EDMOND —
Just how important is it to the Oklahoma economy for policymakers to eliminate the state’s personal income tax? While some in powerful circles are arguing that such a move is crucial, the economic evidence pretty clearly indicates otherwise despite what a recent report suggests.
Currently, the anti-income tax groups are marshaling their forces to launch a repeal of the state’s personal income tax. In the past few months the Governor’s Task Force on economic development recommended a 10-year phase-out of the personal income tax. Meanwhile, all indications are that a legislative task force on comprehensive tax reform is poised to make a similar recommendation despite the warning of several state economists who were called to testify (including me). Not surprisingly, the conservative Oklahoma Council of Public Affairs recently released a report from a national (conservative) research firm — Arduin, Laffer, and Moore Econometrics — who argue that the Oklahoma economy would “soar if the proposed economic plan were implemented.”
I disagree vigorously.
The reason for my disagreement with the report’s conclusions (along with its premises, logic and methodology too) is more than a difference of opinion about a policy, but a difference in the purpose of policy research. To me, the role of that research should be to inform the policy debate. Therefore, a serious research project would identify and explain all of the benefits and all of the costs of a proposed policy. The OCPA study however, focuses mainly (almost exclusively) on the benefits while ignoring the costs of eliminating the personal income tax. Consequently, some fundamental (perhaps even elementary) concerns go unaddressed.
While my concerns about the study are too numerous to detail in full in a single op-ed, there are three main issues that highlight the study’s problems. First, the authors often compare the economic performance of states with different tax structures and infer that the cause for the difference in performance is due to the difference in tax structure. This assumes that other factors don’t affect both tax rates and performance (this is explicitly assumed in their econometric model). But tax rates and tax burdens are not determined in a vacuum. They are both shaped by a state’s culture, their history and their economic structure — all factors that also influence performance.
For example, the authors make note of the economic performance for the 11 states that have instituted a progressive income tax in the past 50 years. The authors then conclude that, “the results have not been pretty … The introduction of a progressive personal income tax in each state that has implemented it over the past 50 years has been a total failure.” Clearly, the authors are trying to make the case that the progressive income tax was a major reason for the states’ decline.
If we look at those states though we see that a different explanation is more likely. The 11 states include many Rust Belt states, like New Jersey, Ohio, Pennsylvania, Illinois, Michigan, Indiana and West Virginia. In fact, all 11 of the states are from either the north or northeast — regions that have been in decline mainly due to the pressures of globalization that have reduced domestic manufacturing employment. In other words, it’s not the fault of the income tax, but the authors do not even hint that another explanation is more plausible.
Furthermore, the authors often overlook the fact that the Oklahoma economy is already outperforming many of the states that lack a personal income tax. Even under the authors’ preferred statistics, which I would argue are not the most relevant statistics to compare, the Oklahoma economy typically fares in the middle of the no-income tax states. Meanwhile, several of the no-income tax states have performed very poorly in recent years. Clearly, eliminating the personal income tax does not guarantee prosperity.
Finally, the authors ignore the impact of government services on economic development. In the report’s favored measure of economic outlook, the quality of a state’s education system and its workforce are not even a variable considered. In the context of this debate, the omission of education is important because an elimination of the state income tax will almost certainly lead to a dramatic decline in state education spending, thus hampering our state’s educational system even further.
There is a need for serious research on the state’s optimal tax policy. Policymakers need to fully understand the consequences of different policies in order to do what is right for Oklahoma. This report from an out-of-state firm does not help our policymakers or our people.
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.
Opinion
State income tax no simple debate
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Oklahomans unite in tragedy; set example for country
Whenever we witness the type of devastation wrought by this week’s killer tornado, we naturally struggle with a host of emotions. Those of us in the neighborhood battle to control our anxieties as we gather the information we can about the storm’s strength, location and direction. We experience dismay when we hear the threat above us has touched down and become a real physical menace to our friends, neighbors and loved ones. When the “all clear” sounds, we are thankful that the nightmare is over. When we realize our loved ones are all safe and sound, we rejoice.
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Spirit of Oklahoma strong in tornadoes
Because we’ve been through so much, we are a people who get perturbed when those on our nation’s coasts look down their noses at us. We are a people who get irritated when others tell us how we should live, or what we should believe. We are a people who cringe when others see our waving wheat fields as only flyover country.
We know that we are not perfect, but we are good, we are compassionate and we are giving. It is this spirit which led the teachers at Briarwood and Plaza Towers Elementary this week to use their bodies to shield students from tornado debris. It was this spirit that enabled law enforcement officers to stand in the way of the oncoming tornado to divert traffic from the storm’s path. It was this spirit that compelled Oklahomans around the globe to rush to the aid of their friends and neighbors. -
Let kids start school on a normal schedule
Q: Our son’s fifth birthday is in August. He did just fine, socially and academically, in preschool, but the counselor at the school he’s slated to attend has recommended that we hold him back a year because of his late birthday. She says that kids with late birthdays, especially boys, do better if they’re given an extra year of maturation before starting school. What do you think?
