OKLAHOMA CITY — The $698 million incentive package aimed at bringing a Panasonic electric vehicle battery manufacturing plant to Pryor is expected to reshape conversations around tax cuts in the final month of the legislative session.
With a booming economy and record savings heading into session, lawmakers from both parties have proposed hundreds of millions in tax cuts. Proposals include eliminating the state’s grocery tax and franchise taxes, creating a gross production tax exemption and modifying income tax rates.
But Senate President Pro Tem Greg Treat, R-Oklahoma City, said the dialogue around such proposals already has changed since lawmakers agreed to set aside the entire amount of the incentive in a bid to be good stewards of the taxpayer funds.
“That obviously changes some of the dynamics of the conversation around any tax relief,” he said.
Treat said tax cuts still will be a part of the broader budget conversation, but lawmakers will have to be more careful about which are approved given the incentive package. It pays $613 million to a “mega project” and allocates $85 million to another project related to the same industry. It provides a 3.4% rebate of the investment over five years up to the balance of the fund once capital expenditures and jobs are created.
Supporters have said the unnamed Fortune 500 company would bring a multi-billion dollar investment and one of the most advanced manufacturing facilities in the country to Pryor’s MidAmerica Industrial Park. The company could create as many as 4,000 to 6,000 new jobs and tens of thousands of indirect jobs.
Citing nondisclosure agreements, top lawmakers continue to refuse to name the company targeted by the legislation. However, other lawmakers confirmed to CNHI Oklahoma that the two companies are Panasonic and Canoo. Canoo already has announced plans to open an electric vehicle manufacturing plant in the same industrial park being eyed by Panasonic. Officials are hoping the Panasonic package along with existing state incentives coupled with more from the Cherokee Nation and local and county officials will be enough to land the company.
State Rep. Collin Walke, D-Oklahoma City, said Democrats don’t know how exactly the $698 million incentive package is going to affect Oklahomans’ wallets because Republicans aren’t publicly talking about it.
He argues Oklahomans need tax relief right now. Big business does not.
“We know that it’s a tough time right now,” Walke said. “If the grocery tax doesn’t pass as a result of having to give three quarters of a billion dollars to an unnamed company, I think that’s pathetic. And so I don’t know what’s going to happen with the grocery tax cut, but Oklahomans need help. Panasonic does not.”
The economic impact to the state if the companies open operations in Oklahoma is projected to be as high as $26.4 billion, lawmakers say.
“I think it’s really hard to make the case that what Oklahoma needs right now is to slash further away at our top income tax rate or corporate income tax rate, which were already cut last year,” said David Blatt, a professor at OU-Tulsa who specializes in public policy.
He said the personal income tax has been cut a half dozen times or more in the last 15 to 20 years, and the rate already is low.
Anything that steers legislators away from slashing Oklahoma’s income tax even further is a good thing, Blatt said.
“So we should be careful about any measure that substantially reduces our tax base,” Blatt said. “That should always be done very carefully and deliberately. If you’re going to do a substantial tax cut, then you should be looking at ways to offset that revenue with new revenue sources, whether that’s doing away with tax incentives or expanding the tax base, looking at some services that we don’t tax in Oklahoma that other states do.”
Blatt said Oklahoma has a volatile revenue system with income taxes and gross production taxes tending to go up and down quickly, and said hopefully lawmakers learned a lesson from the 2000s and early 2010s when they responded to good times by making permanent tax cuts. Under state law, lawmakers need a supermajority to raise taxes.
“(We) found ourselves facing some really, really tough years, which created tremendous policy and political problems for lawmakers,” Blatt said. “It’s always a good time to be cautious and go slow on tax cuts.”
Tax cuts are permanent, strong economies are not, he said.