FOX23 Explains: What is taking state lawmakers so long on cutting the grocery sales tax?

OKLAHOMA CITY, Okla. — Oklahomans are wondering how an unnamed Fortune 500 can have a multi-million dollar tax rebate incentive bill passed through the state capitol in one week flat while they are still waiting to see if the state’s portion of the grocery sales tax will be cut more than three months after Governor Kevin Stitt proposed it in his State of the State address last February.

Last month, House Bill 4455 known as The LEAD Act was created, passed through the House and Senate, and signed into law in one week’s time. The bill set up a tax rebate program totaling just under $700 Million to set up a program meant to lure in an unnamed Fortune 500 to Oklahoma. The passage was one of the fastest bipartisan bills to ever pass in state history.

Unlike a normal state expenditure, HB 4455 sets money aside in a separate fund where the money is held in a side account so the incentive’s existence isn’t dependent on future state budgets that can be good or bad.

As FOX23 News has reported, The LEAD Act is meant to attract Panasonic to build a new electric vehicle battery factory at the Mid-America Industrial Park in Pryor. The company can only collect its incentives once certain hiring and capital/construction goals are met over a four year period.

Panasonic will decide if it will build in Oklahoma or Kansas by the end of the month, Oklahoma Governor Kevin Stitt (R) said without naming the company because he signed a non-disclosure agreement while negotiating with company leadership.

>>>MORE: Gov. Stitt praises lawmakers for passing a large economic development act

But with such rapid passage, many Oklahomans are still clinging to the hope that the legislature will be just as eager to pass relief for the average person, especially when it comes to help fighting inflation at the grocery store.

In February, Stitt told lawmakers they should repeal the state’s portion of the grocery sales tax as a way to fight record-high inflation. In the Tulsa metro, the average sales tax collected on groceries is around 8-9 percent once state, local, and county sales taxes are all factored in at the register during checkout.

If repealed, the state would eliminate its four percent. The city and county portions of the tax would remain, and so there would still be around 3.5-4.5 percent sales taxes left to be paid at the register. Cities and counties are not looking to repeal their portion of the sales tax on groceries because sales taxes are their primary ways of funding operations like police, fire, and other services. State law heavily limits how city and county governments can raise revenue outside of sales tax collections.

Since it was implemented, the state’s portion of the grocery sales tax has raised revenues for the state’s general fund to go towards state funded functions like education, infrastructure, criminal justice, health care initiatives, and other state government functions. Because of the impact the grocery sales tax has on the state budget, a quick repeal cannot happen.

In order to make sure they are not burning an irreparable hole in the state’s budget by eliminating a revenue source, the repeal of the state’s grocery sales tax has been caught up in annual budget negotiations that are still underway. The Oklahoma House of Representatives passed definitions defining what a grocery is that would no longer be taxed by the state, but nothing so far has passed out of the State Senate.

There are approximately two and a half weeks left in the current legislative session, and so Oklahomans will have to wait and see if the final budget proposal accounts for the elimination of a state grocery sales tax, or if it will remain in place and the state will continue to collect revenue through taxation of groceries at the point of sale.

FOX23 asked Stitt if he would sign a budget that left the grocery sales tax in place. He remained adamant that the state’s portion of the grocery sales tax must be repealed to offer families relief from record high inflation, but he said he cannot personally guarantee what will or will not be in the final budget.

“It’s a regressive tax. I want to get rid of it,” Stitt said. “Hopefully the legislature will do that. Who knows what happens between the House and the Senate? I’m just laying out the vision for Oklahoma and hopefully we can get it across the finish line.”

As FOX23 has reported, not only has inflation hit the actual price of many items at the grocery store, but because the sales tax is proportional to the price of an item, people are paying not just more in the price of an item, but they are also forced to pay more in sales tax since that item is more expensive.

>>>MORE: Governor Stitt signs massive economic incentive bill into law

For example: A while ago, someone would pay $2.00 for a bag of chips and pay a 8.75% sales tax. The sales tax collected from that single purchase would be around 18 cents. With current inflation, that same bag of chips is now $3.50. The tax rate has remained the same, but the sales tax collected for the same item now being sold at a higher cost is now 31 cents, nearly doubled in how much people are paying in just sales tax alone.

Proponents of a repeal say the state has the ability to reduce, even if it’s small, some of the costs Oklahomans must endure for basic food they need to eat. They and Stitt say the state has plenty of other revenue sources to make up for a cut from this revenue source.

>>>MORE: Oklahoma grocery tax could still remain for some items