OK’s Income Tax Too Important to Abolish, University Economists Say

• Joe Wertz
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  Joe Wertz was a reporter and managing editor for StateImpact Oklahoma from 2011-2019. He reported on energy and environment issues for national NPR audiences and other national outlets. He previously worked as a managing editor, assistant editor and staff reporter at several major Oklahoma newspapers and studied journalism at the University of Central Oklahoma.

Abolishing Oklahoma’s personal income tax could have severe fiscal consequences, a group of university economists told a legislative panel Thursday.

To even propose abolishing the income tax — which accounts for about one-third of state funding and is the state’s largest single revenue source — is “willful ignorance,” said Alexander Holmes, chair of the University of Oklahoma Department of Economics and former state finance director, according to several news reports.

From the Associated Press:

“Another economist — Oklahoma State University Regents Professor Emeritus Larkin Warner — warned the panel that the income tax is a critical component of the state budget and that other major revenue sources are overextended or volatile.”

Republican Gov. Mary Fallin and the state Legislature have backed reducing or eliminating the state’s personal income tax, saying it would help Oklahoma attract and retain jobs.

But Mickey Hepner, dean of the business college at the University of Central Oklahoma, said Oklahoma is already competitive, according to The Oklahoman’s Michael McNutt:

“Over the last decade, Oklahoma’s economy is faring better than most of the states that lack a personal income tax,” he said. “Specifically, Oklahoma’s median household income has grown faster than eight of the nine states lacking personal income tax.”

But Noel Campbell, associate professor of economics at the University of Central Arkansas, said many states do well without income taxes, which he said are often “swayed to the advantage” of small groups, according to Oklahoma Watchdog.

If lawmakers addressed their “spending problem,” the income tax could be gradually phased out, argued Rep. David Dank, the task force co-chair,The Oklahoman reported.

Holmes, who along with Warner and three other economists authored a 2001 study about eliminating the personal income tax, agreed that legislators should look for services that could be reduced or eliminated.

“But to promote an agenda to reduce government activities and government services through the starvation of the treasury is mindless,” he said, according to The Oklahoman. “It doesn’t go to the question: Is this a good idea?”

The property tax burden in the nine states without a personal income tax is twice what Oklahomans pay, Hepner said, according to The Oklahoman. Also, the state sales tax is already above the national average, so raising that would be a “tough political sell,” he said.