Hobson also painted a bulls-eye on another, often controversial, segment of the Oklahoma economy: gambling.

"Let me admit that we have gambling going on all over Oklahoma today through 50 outlets that the tribes run and they process through the gaming outlets $1.4 billion this past year," Hobson said. "It's not a moral issue as to whether we have gambling in Oklahoma or not. Just drive four miles in any direction from Oklahoma City and you can sit down and play blackjack."

Hobson said the state is not "maximizing that activity for the benefit" of state programs including education through the levying of taxes on gambling.

Any tax increases would have to receive support from three- fourths of lawmakers in both houses or go before a vote of the people. Hobson said the second route is the most likely.

"I'm not saying the Legislature has to grow a spine," he said.

However, Hobson noted that when the Legislature raised taxes four times and cut services during the oil bust in the 1980s, it had dire consequences for lawmakers. In 1986, he said 17 of the 24 senators facing the voters were not re-elected following tax increases.

Hobson, who has already received enough commitments to become the president pro tempore of the Senate next year (assuming Democrats retain control as expected), said there is virtually no chance that Keating's revenue-neutral reform of the tax code will be enacted. Keating's plan would repeal the state income tax and the sales tax on groceries and replace them with a 5.9 percent sales tax on more than 200 services.

"I don't think you can go tax those 200 groups," Hobson said.

The Lexington Democrat said the groups that would be taxed for the first time under Keating's plan represent a wide range of lobbies with a great deal of influence at the Capitol.

"You tax the beauticians, you're going to get beat," he said. "I've seen that drill before."

Hobson also noted that Oklahoma income tax and sales tax collections have increased compared to last year's figures. The state's revenue shortfall this year, which will exceed $350 million according to the latest projections -- is mostly attributable to a dramatic decline in oil and gas taxes.

Hobson noted that the nine states that do not have a personal income tax "are in the most desperate trouble in this recession of any of the 50 states because they have all of their tax base in consumption, where people buy, and people have quit buying."

He said Texas -- which does not impose an income tax and is often cited approvingly by reform proponents -- is facing a $5 billion deficit.

To cover its recent budget crisis, the state of Tennessee spent all of the money reaped from tobacco litigation after voters stopped lawmakers from creating an income tax, Hobson noted. In comparison, Oklahoma placed its tobacco settlement money into a trust fund.

Hobson noted that this year's shortfall is the largest faced by Oklahoma since the 1980s oil bust.

"If this is a one-year aberration, we're OK," Hobson said. "If it's like the `80s, we're in deep trouble."

As a result, he said lawmakers proposing actual tax cuts are not acting in a fiscally responsible manner.

"Those folks that advocate that weren't here in the `80s. They haven't been through what we're about to go through," Hobson said. "And cutting budgets or raising taxes are the two most miserable processes that the Legislature has to go through."

House Republicans have endorsed unspecified reductions in the state income tax, and two Republicans -- Bill Graves of Oklahoma City and Frank Davis of Guthrie -- have filed a bill that would implement a flat income tax of 5.75 percent.

The current top income tax rate is 7 percent and is imposed on single earners with more than $10,000 in annual income.

While Hobson said tax-cut supporters don't know what they're asking for, both Graves and Davis were first elected in 1978 and were active during the oil bust years.

"We were able to cut spending without any problem that I remember," Graves said.

Davis, who served as the Republican leader in the House in the early `80s, said the budget problems of that period were caused as much by runaway spending more than the repercussions of the oil bust.

"We had a large increase in revenue during the early years of the `80s due to the oil boom. And so instead of saving some of that, we increased spending in every agency," Davis said. "And then when the boom burst in the mid-'80s, early part of the mid-'80s, then we were faced with either raising taxes or cutting expenditures. And unfortunately we took the tact of raising taxes."

Davis said today's tax code -- which kicks in at a bottom rate of 0.5 percent on a single dollar of annual income -- is the result of mismanagement during the 1980s.

"That's why our tax rates are as high as they are today -- because of our foolishness in raising expenditures during the oil boom," he said.

Davis said this year's shortfall, like those faced in the `80s, can be blamed on a lack of legislative restraint and runaway spending as much as declining tax collections.

"History repeats itself," Davis said. "We should learn from it, but we haven't so far."

Like Graves, he said budget cutting is not the draconian task Hobson suggested.

"It can be done and we should do it," Davis said.

Graves noted that after taxes were cut at the federal level during the Coolidge administration in the 1920s, the Kennedy administration in the 1960s, and the Reagan administration in the 1980s, government tax revenue increased.

"The government ended up getting more money because it invigorates the economy when you cut taxes," Graves said. "And too many politicians don't understand that."

William Paiva, a partner with Chisholm Private Capital Partners, said that Oklahoma's income tax leads many of its most successful businessmen to leave the state. Paiva, whose firm provides start-up capital to many biotech companies in Oklahoma, said he has seen several individuals leave the state when they sell their companies. He said one acquaintance in Tulsa who chose to stay in Oklahoma represents an exception to the rule.

"It cost him $1.2 million to stay in Oklahoma because he sold his stock here," Paiva said. "If he'd sold his stock in Texas, he'd have made $1.2 million from avoiding state income tax on his options."

Paiva, who also spoke at the Oklahoma Biomedical Research Summit, added, "There's a lot of people that opt out of the state for that very reason."

The loss of those individuals has ripple effects in the state's business environment, Paiva said.

"The indirect effect is real. The indirect effect is the successful guy who left the state is not going to mentor that next young guy who moves up," Paiva said. "The direct effect is losing him; the indirect effect is mentoring."

House Republican Leader Fred Morgan, Oklahoma City, told attendees of the Oklahoma Biomedical Research Summit that the state must spend tax revenue in an effective way before even considering any tax increases.

"Until we get our government priorities straightened out we really can't -- and should not -- start simply taxing people and advocating new taxes on a budget that has been growing $250 (million) to $300 million a year every year ever since I've been in the Legislature," he said.

He noted that tax revenue has doubled since 1988, growing far faster than person income in the state, and the state spent more than $5.7 billion last year.