Is it time to end the state income tax? Recently, the Governor’s Task Force on Economic Development and Job Creation recommended that the Governor “initiate a 10 year program to significantly reduce then ultimately eliminate the Oklahoma personal income tax.” Of course, the recommendation is not surprising. Ever since the Keating Administration, state Republicans have consistently lamented that the state’s personal income tax is a scourge on the Sooner state and an obstacle to our prosperity. Gov. Mary Fallin herself expressed support during the gubernatorial campaign for eliminating the personal income tax.
So, it is not a surprise when a group of her supporters makes this recommendation. While the recommendation to eliminate the income tax was not a surprise, I was surprised by the 1) weakness of their argument and 2) the tax increases the group suggested.
Perhaps it’s the academic in me, but when someone makes a proposal I expect them to provide some hard evidence in support of their cause. In this case, the task force offered no data, no economic impact analysis, no estimate of the impact on families. Instead the task force stated, “Some believe that a key to their (states with no income tax) relative prosperity is the lack of an individual income tax and that Oklahoma would enjoy faster growth if it reduced this source of revenue.” The group later added, that eliminating the personal income tax “could indeed be a game changer for Oklahoma.” Some believe? Could be a game changer? With this irresolute language, even the task force seems unconvinced.
What the task force does not mention, is that Oklahoma’s economy is outperforming many of the states that have already chosen to forego a personal income tax. Since 2000, Oklahoma’s economy (on a per-capita basis) is growing at the 16th fastest pace in the nation, and faster than six of the nine states that do not have a personal income tax (Florida, Nevada, New Hampshire, Tennessee, Texas and Washington). Other measures of economic performance relay a similar story. Oklahoma’s per capita personal income in the past 10 years has grown at the seventh fastest pace in the nation, and faster than eight of the nine states lacking an income tax (all except Wyoming). Finally, Oklahoma’s median household has grown over the last ten years at the third fastest pace in nation, better than eight of nine non-income tax states.
In short, Oklahoma’s economy is already outperforming the states without an income tax. Instead of us modeling them, perhaps they should be modeling their tax systems after ours.
More surprising than the lack of evidence offered by the task force, were the tax increases they proposed to replace the $2.5 billion in lost revenue from eliminating the personal income tax — an increase in property taxes (that should go over well), an expansion of the sales tax (tough news for Oklahoma’s families struggling to make ends meet), and the elimination of the state’s Child Tax Credit (sorry parents). Essentially, the task force is encouraging Oklahoma’s tax system to more closely resemble our neighbors just south of the Red River. Interestingly though, Oklahoma’s families would be the hardest hit under such a proposal. In fact, according to the nonpartisan Institute on Taxation and Economic Policy (www.itepnet.org), the tax burden faced by middle-class families in Texas is nearly three times higher than the burden placed on the 1 percent of Texans with the highest income. The poorest families fare even worse — facing a tax burden nearly four times higher than the highest-income Texans.
In the end a group of wealthy Oklahomans proposed cutting taxes for wealthy Oklahomans, and raising taxes on everyone else. Yes, this is class warfare and it is the poor and middle class that are under attack.
MICKEY HEPNER is the dean of the College of Business Administration at the University of Central Oklahoma. Hepner serves on the Executive Committee of the Board of Directors for The Oklahoma Academy.