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OKLAHOMA CITY — A proposal to repeal the sales tax on groceries would devastate Oklahoma communities who rely on the revenue to pay for public safety, sanitation and other local services, municipal officials said Monday.
Dozens of mayors and other city and town officials converged on the state Capitol to urge lawmakers to defeat a measure that would eliminate the sales tax on groceries when the economy improves and state revenue grows. The bill has passed the Senate and is pending in a House appropriations subcommittee.
Carolyn Stager, executive director of the Oklahoma Municipal League, said sales taxes account for between 30 percent and 70 percent of a municipality's total tax base and that much of it comes from the sale of groceries, especially in small cities and towns.
"That's all cities and towns depend on is our sales taxes," Wilburton Mayor Stephen Brinlee said. "City Hall would probably lose 65 to 70 percent of our income."
Brinlee said repeal of the tax could force cities to increase fees for water and other services.
"The state of Oklahoma is going to have to come up with a better plan," Brinlee said.
Oklahoma is the only state in the nation that constitutionally prohibits cities and towns from levying property taxes to pay their general operating costs.
The bill's author, Sen. Jay Paul Gumm, D-Durant, said repealing the sales tax on groceries would ease the tax burden on low-income Oklahomans and create a fairer tax system.
"You're hitting hardest those who can afford it the least," Gumm said.
He also said opponents don't consider the economic activity that would be generated if residents spent the money saved on groceries on other taxable items and stopped crossing the Texas border to shop in stores that don't tax groceries.
"What they're missing I think is the bigger picture," he said.
Exempting groceries from sales taxes would cost the state treasury an estimated $406 million a year including $190 million in rebates to cities and towns impacted by the loss of sales tax revenue. The state collects a 4.5 percent sales tax and county sales taxes are capped at 2 percent, but municipal sales taxes are set by local voters and have no cap, Gumm said.
Stager said there is no way to verify whether the rebates would equal the taxes cities and towns would lose by exempting groceries.
Legislative efforts to roll back or repeal the sales tax on groceries have failed in the past because of the high cost to the state's general fund. The exemption would not kick in until general fund revenue grows by at least 10 percent more than revenue collected during the fiscal year that ended June 30, 2008, before the economic downturn.
But Rep. Guy Liebmann, a former member of the Oklahoma City City Council, said the state is facing a $1.2 billion revenue shortfall for the fiscal year that begins July 1 and that lawmakers should take a conservative approach to trimming tax revenue.
"This is not the year to be rocking the boat," said Liebmann, R-Oklahoma City.
