Eliminating Oklahoma’s income tax would wipe out $2 billion, or about one-third of state budget dollars, House Democratic Leader Scott Inman told the Greater Oklahoma City Chamber Thursday.

He said that would occur at a time when the state needs to be investing more in core services such as education and transportation, for which funding has been cut about 20 percent in recent years.

“No business wants to invest in a state without those,” Inman said.

If taxes are reduced, he said, that revenue must be made up somehow.

“There is no tax fairy,” the minority leader said.

Inman said that Texas, a no-income-tax state with which Oklahoma is frequently compared, has a state property tax that amounts to about three times the average county property tax in Oklahoma.

Inman said that kind of change in the tax structure would mean that a family making $40,000 per year would pay $615 more, and House Democrats would oppose it.

“It’s not a progressive plan to grow the state of Oklahoma,” he said.

Senate Democratic Leader Sean Burrage, D-Claremore, said a task force proposal to reduce the top personal income tax rate from 5.25 percent to 4.75 percent would require eliminating tax credits and exemptions for the blind and disabled and disadvantaged Oklahomans.

“State services are funded, at this point, at a minimum, in my opinion,” Burrage said.

The minority leader said he agrees with those who say any plan to reduce or eliminate the income tax should be revenue neutral.

“That’s going to take some tough decisions,” Burrage said.

Senate President Pro Tempore Brian Bingman, R-Sapulpa, said that eliminating the income tax “would be a very bold thing to do,” and an idea that should be the topic of continued discussion.

Bingman said that having an income tax makes it difficult for Oklahoma to compete with states such as Texas.

House Speaker Kris Steele, R-Shawnee, agreed the idea needs to be considered, but with a measured, systematic approach.

Steele said that the current effort to eliminate millions of dollars in tax credits could make the job easier.

“We can free up some money that would allow us to reduce our income tax,” he said.

The four legislative leaders were taking part in a panel discussion at the chamber’s annual legislative breakfast, answering questions posed by Bradley Krieger, vice chairman of government relations for the chamber.

Krieger quizzed the lawmakers as to whether they would support retaining certain tax credits that the chamber supports. Those include some credits that are transferable, meaning they can be bought and sold. That is a concept opposed by a task force headed up by Rep. David Dank, R-Oklahoma City, who says the transferable feature does nothing to help create or retain jobs or otherwise benefit the state.

Burrage said that each tax credit should be looked at independently to determine whether it is an economic development tool for the state.

“If we’re ever going to drop the state income tax, we’re going to have to look at some of these tax credits,” he said.

Bingman said the process needs to be more transparent as to who receives various tax credits.

“They have been a vital tool in recruiting business,” he said.

Steele said that if a tax credit meets the job-creation and other criteria drawn up by the Dank committee, “It stays.”

“If it doesn’t, it goes,” the speaker said.

The GOP and Democratic leaders also took different sides on whether the state should fund completion of the American Indian Cultural Center and Museum in Oklahoma City.

Burrage said it is a state obligation.

“Let’s complete it,” he said Burrage.

Inman agreed.

“We’ve made commitments,” Inman said. “We need to meet those commitments. Let’s get it finished.”

Bingman said the state has about $90 million invested in the facility.

“I don’t think we’ve got a $90 million asset out there now,” he said.

Bingman also expressed concern about ongoing costs, such as $5 million-$6 million in annual bond payments.

“We’ve got to look at how to fund it on a yearly basis,” he said.

Bingman said it would take about $80 million to finish the center, which he said is much more than originally anticipated. He said private contributions would help the legislature make a decision regarding its own financial participation.

Steele noted the state’s Native American heritage, saying the center needs to be completed.

“I think it’s an asset worth exploring,” he said. “But I’m not sure now is the time to take on additional debt.”

Steele said the House Republican caucus does not support taking on more bond projects.

Krieger also asked the four whether they think it would be better to give last year’s overhaul of the state’s workers’ compensation laws some time to work, or to enact a new statute this year allowing businesses to opt out of the court-based system.

Steele said he still hears from employers that workers’ compensation costs remain a significant deterrent. He said the state’s leadership needs to monitor how SB 878 (last year’s bill) is working, while discussing more options.

Inman said most members of his caucus supported the 2011 measure.

“We need to wait,” he said.

Inman also cautioned against trying to address a major issue such as workers’ compensation during an election year.

He said he hesitates to support an opt-out law, because allowing some employers to take themselves out of the pool would raise rates for those who remain.

Bingman said workers’ compensation rates are the number-one issue for businesses in Oklahoma.

“We’re not competitive yet with surrounding states,” he said.

Bingman said it is his understanding that enacting an opt-out program would not raise rates for small business.

Krieger also asked the four whether they expect a strong, Arizona-type illegal immigration law to be a priority this session.

“I don’t think immigration is on the top of the list like it was a few years ago,” said Bingman.

Oklahomans’ concerns about that issue center on public safety, he said.

“Let’s don’t get wrapped up in what’s happening in another state,” Bingman said.

Steele said now that the courts have dealt with HB 1804, Oklahoma’s own immigration law, it is time to monitor that statute and see how it works.

Inman said the ultimate solution should come out of Washington, D.C., but that may not happen any time soon.

“So we have to act,” he said.

People are concerned about illegal immigration, he said.

“Immigration, by and large, is a federal issue,” said Burrage.

He said that the couple of dozen immigration measures filed last year were “mainly grandstanding.”

“Many of them that came through the Senate last year were just ridiculous,” he said, adding that, in his opinion, some of the bills were actually racist.

Wrapping up the discussion, Inman said that in general, election years do not result in good legislation. He said it is important to look beyond political party to consider whether a particular measure is the right policy to enact.

Burrage expressed concern about the fact that filing for office this year will take place in April, during session, which he said could change the culture of the session somewhat.

“I’m fearful that could cause a little bit of a silly season at some point,” he said.

Bingman said it is a good time to be from Oklahoma, saying that a lot of others are looking at the state and its successful policies.

Steele noted Dank’s tax credit effort, last year’s pension reforms and others legislative actions.

“I also believe that in Oklahoma, our best days are yet to come,” he said.