Two Arguments For and Against Cutting Oklahoma’s Income Tax
Oklahoma’s two preeminent policy think tanks defended opposing sides of the income tax debate on the opinion page of Sunday’s Oklahoman.
At issue is reducing the top rate of Oklahoma’s individual income tax, which is state’s single largest source of revenue. On Jan. 1, the top income tax rate dropped to 5.25 percent from more than 6 percent.
A legislative panel recently recommended an income tax reduction, which would come over two years, and the creation of a plan to make Oklahoma a “no-income tax” state, which some want to phase-out over 10 years.
Hit the jump to read the two sides presented in Sunday’s paper.
Oklahoma Council of Public Affairs
Citing numbers from the state’s annual financial report, OCPA fiscal policy director Jonathan Small said state spending grew 72 percent from 2001 to 2011. Also, state and local government incomes are increasing while private-sector incomes are shrinking, he said.
Small’s argument: “Oklahoma doesn’t have a revenue problem. It has a spending problem.”
“It’s time for lawmakers to take a serious, in-depth look at state spending. The relationship between total agency spending and revenue sources other than appropriations deserves particular attention. The lure of “free” federal funds and grants has driven state agencies over the years to create and expand programs, which has the effect of ratcheting up state spending.”
Oklahoma Policy Institute
Director David Blatt and policy analyst Gene Perry said tax collections are at the lowest they’ve been in decades and lamented that funding cuts are felt most by low-income Oklahomans. Blatt and Perry also worry about long-term funding for health care, pension liabilities and infrastructure, plus a task force suggestion to offset lost income tax revenues by eliminating popular tax exemptions.
Blatt and Perry’s argument: “The income tax is the only major component of our tax system based on ability to pay, so almost any attempt to shift taxes elsewhere will inevitably take more from those who can afford it least.”
“Oklahoma needs many things to ensure a more prosperous future: well-maintained infrastructure, a healthy and educated workforce, safe communities, clean water. Handing out more income tax cuts will either harm our ability to meet those needs or take more from those already struggling most to get by.”