A: The practice of postponing Kindergarten for so-called “late birthday” children — generally defined as children having birthdays after May — got its start about 20 years ago and has generated the usual unintended consequences. Prime among those is the fact that by delaying the start of school for children having birthdays after May, schools only create a new crop of children with late birthdays — those occurring after January.
It’s true that during early elementary school, boys are less mature in several respects than girls. In general, their attention spans tend to be shorter. Therefore, they’re more impulsive and more easily distracted. It’s also true, however, that some children, boys as well as girls, experience developmental “spurts” during Kindergarten. The slightly immature, impulsive 5-year-old may be at the norm one year later. -
No one realizes how tough Okies really are — until this happens
Like many of you, I’m ending this tragic week emotionally drained. I was either glued to the weather report throughout the first part of the week or — when Su-the-dog and I weren’t settled down inside the storm shelter waiting for the all-clear to sound — I hovered with her about the shelter door leading down to it. Now as the week ends, I just might have changed my mind about a couple of things.
Many of us have been on our knees throughout this week praying that God will strengthen and comfort the state’s numerous tornado victims and their loved ones. Some have already contributed to organizations such as the Red Cross or the Salvation Army to aid this week’s victims of various tornadoes, and those who are able have either donated blood or else they will when the Bloodmobile makes its rounds. -
Seeing yourself as the world sees you
Ever try seeing yourself as others see you, or your piece of the world as others see your piece of the world?
You know, if you could get others to see you, or if you could get other parts of the world to see your part of it?
Narcissism and inferiority, both, can trap us in front of a mirror, admiring or lamenting, pleased or not pleased by the vision we presumably offer others.
Yet, what’s happened over the last three days, since yet another deadly tornado rolled through Moore, offers an entirely different perspective.
Through strength or weakness, we may take an interest in how we project. But when the “Today Show” is broadcast from the rubble and the network evening news has placed its anchor amidst the carnage; and when the news channels descend upon the destruction and every newspaper in the country is playing your and your neighbors’ plight bigger than its own hometown news, it turns surreal. -
ROCK DOC: Japanese find a new source of natural gas
The name “natural gas” might be a puzzle. After all, how could there be such a thing as unnatural gas? The reason we call natural gas what we do has to do with history. There was a day that people made burnable gas by heating coal. The gases that came off the coal were piped around cities where they did things like light street lamps and even power cook stoves in homes.
Coal gas had its down side. For one thing, it often contained carbon monoxide. And it took energy to make the gas, so it never could be truly cheap. -
Witnesses missing; Behenna case could be heard at Supreme Court
The film “Breaker Morant” was nominated for an Oscar for the best screenplay in 1980. It told the story of Harry “Breaker” Morant, an Australian who served in the British Army and was court-martialed for alleged war crimes during the Boer War in Southern Africa in the early years of the last century.
That conflict pitted the British Army against the descendants of the Dutch settlers who had migrated to what is now South Africa in the 17th and 18th centuries. The majority of them were farmers and in their language of Afrikaans were known as “Boers.” -
Don’t leave Oklahoma!
May is graduation season. As I have done every year as lieutenant governor, I have given multiple commencement speeches. Advice flows freely during this time and it usually runs the gamut. What to do, what not to do, how to do ‘x’, be sure not to do ‘y.’ Too often commencement speakers speak in big generalities. So general, the message is frequently lost or forgotten.
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Last-minute funding proposals not in state’s best interest
All indications point to this being the last week of this year’s legislative session. The Legislature will go home a week early. This is good news for Oklahomans as not only will there be cost savings but all Oklahomans should breathe a sigh of relief when the Legislature stops making new laws a week ahead of schedule.
As usual, the Legislature will take a number of important votes during the last week. Some will be forced due to attempts to introduce and pass far-reaching, new policies that should have been introduced much earlier in the year. -
BY THE NUMBERS: Oklahoma still needs to invest in its economy
After six months of stagnation, the Oklahoma economy finally appears to be expanding again albeit still weakly. Unfortunately, our leaders aren’t making the investments we need to give our economic prospects a boost.
Last week the Oklahoma Office of Management and Enterprise Services reported that in April state General Revenue fund collections were 5.2 percent above the estimate and 14.7 percent higher than last year’s collections. Under normal circumstances, such a report would indicate that the Oklahoma economy was very strong. But this isn’t a normal circumstance, and April isn’t a normal month. - More Opinion Headlines
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Oklahomans unite in tragedy; set example for country
