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January 12, 2014

Speaker pushes tax cuts

OKLAHOMA CITY — Despite a projected $170 million decline in revenue available for the Legislature to spend on schools, child welfare and other state programs, House Speaker T.W. Shannon wants an income tax cut and a permanent and generous oil and gas drilling tax incentive that is costing the state hundreds of millions of dollars each year.

The 2014 legislative session is still several weeks away, but the Republican speaker, preparing for his second session leading the increasingly conservative House, already has staked out firm positions despite his own caucus seeking increased spending for education and public safety.

Shannon also has said the House will not support a bond issue to pay for any capital improvements, including repairs to the crumbling state Capitol building, saying instead he supports a “pay-as-you-go” approach.

“We don’t need more government. We just don’t. We can live within our means,” Shannon said in a telephone interview with The Associated Press. “Any areas of growth, we should offset in some other area. It’s all about priorities.”

Discussions are ongoing among officials from the Senate, House and governor’s office with the oil and gas industry over the tax incentive for horizontal drilling that reduces the amount of tax from 7 percent to 1 percent for the first 48 months of production. The incentive, originally put in place in the late 1990s when horizontal drilling was experimental and costly, now applies to most new wells that are drilled because horizontal wells are now the norm.

Projections released last week from the Oklahoma Policy Institute, a Tulsa-based think tank, show the incentives are expected to cost the state close to $300 million annually over the next two fiscal years.

State finance officials don’t dispute the projections. Those estimates don’t include an additional $300 million the state is paying back over three years to the industry for the incentives that were suspended at the height of the state’s fiscal crisis in 2010.

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