OKLAHOMA CITY, Okla. — The chairman of the Oklahoma State Senate appropriations committee says he and some of his colleagues are still hesitant to repeal the state’s portion of the grocery sales tax, especially with an anticipated recession likely next year.
Senate Appropriations Chair State Senator Roger Thompson (R-Okemah) said rhetoric about how financially well the state’s finances are right now are misguided, and he said the money the tax brings in will be needed in the coming years to help make sure cuts don’t come to education and other core services.
“The rainy day fund is only supposed to help make up for one time expense, that’s 287 million dollars each year that we are going to lose,” Thompson said.
Governor Kevin Stitt (R) and members of both parties in the Oklahoma House of Representatives have been putting pressure on the State Senate to repeal the state’s portion of the sales tax on groceries calling it “inflation relief”. Proponents of a repeal said that the state’s rainy day fund being fuller than ever before at any point in state history shows that there is too much revenue coming into the state right now, and cutting the state’s portion of the sales tax on groceries would be an easy way to give Oklahomans their money back that is simply going to the state and being held on to.
But Thompson and other Senate Republicans opted to form a study committee to find ways to deliver tax cuts and other relief to Oklahomans in the 2023 Regular Session set to begin in February.
“That is not what the Rainy Day Fund is designed to do,” Thompson said about claims that the money in the Rainy Day Fund would make up for whatever was eliminated in a grocery sales tax repeal. “The Rainy Day Fund can’t make up for a constant 287 million dollar loss every year.”
Thompson said Oklahomans need to understand that while times are good now, he and others working on the state budget will prepare for revenues to dip next year.
“We will budget with a recession in mind next spring,” Thompson said.
The Federal Reserve, in an effort to tame inflation, has been raising interests rates to create what they hope will be a “soft-landing recession”. Thompson said any slowdown in the economy will cause revenue to decline and warned it’s easier to cut taxes in good times than to raise them again when times get tough.
In 1992, Oklahoma voters passed a State Question 640 which requires a supermajority of lawmakers to approve of any tax raising measures, but it allows lawmakers to cut taxes with just a simple majority.
“We have to keep State Question 640 in mind when we make decisions like this” Thompson said. “We can’t just cut taxes one year and easily bring it back the next.”
The state’s portion of the grocery sales tax was implemented as one of the ways to end the statewide teacher walkout in 2018, and then-Governor Mary Fallin (R) had to cut a deal with Democrats to have enough votes to pass measures to fund a teacher pay and education operating funds increase.
Thompson said he also fears opening pandora’s box on municipal governments across the state when people realize they will still pay a sales tax on groceries to fund city and county-level government operations.
“This is the primary way local government pay for things like police and fire, and the people are going to want a full repeal when they realize we only partially cut the tax at the grocery store,” Thompson said. “We can’t do that to our cities.”
Thompson also said he heard from rural constituents who operate small town grocery stores and stores that also sell other sundry items that their stores don’t have high tech cash registers that can easily and quickly decipher between which goods will and won’t be state-tax-exempt, and no one is accounting for the possibility of human error and the slowing down of checking a customer out that can happen in some rural stores.
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