NORMAN — Oklahoma’s corporate income tax has become the wild card of state finance, gyrating unpredictably from one year to the next.
This year’s corporate tax collections have fallen so far below expectations that the state came within a hair’s breadth of declaring a “revenue failure.” That would have triggered cuts in scores of state programs.
Sixteen months ago, when the State Equalization Board determined how much money the Legislature could appropriate for the 2014 fiscal year ending this June 30, it certified that the corporate tax would generate $482 million for the general revenue fund.
Corporate collections for the previous year were rolling in at an annual rate of about $450 million. The state economy was expanding. Companies were reporting rising profits. Bumping the previous year’s tally by $32 million seemed like a safe bet.
Instead, it turned out to be a colossal forecasting error.
With less than one month to go in the fiscal year, it looks like the state will be lucky if it collects $300 million in corporate taxes for the general revenue fund this year.
The near miss has focused attention on the ability of corporations to reduce their taxable incomes at the same time they report big profit gains to their shareholders.
“They’re taking advantage of all the (tax law) structures that are made available to them. That’s what any good business would do,” State Auditor & Inspector Gary Jones said.
“While they may be profitable in a particular year, that does not mean they do not have loss carry-forwards” and other tax benefits they can legitimately claim, Jones said. “That, along with the fact that we have so many tax credits that people have accrued, and we have no method by which we account for those.”
Although the bad estimate almost triggered a revenue failure, “it’s probably more a failure of forecasting,” said State Treasurer Ken Miller.