The Sooner State is wrestling with the same downturn in the oil patch that plagues New Mexico. But despite a strong attempt to close its massive deficit for fiscal year 2017 with big tax hikes, legislators have reached a deal that cuts spending and does not hike the state’s major revenue-raising mechanisms.
As summarized by the Tax Foundation, the fiscal compromise eliminates the refunability of the earned income tax credit, ends a “double deduction” to the state income tax, caps the total credit available for low-producing oil wells, and puts a cap on the “Investment and New Jobs Tax Credit.”
Jonathan Small, the president of the Oklahoma Council of Public Affairs, is pleased that the deal “cuts one area that, while important, is also rife with waste and abuse — higher education. Many legislators deserve credit for forcing administrators (some are former politicians) at state colleges and universities to tighten their belts and refocus on the critical core mission of educating students. Hopefully, future legislators and governors will take the same attentive eye to the rest of Oklahoma government.”
The start of fiscal 2017 is less than a month away, and it’s quite clear that there won’t be enough revenue to cover the spending plan New Mexico legislators adopted earlier this year. A special session charged with closing the deficit is all but certain. Let’s hope that Santa Fe makes the right call, and focuses on expenditure control, not tax hikes. New Mexico’s economy has not yet clawed its way back from the Great Recession, and some are warning that another national downturn is likely. The Land of Enchantment’s workers, families, and taxpayers are in no position to bear the burden of “revenue enhancement.”