Published: August 20, 2008 09:21 pm      

Oklahoma income tax revenues growing

EDMOND — The conventional wisdom — peddled by tax consumers and amplified by a largely sympathetic news media — says that, because of income-tax cuts signed into law by Gov. Brad Henry in 2004, 2005 and 2006, Oklahoma’s individual income tax revenues are declining.

If that’s the case, someone forgot to tell Henry. Because according to the governor’s own budget books, individual income tax revenues are not falling. They are rising.

It only appears otherwise because those with an interest in bigger government are not telling you the full story about tax collections. But in the July issue of Perspective, published by the Oklahoma Council of Public Affairs, I demonstrate that individual income tax revenues have been increasing every year since 2003. Somewhere Art Laffer is smiling.

Here’s what happens. When the State Board of Equalization officially announces a number that’s available for appropriation, they don’t tell you about all the other money that actually has flowed to the state treasury.

You see, before individual income tax revenues become available for appropriation, several groups get a piece of the pie. For example, the Oklahoma Teachers Retirement System has been grabbing money at an increasing rate to support its obsolete pension plan. And for good measure, the education establishment helps itself to an additional 8.34 percent of individual income tax revenues. Again, all this is before the appropriations process begins.

And Big Ed isn’t the only culprit. The biggest pre-appropriations “split-off” comes courtesy of the Quality Jobs tax credits and other credits that have been enacted during the years. These amounts are conveniently left out of the Board of Equalization numbers.

In short, before policy-makers ever sit down to appropriate money to state agencies — to divvy up the pie — some folks have managed to sneak into the kitchen and help themselves to several pieces of the pie. These several pieces add up to more than a billion dollars. And just because these dollars are not available to appropriate doesn’t mean they haven’t flowed to the state treasury. They have flowed to the state treasury, and they’ve been flowing in increasing amounts.

So why is the public being misled? Is it simply bureaucratic incompetence? Or is someone doctoring the numbers in order to fend off further income-tax-rate reductions?

A March 12 Open Records request is attempting to get to the bottom of this. The simple request would have taken the Office of State Finance about an hour to fulfill. Instead, the agency hemmed and hawed, then four months later performed a mammoth document dump that still didn’t fulfill the request. There’s something happening here. What it is ain’t exactly clear.

But one thing is clear: State income tax revenues are going up.

“There were a lot of dire predictions by opponents of tax relief that income tax cuts would drastically shrink income tax revenues,” said state Sen. Mike Mazzei, R-Tulsa, co-chairman of the Senate Finance Committee. “But the facts tell a different story — revenues from individual income taxes continue to grow.”



STEVE ANDERSON is a research fellow with the Oklahoma Council of Public Affairs (ocpathink.org). A certified public accountant with more than 20 years experience in private practice, he previously spent two years as an analyst in the Oklahoma Office of State Finance.