The Pew Charitable Trusts

Many Oklahoma employers expect the state will have a better chance keeping and attracting new business now that voters eliminated a type of property tax affecting primarily corporations; others, however, worry that schools there will face a $50 million cut in funding.

Both conclusions are the result of a property tax ballot measure Oklahoma voters approved this month that takes effect in January.

Lowering property taxes is always popular, and results from the November 6 elections show this year was no exemption. Four other states joined Oklahoma in endorsing various ballot measures to limit or cut certain property taxes.

Florida seniors and veterans can look forward to new property tax relief, while Louisiana targeted certain veterans’ spouses for a property tax break. Kansas reduced property taxes on boats. And Arizona, Florida and Oklahoma all endorsed caps for property tax increases (5 percent per year for Arizona, and 3 percent for Oklahoma and Florida).

But the most comprehensive tax action occurred in Oklahoma. “On balance, the Oklahoma measures are more sweeping, especially when taken together,” says Pete Sepp, executive vice president of the National Taxpayers Union, a group that advocates for smaller government and lower taxes. Besides limiting property tax increases to 3 percent a year, Oklahoma, he says, eliminated another entire type of property tax.”

Those are taxes on “intangible” personal property or assets that cannot be seen or touched, such as patents, copyrights and trademarks. Under the Oklahoma measure, “no person, family or business will pay a tax on intangible property.” Only 12 states levy intangible business property taxes to some degree, according to the Tax Foundation.

The ballot measure was in reaction to a 2009 Oklahoma Supreme Court decision that essentially said the state could apply a tax on most intangible property. The business community there was concerned that the ruling would open the door for new taxes not just by the state but also by local authorities.

“This arguably was the biggest victory for the Oklahoma business community on Tuesday, as this constitutional change prevents the largest tax increase in state history,” Fred Morgan, president of the State Chamber of Oklahoma said in a prepared statement. The chamber was a major proponent of the measure, arguing that the uncertainty that the court ruling created was putting the state at an economic disadvantage.

The ballot measure largely affects corporations that have property that crosses county lines, like utilities, railroads and airlines. The Oklahoma Tax Commission had estimated that companies like AT&T, Oklahoma Gas and Electric, American Airlines would collectively save $50 million if the ballot measure passed.

Opponents of the measure say local governments could be forced to raise property taxes and local fees to make up for that loss of revenue.

“The money has to come from somewhere,” says Emily Hutton, a spokeswoman for Oklahoma School Boards Association based in Oklahoma City. “Schools in Oklahoma have been hit hard with budget cuts … This is just another hit to schools. It’s a very large hit.”

The Oklahoma Education Association estimates schools have received $300 million less over the last three years. “Our schools simply cannot manage another multi-million dollar loss in revenue,” Linda Hampton, president of the Oklahoma Education Association said before the election.

Critics contend that the ballot measure’s passage will eventually mean higher tax rates at the local level. For budget items that cannot be cut, such as bond issues and legal judgments, local assessors will have to increase property tax rates to offset lost revenue, says David Blatt, director of the Oklahoma Policy Institute, a group that lobbies for what it calls fair and fiscally responsible funding of public services.

“This is going to be a large tax cut for the large utilities and telecommunication companies and actually harm everyone else in terms of cuts to services and higher property tax rates,” Blatt says.

A report from Standard & Poor’s indicated that while the ballot measure could reduce the property tax base, “we anticipate that the decline would be relatively modest in most cases as intangible personal property tends to account for a small share of overall tax bases.”