQ 640, there’s little surprise in its glee about a challenge to House Bill 2562 under consideration by the state Supreme Court. The measure was passed by the Legislature and signed by the governor to prevent the state’s oil and gas gross production tax from increasing 600 percent to its formerly statutorily set amount of 7 percent.

The lawsuit was filed by Jerry Fent, an attorney who has challenged other provisions passed by lawmakers. Fiscal conservatives have agreed with some of Fent’s prior challenges. However, in this instance, 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. If the court rules according to Fent’s interpretation, the budgeting and appropriations process will come to a screeching halt. Appropriation bills, bills making minor or technical amendments to revenue-related statutes, bills lowering fees and even prior personal income tax cuts will be thwarted by such a ruling.

No question, HB 2562 is a tax cut because the effective date of the new 2-percent rate doesn’t take place until the rate would have reverted to 7 percent. Those opposed to SQ 640 will have to find another angle to attack.