NORMAN — In addition to higher federal taxes, Oklahomans face another threat to their pocketbooks from the fiscal cliff, State Treasurer Ken Miller said this week.
“Taxpayers in Oklahoma save an average of 25 to 30 percent on interest costs by using tax-exempt bonds as a financing tool as opposed to taxable bonds, but that could go away thanks to fiscal cliff negotiations,” Miller said.
Miller said investors accept lower interest rates due to the tax exemption and that saves billions of dollars per year in lower taxes nationwide.
“Tax-exempt bonds are the primary mechanism that states, counties, cities and school districts across the country use to finance highways, streets, bridges, water systems, school buildings and buses and many other public infrastructure projects,” he said.
Miller said this critical tool is now in danger of being eliminated as Congress and the President consider plans to either eliminate it or place a cap of 28 percent on the amount of interest bond investors can deduct from their taxable incomes.
“While fiscal sanity is sorely needed in Washington, shifting the tax burden from federal taxpayers to state and local taxpayers will not resolve the spending problem our country faces,” he said.
“A rough estimate shows that Oklahoma state government would have to spend an additional $30 million each year if the interest paid on its tax-exempt bonds were to become taxable,” Miller said. “For counties, municipalities and school districts, the cost would be much higher.”
The tax-exempt bonds issued by the counties, cities and school districts are retired using property taxes. If the tax-exemption is capped or eliminated, interest rates paid to the bondholders would rise and so could property taxes.
Miller said another alternative would be a reduction in the capital improvement projects funded by tax-exempt bonds or cuts in funding to core areas.