----- Original Message -----
From: "AIA Eastern Oklahoma"
To: "Architectural Community"
Sent: Tuesday, April 16, 2002 1:37 PM
Subject: Fw: Tax Reform Task Force Update
To AIA Eastern Oklahoma members and area architects:
Please note that this language is exactly as received from Clayton Taylor, AIA OK lobbyist, and Jan Edwards, AIA OK executive director. It is NOT the final report, but instead a summary of what they have been advised are the Tax Reform Task Force recommendations. The language affecting architects and engineers imposes a state sales tax of 4.5% on selected services including: (24) Engineering and Architectural
Services.
Please familiarize yourself with this summary. As soon as the final report has been released, we will forward AIA OK's strategic response in opposition to the recommendation(s).
AIA Oklahoma and AIA Eastern Oklahoma is appreciative of the interest and advocacy expressed by our membership on this subject. Your efforts will be required in defeating this recommendation.
----- Original Message -----
From: "Clayton Taylor" <
To: "Jan Edwards" <
Sent: Monday, April 15, 2002 5:20 PM
Subject: Tax Reform Task Force Update
CLAYTON C. TAYLOR
3212 North Harvey Parkway
Oklahoma City, OK 73118
Phone (405) 525-6336
Fax (405) 525-6339
April 12, 2002
Tax Reform Task Force
Preliminary Report
On Friday, April 12th, the 32 person citizen-legislator Tax Reform Task Force met for the final time with the stated goal of adopting a revenue neutral tax reform plan to stimulate economic development. This is the culmination of the effort initiated one year ago by Governor Keating to eliminate the state's income tax and adopt a "Texas-style tax plan."
It is our understanding that the final report of what was approved by the Task Force will not be available until Tuesday, April 16th. However, knowing of the intense interest in what is being proposed, we are providing this summary of what we have been informed was approved.
A majority of the Task Force approved a 3-year phase-in of tax reform that begins on January 1, 2004 and is completed by January 1, 2006. The major provisions that have been approved are:
I. Tax Reductions (totaling approximately $979 million):
1. Reduce the individual income tax rate from 7% to 4.5%;
2. Tax net capital gains at only 2.35%;
3. Adopt the federal personal exemption of $2,900, replacing the lower
current state allowance of $1,000 per person. Also adopt the federal
standard deduction for singles and married filing jointly - $4,550 & 7,600
replacing $1,000 & 2,000 respectively;
4. Extend low-income tax credits to $100 per person for qualifying income
levels up to $10,000 and to $60 per person for qualifying income levels up
to $50,000;
5, Eliminate the state corporate franchise tax -- and rename the state corporate
income tax to be the state "corporate franchise tax" (to sound more like the
Texas tax); and
Make Oklahoma a "pick-up" state for estate tax purposes - the state estate tax
will be reduced to the amount deductible in federal estate tax returns. If the federal deduction is eliminated, so too would the state deduction be eliminated.
II. Tax Increases (totaling approximately $974 million):
1. Impose state sales tax of 4.5% on selected services, including:
Note: Not included in this new taxable class is "advertising - space and
time" - which was specifically removed from the list of new taxable
services.
(1) Landscape and Horticultural Services;
(2) Construction Services (including new residential,
new industrial and commercial buildings, new utility buildings,
maintenance
and repair on residential property and other facilities with a resale
exemption for materials purchased and subcontractor work);
(3) Real Estate Services (excluding rent);
(4) Laundry, Cleaning and Shoe Repair;
(5) Portrait and Photographic Studies;
(6) Funeral Service and Crematories;
(7) Miscellaneous Personal Services;
(8) Advertising Services only (sales of advertising
space or time would not be taxable)
(9) Other Business Services;
(10) Photo Finishing - Commercial Photography;
(11) Services to Buildings;
(12) Detective and Protective Services;
(13) Automotive Repair and Services;
(14) Electrical Repair Services;
(15) Watch, Clock, Jewelry and Furniture Repair;
(16) Miscellaneous Repair Shops;
(17) Motion Pictures;
(18) Theatrical Productions;
(19) Bowling Alleys and Pool Halls;
(20) Commercial Sports (including racing and track operations);
(21) Amusement and Recreation Services;
(22) Membership in Sports and Recreation Clubs;
(23) Legal Services;
(24) Engineering and Architectural Services;
(25) Accounting, Auditing and Bookkeeping; and Management and Consulting Services.
2. Increase the insurance premium tax from 2.25% to 3.0% - but removed
"Insurance Agents and Brokers (commission only)" from the taxable group of
services;
3. Increase the gasoline tax from 17¢ to 18¢ per gallon and the diesel fuel tax from
14¢ to 18¢ per gallon;
4. Remove the sales tax exemptions for sales of newspapers and periodicals;
and
5. Increase the cigarette tax from 23¢ per pack to 60¢ per pack.
III. Local & County Taxes:
After some heated debate the Task Force agreed that its proposal should not prohibit the application of local and county sales taxes to the new taxable services. If applied by all local entities, the proposal would not be revenue neutral but would raise more than $500 million dollars in additional tax. The Task Force did vote to require a public vote in each local tax jurisdiction to approve the expansion of the local tax base
to include the new taxable services.
IV. Other Proposals Approved:
The Task Force also adopted a proposal that administrative law judges at the Tax Commission would no longer be OTC employees, and thus give taxpayers a more level playing field.
V. Proposed Phase-in Schedule:
The Task Force draft proposes the following three-year phase-in plan (although the Task Force did not specifically vote to approve the phase-in plan):
Effective January 1, 2004:
- Oklahoma becomes estate tax pick up state;
- 1.5% sales tax on the new services instituted and sales tax exemption on periodical sales terminated;
- Individual income tax becomes flat tax including full use of federal deductions and exemptions amounts and current Oklahoma retirement income provisions and the tax is at a rate of 5.5%;
- Extended tax credits effective;
- Higher insurance premium tax;.
- Cigarette tax, and gasoline and diesel fuel tax implemented; and
- Current corporate franchise tax eliminated and corporate income tax renamed.
Effective January 1, 2005:
- Sales tax rate for new services increased to 3.0%; and
- Capital gains tax reduced to 3.0%.
Effective January 1, 2006:
- Sales tax rate increased to final rate of 4.50% for new services;
- Income tax rate reduced to 4.50%; and
- Capital gains tax reduced to 2.35%.
