Deal on fiscal cliff affects Okla. tax collections

The deal approved by Congress to avert the "fiscal cliff" will mean lower income tax collections for Oklahoma than previously estimated, state finance officials said Wednesday.

Finance officials with the Office of Management and Enterprise Services said an estimated $50 million in income tax revenue projections certified last month were based on the assumption that higher federal income tax rates would take effect Jan. 1.

Since most of those tax hikes were averted as a result of the deal reached in Congress, OMES spokesman John Estus said some percentage of that $50 million will not be available, although the exact amount is still being determined.

"This is because the board had to certify funds based on current law at the time of certification, and last month the law said federal taxes would be higher across the board on Jan. 1 due to the expiring Bush tax cuts," Estus said. "Now that most of those rates are going to be lower, state income tax collections will most likely be lower because the state income tax code is tied in part to the federal income tax code."

Oklahoma Secretary of Finance Preston Doerflinger said last month before the deal that he would recommend that Gov. Mary Fallin consider a revenue impact between $35 million and $40 million while building her executive budget, but the Oklahoma Tax Commission will determine the final amount.

The official revenue estimate approved last month projected lawmakers would have about $7 billion to spend on the budget for the fiscal year that begins July 1, an increase of about $214 million over the current fiscal year.

Included in that estimate was an increase of about $121 million from personal income taxes, a figure that will be revised downward as a result of the deal reached by Congress.

Last month's estimate is used by the governor's office to prepare the executive budget.

A final revenue estimate on how much available revenue lawmakers will have to spend will be approved in February before the Legislature convenes.

"We don't expect total state revenues for appropriations to change markedly, but that will depend on a number of factors, including any changes in growth projections for various revenue sources," Estus said.

State leaders, including Fallin, have raised concerns about the possible impact that cuts to federal spending would have on Oklahoma, particularly how defense spending cuts would affect the state's five military installations.

Those spending cuts, which were expected to start hitting the Pentagon and domestic agencies this week, have been delayed for two months.

Oklahoma Treasurer Ken Miller said if the defense spending cuts take effect, some studies have suggested Oklahoma could lose up to 20,000 jobs, including 4,000 military positions.

"This would be devastating to Oklahoma and can be avoided if Congress implements strategic rather than across-the-board spending cuts," Miller said in a statement.

Oklahoma's entire congressional delegation, except for U.S. Rep. James Lankford, R-Oklahoma City, voted in favor of the measure to avoid the fiscal cliff.

In a letter to his constituents after Tuesday's vote, Lankford said while there were compelling reasons to approve the measure, he didn't believe it did enough to slow the nation's "mushrooming debt."

"At the end of the day, our debt is not a Democrat or Republican problem, it is an American problem and it will require significant spending restraint to resolve," Lankford wrote. "Unfortunately, the bill that passed tonight does not move us forward toward solving the $16.4 trillion national debt that looms over every American."

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Sean Murphy can be reached at

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